The teams, FIA and Formula One Management are often seen as the three main power brokers in the sport but, as a united force, the race promoters hold considerable sway. Without them there are no circuits to race on and collectively they contribute over $600 million to F1's $1.8 billion annual revenue. The decision for 16 of the 21 circuits to issue a joint statement under the Formula One Promoters' Association [FOPA] criticising the sport shows an awakening in their power as they look to secure a "more collaborative approach from F1" in the future. And with the contracts for the British, Italian, Spanish, German and Mexican grands prix all due to expire at the end of the season, there is an awful lot at stake for both sides this year.
Liberty Media took control of F1 from Bernie Ecclestone two years ago and has faced a major challenge unpicking the deals struck by its predecessor. Under Ecclestone the sport was a finely tuned revenue-making machine, hoovering up vast sums of money from race contracts, TV deals and big-name sponsors. Liberty initially looked to shift the sport's priorities away from its bottom line and towards less tangible goals such as fan engagement, but with the sport essentially still running on the contracts that underpinned Ecclestone's business model, Liberty's ultimate vision still looks distant for many of the sport's stakeholders.
The market for grands prix is lucrative for Formula One, but also complex. Different race promoters have different deals with the sport, with the likes of Abu Dhabi and Baku paying the most while Monaco, due to its historical status, paying a minimal fee. Under Ecclestone, newcomers tended to pay big money to join the calendar and he looked to new venues with government funding to up the market rate for holding a grand prix. Although some new races fell off the calendar due to the expense, such as Turkey, India and Korea, by 2016 the calendar had expanded to 21 races, which is considered to be the limit before teams start to incur significant increases in costs. But with the going-rate for hosting a grand prix being driven ever higher, independent circuits without government funding have struggled to make their own business models work.
Silverstone is the perfect case study of an independent circuit. In 2009 it agreed a 17-year deal to host the British Grand Prix, starting at £12 million in 2010 but with a five percent escalator fee each year. A 2019 break clause was part of the original contract, and with the annual fee due to rise to as much as £26 million by the end of the 17-year deal, it became increasingly clear that it would be activated. Silverstone, as the home to one of the best-attended races of the season, believed it could command a better deal, especially as Liberty Media's early outward messaging had been to serve fans and protect historic circuits. But after over a year of negotiations a deal has not been agreed and, judging by the statement issued by the Formula One Promoters Association on Tuesday, Silverstone is not alone in feeling frustrated.
Meanwhile, Liberty has been looking beyond its existing calendar of races to bring the sport to a wider audience. Key to that vision has been the introduction of new races, with Vietnam signed up for 2020 and an attempt to expand F1's presence in the U.S. with a street race in Miami. The Vietnam deal is similar to existing contracts and was secured with financial backing from the Vietnamese conglomerate VinGroup, but the Miami deal, which has now been postponed indefinitely due to local opposition, was based on a profit sharing model. While the 16 race promoters behind this week's statement would like to strike a deal along the lines of Miami's, they are concerned that such a model is only being offered to new, exotic venues.
"New races should not be introduced to the detriment of existing events although the association is encouraged by the alternative business models being offered to prospective venues," the FOPA statement said.
There is also some concern about what the race promoters are signing up for. FOPA's statement highlighted a "lack of clarity on new initiatives in F1" as well as criticising a "lack of engagement with promoters on their implementation". F1 is currently working on a complete overhaul of the regulations for 2021, which aim to improve racing and create a level playing field among teams. But as things stand, the teams are only signed up until the end of 2020 under the current Concorde Agreement and any circuit looking to commit long-term with a new deal would have to do so without knowing exactly what the sport will look like. What's more, until a new Concorde Agreement is signed there is no guarantee that some of the biggest crowd-pulling teams will be on the grid after 2020.
Finally, the statement also raised concerns about the move to pay TV and the impact it will have on casual fans. While F1 is looking at new ways of engaging fans via multimedia platforms and social media, last year live race broadcasts in Italy went behind a pay wall, resulting in a reduction in viewers, and a similar model is set to be rolled out in the UK this year with all races bar the British Grand Prix on pay TV. Although F1's global TV audience increased in 2018 regardless of the deal in Italy, FOPA is concerned a shift to pay TV will result in an overall reduction in F1 fans, which in turn could have a negative impact on future ticket sales.
The next step is for all 21 race promoters to meet with Formula One in London on Tuesday to discuss the above issues.