On the final day of pre-season testing in Barcelona I met briefly with F1 CEO and chairman Chase Carey in the paddock. We discussed the downward spiral of F1’s share price (FWONK) – at that stage it had dropped 25% in the wake of China’s ‘postponement’ of its grand prix. Bearing a harassed expression behind his spectacular moustache Carey observed: “Markets don’t like uncertainty, and we’re a travelling sport.”
As this is written FWONK sits at 40% of its January 2020 all-time high of over $48.00, and will slip further, certainly while uncertainty prevails – an oxymoronic statement, yes, but equally a sign of the current times and of the uncharted waters ahead.
Until F1 issues a revised calendar FWONK will be continuously punished and pummelled, but how can such a calendar even be realistically considered as accurate while most countries across the world are recording ever-increasing fatality rates on an hourly basis? In the words of an F1 spokesperson, even a draft calendar is “a moving target”.
Therein lies the biggest challenge F1 commercial rights holder Liberty Media has faced since acquiring control of F1 from investment fund CVC Capital Partners – who, incidentally, now plan to squeeze the game of rugby as much as they exploited F1 – in January 2017: how to salvage the maximum number of events without being accused of insensitively profiteering, all while disrupting existing dates as little as possible.
Thus, once the season is able to restart, the imperative will be to slot in as many of ‘postponed’ dates between existing dates as logistically feasible, while maintaining existing dates where tickets are already on sale. As at end of testing there was allegedly a single event that had not accelerated its sales effort – Abu Dhabi – which is unlikely to start doing do so now. Delaying that race a week would hardly affect ticket sales.
Still, an indicator of the difficulties F1 has in postponing dates is the truculence of the Dutch Grand Prix promoter: it’s absolutely clear to even the most myopic folk that the race cannot be staged on 3 May as scheduled, yet they refuse to confirm a date change despite an F1 release – and various subsequent official statements, including a fan apology from Carey – stating racing would resume the end of May, at earliest.
It is such in-fighting between race promoters (and governments in many cases) and Liberty that caused unacceptable delays in Australia as teams, promoters, politicians and Liberty Media (in conjunction with the FIA) squabbled over who carries which money pot, and how far. In the process F1’s reputation ended up being seriously soiled, and one wonders how long it will take to rebuild trust all round.
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While F1’s sporting regulations state that the world championship needs to comprise a minimum of eight rounds, it does not, though, state that these need to be held at eight different venues or even on different weekends – thus it is theoretically possible, if highly unlikely for reasons that will become clear, that selected circuits could host double-header events on Saturday/Sundays, during the same weekend.
However, F1’s sporting regulations stipulate various provisos – including, for example, that “The final list of events is published by the FIA before 1 January each year” – and strict weekend timetables that can be waived only by unanimous agreement, which is where it gets very sticky. Should just a single team fail to agree to any changes, any plans could easily be torpedoed.
Thus, F1 needs to have all team approvals sorted before formalising and announcing any plans, or risk having dozens of very rotten eggs hurled at its face by irate fans and sponsors. Yes, following due process will be highly frustrating for all concerned – as it always is in F1 – but there are no other options.
The split team vote over racing in Australia – and abrupt about-turn by Mercedes over the Ferrari flow saga – demonstrates how fragmented they can be, even in times of external threats. However, one hears all teams were united during a vote on shifting the summer break to March and April, and increasing its duration to 21 days (from 14), both to create additional dates in August and to aid teams during a largely non-productive period.
Some teams are said to be perilously close to temporarily shutting shop due a shortage of parts or services, and one hopes this new-found unity marks a shift in attitude: fight hard on-track, but consider the greater good of the sport of it.
During the last three years Liberty has only begun scratching the surface of this one, as slow progress over the replacement Concorde Agreement proves.
Talking of which, at this point in recent seasons we have previously published F1’s revenue schedules. These are based on projected team income for 2020 but distributed on the basis of last year’s constructors championship classification, and divided into ten payments spread over the year.
However, due to the current uncertainty, Liberty is unable to project 2020 income, and thus teams still don’t know what they will earn this year. Try borrowing from a bank to tide the team over…
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Then there are purely commercial considerations: While the regulations call for eight events minimum, according to a TV broadcasting source such contracts stipulate a minimum of 15 races before Liberty needs to reimburse broadcasters for lost events. Thus, the crucial number is not eight, but almost double that – and that relates purely to TV income.
F1’s business model is simple: Promoters recover the costs of staging a race and the race hosting fees are paid to the CRH are recovered by the promoter from the “gate” and subsidies as paid by local/national authorities in return for tourism benefits generated by events. The CRH retains all other rights, and thus has four main income streams: race fees, TV contracts, “bridge and board” advertising, and high-end hospitality.
