18/06/2013
NEWS STORY
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This time last year the organisers of the British Grand Prix were trumpeting the fact that less than 5,000 tickets were remaining to be sold. It was no exaggeration because on race day a record 127,000 spectators were in attendance. This was despite downpours which transformed car parks into mud baths and forced organisers to turn spectators away for the qualifying session on Saturday. There was bound to be some fallout from this and it is revealed warts and all in an article in today's Independent by Pitpass' business editor Christian Sylt.
As many as 30,000 ticket-holders were told to stay away from the circuit for qualifying last year as car parks were water-logged and local roads were left groaning under the weight of traffic trying to access the circuit. To prevent this from being repeated the race organisers have invested in improving the non-tarmacked car parks and expanded both park and ride and shuttle services. However, it doesn't look like traffic jams will be a problem this year.
According to Sylt's article, attendance at this year's British GP, which takes place next Sunday, is expected to be significantly down on 2012 as tighter purse strings have put people off buying race tickets which start at £145.
At close of business yesterday, Silverstone's website showed that 22 ticket categories are still available whilst only 11 are sold out. As Pitpass has reported, three F1 teams, Marussia, McLaren and Williams, recently took to Twitter to try to drum up support. In a co-ordinated approach they all wrote “Only #28days to go until the 2013 Formula 1 Santander British Grand Prix! Have you got your tickets yet?”
Only races in Abu Dhabi and Brazil are more expensive than Britain, while Malaysia is cheapest with tickets starting at £13. At £60, the cheapest tickets to last month's Champions League final were less than half the price of those for the British GP. Likewise, tickets to the men's final at Wimbledon, the Grand National and the final day of The Open can all be bought for less the cheapest option at the British GP.
The high-octane ticket prices are down to F1's business model which is unlike other sports. Circuits generally do not get any revenue from the television broadcasts of the race or the corporate hospitality and advertising hoardings at the track. Money from this goes to the sport's rights-holder the F1 Group, whilst the circuits' sole source of income from F1 is usually ticket sales. This barely covers the annual hosting fee with running costs often covered by investment from governments. The British GP gets no state subsidies which is why its ticket prices are so high.
The organisers of the race are forced to increase ticket prices due to an escalation clause in their contract which boosts the hosting fee by an estimated 5% annually. It currently stands at around £14m and the cheapest ticket prices have accelerated by 43.5% since Silverstone signed a 17-year contract to host the race in 2009.
An increasing fee isn't the only cost which Silverstone has had to cover. Prior to signing the contract F1's boss Bernie Ecclestone demanded that the track upgrade its facilities. In 2011 it opened a new pit and paddock complex largely funded with loans from Lloyds. This left the British Racing Drivers Club (BRDC), which owns Silverstone, with £26.1m of net debt in 2011, the most-recent year for which its accounts are available.
The narrow margins on the race give the BRDC little free cash to pay down the debt and interest alone came to £842,000 in 2011. This pushed the BRDC to a £4.5m net loss and the combination of declining ticket sales and the increasing fee could be a perfect storm this year.
A spokesperson for the British GP told Sylt “we had record crowds at Silverstone in 2011 and 2012 and during our initial sales period for this year's event ticket sales were not as strong, however they have picked up significantly in the last six to eight weeks and we are pleased to report that although the crowd will not be as big as last years it will still be one of our biggest of recent years. There are a number of influencing factors ranging from the current economic climate through to what is going on in the championship - British drivers on the podium always have a positive impact on ticket sales. Thirdly, there is no doubt about it that some people came last year, got soaking wet and didn't have a good experience. But recently with the better weather and the championship coming into Europe things have picked up and we are looking forward to welcoming a decent crowd to Silverstone for what should be an amazing event."
A senior source at the BRDC adds “I don't think we will see the BRDC making money in 2012. The Grand Prix was a failure on the basis of the weather."
It could be tough for the BRDC to raise money from its owners because of its structure. It is a Club with more than 800 senior members from the motorsport industry including former British champions Nigel Mansell and Damon Hill. Getting them all to agree to invest could prove to be tricky.
Instead, the BRDC has embarked on the daring strategy of trying to sell a lease on Silverstone for 150 years. The new owner would get control of 850 acres of land which is the BRDC's biggest asset and was valued at £11.7m by real estate advisers Jones Lang LaSalle in 2011. It would also become promoter of the British Grand Prix which would financially separate the race from the BRDC and allow the Club to pay off the debt with the proceeds.
The BRDC did a similar deal in 2000 when marketing firm Interpublic took over management of Silverstone. The arrangement was short-lived as Interpublic made huge losses on the deal and it ended in three years early in April 2004.
The race to find a new investor has already stalled once. It began in August 2009 when the BRDC members gave permission for a lease to be granted on the land. The club then engaged PricewaterhouseCoopers to contact potential investors and entered into exclusive talks with a preferred bidder. The talks fell through and in May last year the BRDC announced it had opened discussions with other parties.
“The bidder was believed to be from Qatar but I don't think that's correct," says the BRDC source adding “I think probably the Club committed a bit too much time to that opportunity. It was given all the time in the world because they thought they were a genuine goer. I think there is now a much stronger likelihood of a deal happening."
The latest company which has been linked to Silverstone is MEPC, a property group owned by the BT pension fund. It is understood to be closing in on a £40m deal which would pave the way for a 200-acre business park development at Silverstone. If the race next week exceeds expectations then MEPC could end up being the biggest winner.