The United States Grand Prix is no more. It’s off the Formula 1 calendar for 2008 and a return looks dubious – unless Las Vegas steps up to the plate
By David Phillips
Did Lewis Hamilton win the final US Grand Prix? Never say never, but it is hard to imagine another taking place unless a sea change occurs in the financial structure of staging Formula 1 races as well as America’s attitudes towards F1.
As it stands, an American F1 promoter is almost guaranteed to lose millions of dollars. F1 promoters generally earn revenue from event sponsorship, ticket sales, concessions and license fees to offset their operating expenses, capital costs and sanction fees. Portions of the sponsorship, ticket sales, licence fees and all television revenue flow to Bernie Ecclestone’s Formula One Management.
That last factor is crucial for an Indianapolis Motor Speedway (IMS) that makes much of its profits on the Indy 500 and Brickyard 400 from television revenue. Without television money or the government subsidies key to most F1 events, IMS struggled to make up the difference between its revenue and the cost of staging the US GP.
Although some reports put the US GP sanctioning fee as high as $35m, those close to IMS CEO Tony George say it’s around $15m; that the $35m figure represents what the newer F1 events pay. But while Ecclestone offered “favourable” terms for the US GP, the Speedway could not compete against the governments of Singapore, Spain and Abu Dhabi.
Bobby Rahal, Indy 500 winner and former boss of the Jaguar F1 team, concurred: “When there are countries spending that kind of money to host an F1 event, it’s very difficult for any individual, even in Europe, to afford the price.”
Yet F1’s American challenge goes beyond sanction fees. “It [money] has some bearing on the decision,” said George, “but there are a number of things that need to happen for it to be viable. One, the promoters, in this case Indianapolis Motor Speedway and F1, have to provide the leadership in a relationship that includes a national broadcast partner and a title sponsor that will actively embrace and support the event… Those are the important things that really have been really lacking.” Indeed.
Ecclestone helped secure SAP as a title sponsor, but the German software giant declined to renew its contract. The fact that companies supporting F1 teams are ‘out of bounds’ as event sponsors limits the list of potential clients. And, at $5m to $7m to sponsor the US GP, American companies have decided to spend their money elsewhere; witness the Allstate Insurance Brickyard 400.
Television coverage is similarly problematic. The US GP has been broadcast on CBS as part of a limited package of F1 races rather than as the crown jewel in a season-long series. The rest of the schedule is carried by the SpeedTV cable channel, with European races airing early on Sunday mornings on the East Coast – which means 4 or 5am in California. Such is SpeedTV’s budget that it provides commentary from a North Carolina studio, with a satellite link to journalist Peter Windsor its only direct connection.
Greater investment by American sponsors and television networks is a chicken or egg proposition. Neither is apt to spend money until there is a groundswell of interest in F1 and, without substantial investment by sponsors and television, that groundswell is unlikely. This is not to say America is indifferent to F1, but F1 fans are dwarfed by those following NASCAR, to say nothing of baseball, basketball and football. And motorcycle racing.
IMS recently signed up for a second US MotoGP in September 2008 (the first is in June at Laguna Seca). George says the timing was coincidental, but MotoGP will go a long way towards supplanting F1’s impact.
“Laguna Seca reports an economic impact figure of $100m for its MotoGP events,” noted Bob Schultz of the Indianapolis Convention and Visitors Association. “We would expect visitor spending to meet or exceed those numbers.”
Nor is it sour grapes to note that, apart from attracting 200,000 in its first year, US GP attendance ranked far behind the Indy 500 and Brickyard 400. Attendance predictions for MotoGP vary, but MotoGP’s sanctioning fee (reportedly $3m) is a fraction of the one for F1.
George is also considering adding either an American Le Mans Series or Grand Am sports car race, but IMS can easily fill the ‘void’.
Sobering though that may be to fans of the US GP, it’s nothing compared to the challenge of making F1 relevant to a critical mass of potential spectators and sponsors in the United States. As George noted: “F1 is not perceived in quite the way it is around [the rest of] the world. It’s a tough dynamic, but the future will depend upon recognising the fact that the United States is a bit different.”
Although American-based companies such as AT&T, Dell, Intel and Mobil are involved in F1, they tend to be technology partnerships instead of commercial sponsorships. The lack of participation in F1 by American teams and drivers is another stumbling block. With America’s top race teams focused on NASCAR and Scott Speed’s firing from Toro Rosso, that is unlikely to change. Graham Rahal (18) and Marco Andretti (20) are mentioned as F1 prospects, but mainly in the US…
F1 has made some inroads in mainstream America – witness the fact that race results are found in most major newspapers – but it remains a minor blip on the cultural radar. Recall that talk show host David Letterman – partner in Rahal’s IRL team – declined to have Lewis Hamilton on his show during the run-up to this year’s US GP. Frankly, despite the feel-good story of Hamilton’s success and a fiercely contested championship, even some of America’s F1 aficionados are growing weary of what they perceive increasingly as F1’s cynical environment. Most stalwarts forgave F1 for the 2005 US GP debacle, but Stepney-gate, McLaren’s Hungaroring fiasco, hollow promises about American drivers and now the cold shoulder to IMS only reinforce negative attitudes. As much as George has been savaged by critics for his role in the ongoing train-wreck that is American open-wheel racing, there has been widespread support for his position on the F1 race.
“In the US, you’re never going to have the government supporting an automobile race,” said Mario Andretti. “It’s going to be private enterprise, and I cannot see a private enterprise more stable, more committed to the US Grand Prix than the IMS. I thought Indy was the American venue to hold F1 in this day and age… and Tony [George] made quite an investment in the event, but I’m sure it just got to the point where the financials didn’t make any sense.”
Similarly unanimous in their opinion were BMW, Honda, Toyota and Mercedes, for whom the USA is a major market. Suffice to say they did not applaud the US GP’s discontinuation. “We most definitely should have a race here and, if you ask me, maybe two or even more,” said Mercedes’ Norbert Haug. “For a world championship, it is important to be here.”
Barring pressure from the manufacturers or a restructuring in F1 finances, the only light at the end of the tunnel may be Ecclestone’s new-found love for street races, with Las Vegas an obvious candidate. Vegas, which is among the world’s premier tourist destinations, has been America’s fastest growing city for years and its populace, business community and government possess a can-do spirit. If the casinos give their backing to an F1 race, a US GP in Las Vegas could certainly happen.
That’s a big if. F1, of course, staged its 1982 finale in the parking lot of the Caesar’s Palace hotel – one of many ‘one-off’ US GPs that sank beneath the waves. What’s more, reaction to the race Champ Car staged this spring on the downtown streets (as opposed to the glittering Strip) was subdued.
The Champ Car World Series is a far cry from its glory days, let alone F1, but in baseball parlance it’s three strikes and you’re out. Will Vegas afford F1 a third strike? If not, it’s difficult imagining there being another US GP.