You don’t get much for $80m these days. Two houses in Melbourne, 200 in Adelaide, a block of flats in Manhattan, a night out in Sydney and if you’re Lance Stroll, a drive in F1.
But if you believe the rumours, and I don’t, that’s what the NSW government might be prepared to pay to prise the annual race around Albert Park (and don’t get me wrong, who doesn’t like watching 20 cars driven at 320km/h by male persons aged from 21 to 42 around a man-made lake and what passes for a harbour?) to Sydney.
Now, of course, all the talk is about what a spectacle it would be for viewers from overseas to see the F1 circus in the Monaco of the south. You know: Harbour Bridge, Opera House, Crown Casino (if still licensed), pancakes on the rocks, the cast iron pissoir at Millers Point and the concrete monstrosity of an expressway that blocks the view of the world’s most beautiful expanse of water.
At a meeting of the (unofficial) FI Sydney Advisory Council (SAC) at the (unofficial) race headquarters, the Hero of Waterloo hotel (1843) in The Rocks, it was decided that to highlight all that is good about Sydney, the race would go up and down the city’s main drag (if I may call it that) George Street.
Now I understand that this would mean only two tight corners (at either end of the street) but it does allow pit crews to be stationed at every one of the 31 pubs and entertainment venues.
Don’t be stupid, we’re not suggesting the drivers stop for a drink! No, a FIA approved and trained glassy would be required to bring a schooner out to each driver. The driver has to down it completely and the crew have to change tyres and refuel the car before the lollipop person releases the car from the box. Given the pit stop record is under two seconds the problem here is likely to be human capacity vs technical expertise.
Some years ago, The Herald Sun exclusively revealed that the overall cost of the five-year Melbourne F1 contract was $50m for the 2015 year. For some reason, four successive state governments had kept this secret for almost two decades. So, post-Covid you would expect the bastions of Bleak City would be sending F1 owners Liberty Media Corporation (NASDAQ: FWONK, $80 last close) an annual cheque for $70m.
So, is $80m a fair price for Sydney to pay? As we’ll see the price of hosting the traditionally powered petrol vehicles is about to jump, but all the local pollies would have to do is divert the fines from two well placed speed cameras for a year, so maybe $80m is a steal.
Liberty Media, the owners of F1, are “committed to our vision and strategy to grow and continue to evolve our sport”, F1 CEO Stefano Domenicali told us on the Liberty Media third quarter earnings call last week.
“All good,” the analysts on the phone said, “but when are you going to make some money?” Aren’t these trumped up cardigan wearing beancounters all the same? Always wanting to focus on the short term.
In the case of Liberty that’s been about 4½ years since they bought the business from Bernie Ecclestone and 4½ that they’ve lost money. They put in Chase Carey, a former exec from our global empire, and he did solve four contradictory problems. How to give the 10 teams a fairer share of the near $3bn revenue, how to make the teams more valuable, how to lower costs and how to make the sport more popular.
I’ll spare you most of the boring stuff but up till Chase got the teams to sign up to the new agreement, F1 team revenue was more complex that quantum physics. Basically, it was based on what they called three columns. Each team got about $40m for turning up each Sunday. Then winning teams got money for winning. Then the team that won the constructors’ championship got more money. And then Ferrari got a special payment every year because, well, because they were Ferrari, even though the team hasn’t won a constructors’ championship since 2008 and the last driver to win a world championship for the Italians was Kimi Raikkonen in 2007 who is the oldest driver in the comp (42 this year).
The top teams spent about $200m a year on keeping two cars going around 22 tracks and their revenue was about the same. Analysts call this breaking even.
Under the new arrangement it will cost $260m to buy a team and you will immediately share in the revenues from the sport. The existing teams will get equal shares of your $260m. So immediately the teams have more value than they did before. Teams will eventually only be allowed to spend about $140m on running costs (including Mercedes-official supplier of V8s to the Kensi and the Hero of Waterloo, who pay $50m to Hamo to drive their car).
In the past, Liberty and Stefano Domenicali’s boss, Greg Maffei, has talked about expanding the sport outside the US, Europe and the UK. That was code for Asia.
Well, that bit hasn’t worked out so well. Next year there will be 23 races with new races in those two famous Asian hot spots, Qatar and Miami. But the success of this year’s Austin, Texas race (the biggest F1 ever) and real competition means the sport is getting more popular and the business is getting better (which may explain the record share price). As Greg told analysts on the call, teams and host cities “should expect more demands from us”.
Now watching the race on Foxtel is better than being at the track unless you are in a box over the pits with free drinks and food. You see more, get the commentary and hear the team radio. However, I have to say the Supercars in the torrential rain, fog and snow last weekend were even better entertainment.
As a race driver, not being able to see where you are going doesn’t have many advantages. If you want to see just how skilled these steerers are, have a look at a replay. My pick for driver of the F1 session was Alpha Tauri’s Pierre Gasly and I now hate to admit Mad Max will take the world championship but Mercedes will take the constructors’ championship (even though their cars are underpowered sixes).
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