Zandvoort sold, Silverstone sale, Monza limbo, COTA concerns

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When I was in Austin for last year’s Formula 1 race, there were several in the paddock’s press room suggesting that the Circuit of the Americas really needed to find a buyer in order to restructure the debt and have a shot at long-term viability. I have not see their balance sheet so I cannot comment on what COTA should or shouldn’t do but I get the point being made nonetheless. Times are tough for circuits and one need look no further than Hockenheim and Nurburgring to see the lack of a German Grand Prix as evidence.

Even if circuits could afford the $25m F1 sanctioning fee, there is the FIA grade 1 certification they need in order to host the race and that could require millions in circuit upgrades. It’s the challenge many US-based circuits face when fans suggest them as possible locations for an F1 race.

Zandvoort

Prince Bernhard of Orange-Nassau and investor Menno de Jong have just purchased Zandvoort from Hans Ernst and the Prince, who races a BMW GT4, would ultimately love to bring F1 back to this historic track. The Prince says that hosting an F1 race is the ultimate dream but otherwise, the on-track activities will continue as they are.

One possible issue is the infrastructure and amenities. Parking, seating, paddock and pit buildings all have to be up to snuff and accepted by the FIA from a safety standpoint. That would cost millions to improve and this would be on top of the sanctioning fee for the rights to host the F1 race.

One possible motivation piece could be the presence of the Plucky Teen Max Verstappen who is one of the more exciting things to come into F1 in a while. Perhaps the Netherlands could find government support for the sanctioning fees on the wave of Verstappen support.

Silverstone

At the same time, according to the Daily Mail there are conversations regarding the sale of Silverstone to, possibly, Jaguar Land Rover in a £25million deal. The shareholders are discussing the potential sale this week.

The track has a deal with F1 through 2026 but he revenue stream is tight as the circuit is one of the few that receives no government support for hosting the F1 race. The owners, the British Racing Drivers Club (BRDC), leased 280 acres to MEPC and this impacted revenue as well. BRDC chairman, John Grant, said in a letter to members:

‘Our balance sheet is still too weak to support a high-risk £50m-plus turnover business and we have no cash reserves to fund future development of the circuit.’

The other challenge in the possible sale is that any changes in track control has to be approved by F1’s Bernie Ecclestone per the contract with the sport.

Monza

The latest from Monza is that the circuit does not have a done deal to host the Italian Grand Prix and some suggest that Mugello or Imola are possible alternatives. While circuit bosses are trying to get the funding needed, F1 says the situation is out of their hands at this point and it is up to promoters and local government to get the deal done.

The issue at hand is the weight of history demands it but the finances can’t bear it. that’s the same for many circuit such as Spa Francorchamps, Nurburgring, and many other legacy tracks that represent a rich history of the sport. It’s part of the reason that F1 is chasing new markets and circuits, usually government funded, willing to pay. While the owners get a large portion of the money from these sanctioning fees, the teams get more of it and these days, the teams rely on this as their primary source of revenue sans sponsors and alternative revenue streams.

Circuit viability

Regardless of if Silverstone sells or not, it really is starting to look like the track economics model is not working the way it used to and the revenue streams are simply not enough to cover the cost of not only running the circuit but upgrading them, maintaining them and hosting fees. It’s a deadly spiral and we saw the impact of poor weather and a possible change in State assistance from Texas as to whether or not COTA will host a F1 race in 2016.

The economic reality is coming home to roost and the question is, who blinks first? Does F1 lower its fees (impacting investor gains as well as team total revenue), offer other revenue streams to circuit owners and promoters or do legendary circuits continue to fall from the F1 calendar?

Hat Tip: de Gelderlander and Daily Mail

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Paul KieferJr

While I am loathe to rely on the Daily Mail due to its reputation, it is nevertheless true: Everyone’s greed is killing the goose that lays the golden eggs. If it doesn’t stop, there will soon be no Formula 1, period.

Mike W

I think NASCAR continues to have the best model for track revenue. The tracks get a share of the TV money and NASCAR jointly promotes the event with the track and splits the ticket sales. That way everyone has skin in the game, and many say that just getting put on the NASCAR schedule is enough for a track to make a profit. F1’s $25+ million cash grab will always leave the circuit making up the difference between the government money and the shortfall on ticket sales and concessions. IndyCar has something of the same model as F1 (with sanctioning… Read more »

Negative Camber

Yeah, the prize pot for TV and other revenue is split between FOM and the teams right now. No room for tracks unless FOM wants to take less than their 40-ish %. With 21 races, that adds up. I am not sure what the total revenue is for track-side advertising but that might be one avenue to relinquish. The problem is that it is a wholistic system and only some are compensated at a level to continue to be part of that wholistic system. When they aren’t, they go away and are replaced with someone who can…for a little while… Read more »

MIE

The sooner CVC gets bored and pulls out of F1 the better. Then perhaps we may get some organisation that is actually interested in the sport rather than how much money they can remove from it.

Jack Flash (Australia)

Does a Vampire stop hunching over the limp and near lifeless body of its victim… or does it suck it dry till it is dead?

Cash-hungry Vampire Corporation. Draining F1 of Lifeblood Cash$ for nigh on a decade.

A coup is required.

jcn115

F1 needs to allow the tracks to sell advertisement in order to bring revenue, right now F1 controls all the advertisement that you see on the track.

Louis Jansen

Thanks for your in depth analysis. I live in Amsterdam and visit the Zandvoort track many times. The paddock area is very small and unsuitable for modern F1. It is closed in by the Tarzan and Gerlach corners. So it cannot be upgraded without changing the layout of the track. The start-finish straight is much too short in the current layout. And the biggest problem is the fact that you cannot reach Zandvoort by car on a busy summer day. The roads are too small! And I don’t know how much the fee will be for a F1 GP… 25… Read more »

Tom Firth

So much for Silverstone selling on its own terms…

Tom Firth

On the wider issue, what are the circuits going to realistically do? If the circuits challenge F1, the circus just moves elsewhere, it always does and always has, the whole idea of a wealthy country or country wanting to gain credibility, or bringing international sport back, isn’t anything particularly new. Will always be some rationale of why a country should host an F1 race and with the means to do so. It won’t be in the heartlands of Europe though, least not in the short-term, but no one can predict the economic outlook of an area of the world in… Read more »