One of the more interesting facets of the Liberty Media acquisition of Formula 1—if you’re an American anyway—is the comments made by the new owners that they are keen to bring more races to the US. It was a comment made very early in the acquisition process and one that’s had the imagination of American F1 fans running ever since.
Road America, Road Atlanta, Mid Ohio, The Glen, New York, LA, Vegas, Sonoma, Laguna and many other circuits have fueled the imagination and while American fans all know that these circuits would need serious upgrades in order to host a round of the F1 world championship, we also started thinking that a couple of street circuits might be an less expensive option. Maybe Miami, Vegas, New York or the legacy that is Long Beach?
Long Beach has often been mentioned as a potential new race but it seems that McLaren chief, Zak Brown—an American marketing genius himself—says that Long Beach may be a long shot.
“But the economics that Formula 1 requires would need heavy subsidy from government, and from what I understand, I don’t believe Long Beach is prepared to pay that type of rights fee.
“The other very significant part is that to host an F1 race, the track would need to be FIA Grade 1, and that would need a longer track with much more run-off and a substantial pit complex. Well, the track is up against the harbor so you’re not really dealing with an environment that is easy to modify! Plus, the entire circuit resides within the jurisdiction of the California Coastal Commission so any circuit improvements such as the necessary pit/garage complex would be subject to their review and approval.
“So even from the construction point of view, the amount of capital expenditure that would be needed is tens and tens and tens of millions of dollars. On top of that, like I say, the rights fee for Formula 1 is infinitely more than IndyCar demands.
“Combine those two costs together and there is no economic model where private investors can get any return on that investment, so therefore it all comes back to the state of California and the City of Long Beach coming up with the funding. I know KPMG has been hired to conduct a study, but that study is going to say it will cost hundreds of millions in commitment.”
It’s an interesting comment from a guy who knows F1 and also knows the American racing scene and circuit economics needed to survive. What’s more interesting is that the new owners were mumbling something about race fees and ticket prices and more and while I think those platitudes are nice, the entire F1 revenue stream is based on these healthy fees. They say they are thinking long-term and that’s great but reducing sanctioning fees in the hopes it reduces ticket prices is not something I’m confident they will make as their first move as new owners. I hope I’m wrong but the economics have to work.
“Right,” said Brown, “and the fact is that if you look at every single Formula 1 race – the Circuit of The Americas included – that gets a government subsidy, they are still financially challenged. So I don’t see any economic model that would make F1 at Long Beach work.
“That’s not a negative towards Formula 1 nor a negative towards Long Beach. They’re just incompatible and suggesting that isn’t the case is very much trying to fit a square peg into a round hole.”
If teams weren’t depending on the F1 prize money for survival and they were truly independent, perhaps Liberty would be willing to take less profit but I can’t imagine anyone on their board would look at taking a haircut on the revenue side while retaining the team’s cut so they can reduce race sanctioning fees. There’s no guarantee that the race organizers would reduce ticket prices if their race fees were reduced either. They’re playing catchup and see the delta as extra margin.
In the end, fans may be talking about Long Beach because they know street circuits would be less expensive to pull off that purpose-built race tracks and Long Beach comes to mind but Zak says that hasn’t been a name kicking around in discussions with Liberty Media.
“I’m not aware of every market that Liberty is reviewing,” he said, “but I’m aware of some, and I can honestly say that as far as potential venues in North America are concerned, I have never heard Long Beach being mentioned as one of them.”
Having said all that, now what do you think they’ll do to find another race in the US? My bet would be an all-new street circuit but I’m not sure the lack of subsidies will make that a very doable scenario unless Liberty Media see the long-term benefit of taking a haircut on a new US race and if they do that, Circuit of the America’s president Bobby Epstein will have something to say about that.
Hat Tip: Motorsport