21/05/2012
NEWS STORY
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It is now seven months since the pomp and circumstance that was the announcement about the Grand Prix of America in New Jersey which is due to join the Formula One calendar in 2013. Just last month F1's boss Bernie Ecclestone said he was unsure whether the race will take place next year as planned. Pitpass' business editor Christian Sylt now hears further evidence that all is not well between Ecclestone and the New Jersey camp. Details of the contractual situation between the two parties are likely to come into the public domain soon and, surprise surprise, it is understood that money is at the heart of the current concerns.
New Jersey is in quite a unique situation and we aren't talking about the attributes of its track or its location overlooking the New York skyline. Pretty much all new races which have been added to F1's calendar in recent years have revealed the source of their funding when they were announced or relatively soon after but the promoters of the New Jersey race have kept quiet about this and are remaining tight lipped. All that has been indicated is that the race will not be funded with public money. However, no names or details of investors have been given.
This doesn't mean that there is no backing behind the race but rather that there are still question marks over where it is coming from. This is simply exacerbated by the continued doubt over whether the race will actually join the calendar next year.
One senior sports marketing expert said "I have not heard anything more about the NY race which I think is indicative. If it was going well I would expect to read lots about it in the US sports business press." It remains to be seen whether the preparation for the race is or isn't going well. Following Ecclestone's scepticism about it being ready for next year, race spokesman, Stephen Sigmund said "the race is on, as scheduled, for 2013."
The marketing expert adds that there is one reason why the lack of knowledge about the funding may not be so significant. "The only point I can make is that the promoter has very substantial private funds," he says. The executive chairman of the race is American businessman Leo Hindery who alone is believed to be worth over $150m and is an accomplished former racer having won his class at Le Mans in a Porsche GT3. Hindery is also managing partner of InterMedia Partners, a New York-based media industry private equity fund. Until 2004, he was chairman and chief executive of The YES Network, the largest regional sports network in the US which he founded in 2001 as the television home of the New York Yankees baseball team.
Nevertheless, the marketing expert adds that Hindery "is very unlikely to have entered into the venture with the intention to spend his own money." It keeps us guessing as to where the money behind the race is really coming from. In contrast, there are no such questions about the US Grand Prix which will steal a march on New Jersey and will join F1's calendar in November this year after a five year absence.
The funding behind the purpose-built Circuit of the Americas in Austin, the capital of Texas, was revealed just a couple of months after it was announced in May 2010 that the US Grand Prix will be coming to the track. Austin-based private equity boss Bobby Epstein and Texan billionaire Red McCombs are backing the circuit amongst other investors. Earlier this year, public filings in the US showed that funding for the circuit had reached nearly $200m and, after that, it was announced that tequila tycoon John Paul DeJoria had also become an investor.
In a country which is famous for its love-affair with litigation it is little surprise that a lawsuit has been filed in connection with Circuit of the Americas as Tavo Hellmund, once the face of the project, is suing Epstein and McCombs over, amongst other things, an unfulfilled buyout agreement.
The lawsuit is essentially an internal dispute and is dwarfed by the litigation which the previous US Grand Prix attracted. From 2000 until 2007 the US Grand Prix ran at the Indianapolis Motor Speedway and its fate was sealed by one race. The F1 industry tends to have a short memory and the worst offenders can often be the sports reporters. Last month's Bahrain Grand Prix was widely reported to be the most controversial race in F1's history but, in fact, the 2005 US Grand Prix has a good claim to that title.
For the first time ever in F1 just six cars took part in the race after severe safety issues affected the Michelin tyres being used by the other 14 cars. It capped off an astonishing weekend of racing which began with Ecclestone suggesting that Indianapolis was not doing enough to promote the race locally. When only six cars raced spectators threw bottles on to the track and filed a class action lawsuit against Ecclestone's business. It was ultimately unsuccessful but the damage had been done.
A new report published by Formula Money, the F1 industry monitor run by Sylt, shows in minute detail the attendance trends over the last four years of the US Grand Prix in Indianapolis. It doesn't just reveal how it was split between walk-up sales and tickets sold within and outside central Indiana, it also shows the zip code of every spectator who visited the US Grand Prix in 2004 - the year that it had the highest local attendance.
The data comes directly from the gate sales at the race so it couldn't be more accurate and it shows that the spectators came from over 7,000 zip codes in the US. It is the first time that such a detailed study of attendance at any F1 race has ever been released and is a goldmine for marketing bosses involved with F1 in the US as it enables them to ensure that their budget is invested in the areas where the sport has the highest popularity.
The data shows the wider effect of the scandal as attendance had fallen 14.6% by the time that the contract to host the US Grand Prix at Indianapolis came to a close compared to the year before the scandal. By 2007, 72.3% of total tickets were sold outside central Indiana compared to 74.1% the previous year so that too was on a downward spiral.
Nevertheless, it reveals the foundation which the US Grand Prix in Austin is building on. In 2006, the year after the tyre scandal, total attendance came to 106,753 and projections for this year's race show that it will hit 120,000. It will get a boost from having some significant benefits over Indianapolis.
At the top of the list, Circuit of the Americas is the first track purpose-built track for F1 in the US. Crucially, it also starts from a clean slate as it comes with none of the baggage that blighted Indianapolis. It is also very close to Mexico where interest in F1 is surging at the moment thanks to Sauber's rising star Sergio Perez. Mexico is a huge market which lacks its own Grand Prix despite multiple recent plans to put one in place. The border is just 580 miles from Austin compared to being 1,500 miles from Indianapolis. Then there is the sheer novelty factor of F1 returning to the US after a five year absence. This too will boost attendance and drives the 120,000 projection which in turn fuels the projected economic impact of $265m.
In contrast, New Jersey will have to wait at least a year until it gets on to the F1 calendar by which time Austin will have taken the limelight of reintroducing the sport to the US. New Jersey also has to contend with the fact that it has a rival Grand Prix in Montreal which is just 370 miles away whereas the closest F1 race to Austin is New Jersey and that is 1,500 miles away.
Perhaps the most important characteristic for any race is having Ecclestone's support. Indianapolis certainly didn't have it but Sylt says Ecclestone is not only highly complimentary about the plans for the race in Austin but he is also extremely happy with the construction progress there. Time will tell what he has to say about New Jersey.