Based on this model, the chances of running “behind closed doors” events makes no sense save possibly for F1’s five so-called “propaganda races” – Abu Dhabi, Baku, Bahrain, Shanghai and Sochi – for whom the “gate” is largely insignificant. However, they would need to brace themselves to foot the entire bill, for there would be no spectator or tourism benefits to off-set. All to enable a US-listed entity to cream the income…
By the same token, weekend double-headers, with or without spectators, make little sense overall, for crucial ingredients such as tourism and gate income would not be doubled, while aggregate eyeballs would probably drop, particularly as sporting calendars are likely to be massively crowded once (if) Covid-19 recedes.
Thus, double-headers are unlikely to result in double exposure or double accommodation stays, particularly if the primary rationale is to top up Liberty’s depleting coffers and not provide income.
However, teams are acutely aware they will not derive income from F1 for as long as there are no races to contest (televise) – and those who entered into exposure- or performance-linked contracts will be particularly hard-hit – and thus they can be expected to be as flexible as possible within their own business models.
All that said, all parties, ranging from the FIA and F1 through race promoters to teams and broadcasters and many more beyond that, have a genuine need (and every imperative) to resume racing immediately after the lifting of Covid-19 restrictions enables F1 personnel to go about their usual business.
Assuming (key word) F1 is able to stick to its projected “moving target date” of the end of May, that would mean the 2020 season starts either in Monaco as per the current schedule (24 May) or Baku a fortnight later, with all other events running as per the schedule save for a finale in Abu Dhabi – which can be pushed out a week or so due to special circumstances – and others slotted into any gaps.
On that basis then the races that are directly affected are: Australia, Bahrain, Vietnam, China, Netherlands, Spain and (possibly) Monaco. Before turning to the projected schedule, let us examine their fates:
Unlikely to be slotted in at some point this year due to logistics, and build cost and disruption of (re)building a park circuit that is currently being dismantled after last weekend’s fiasco. Thus, the event, hardly the biggest earner for F1 after the costs of travel to the distant country, becomes the first real casualty of Covid-19.
All-year good weather conditions in the region plus proximity to Abu Dhabi means this event can easily be slotted into the back end of the schedule, ahead of a delayed finale.
Likely to be the second casualty: Logistics make it challenging to slot the race into the calendar, while its street circuit format presents similar obstacles to those in Melbourne. Add in hosting fees that ride on the back of China’s travel costs and there is little appetite to force a stand-alone race into a packed schedule.
In addition, notwithstanding press releases to the contrary, sources on the ground suggest that Vietnam needs another year to prepare for its inaugural event, while pre-Covid ticket demand was such that numerous grandstands were taken off sale.
Every attempt will be made to accommodate a substitute Chinese round, particularly as the circuits pays amongst the highest fees ($40m) and the world’s most populous (and world’s largest car market) has been identified as a prime growth area for the F1. Hence the event could be slotted into the back end of the calendar, but this is thought unlikely as freight costs would not be shared with Vietnam.
Still, F1 needs to be seen to be making every attempt at accommodating the race.
Being Europe-based, the event can be slotted in ahead of the Belgian Grand Prix – staged 300kms from Zandvoort – in August, during what is/was F1’s summer break. Thus, the race could fall on any of three open weekends in August.
A back-to-back with Hungary is the most likely, still providing a brief break before what will an extremely hectic period. This slot provides the longest gap to Spa’s race, crucial to reduce ticket cannibalisation between the two events.
Likely to be cancelled entirely due to political issues which arose after the current one-year race contract was signed: according to Spain’s El Confidencial publication the hosting club RACC owes €30m plus and is effectively bankrupt, while the F1 grand prix itself has never covered its hosting fee, said to be €22m in 2020. Thousands of tickets are given away to prevent embarrassingly empty stands, the publication added.
An interview promised to RaceFans during testing was cancelled after RACC chairman Vicenç Aguilera resigned unexpectedly. Thus, cancellation of the race will probably be welcomed by the Catalan government, but expect much wrangling over payment of the fee.
Could be hosted subject to Covid-19 restrictions being lifted. If not, is unlikely to be accommodated later due to the logistics of building/rebuilding the street circuit – currently in progress – plus the fact that Monaco is usually (not always) run during Ascension Day weekend to minimise disruption to traffic and business.
According to a source, the Monaco Automobile Club is adamant that this year’s race be run on the scheduled weekend, or not at all – the most likely scenario should Covid-19 prove unaccommodating even to principalities, as the race pays zero hosting fees while gradually being overtaken by others in the glamour stakes.
Thereafter the calendar will take its normal course through to Hungary, with the Dutch round slotted in ahead of Belgium and the “normal” schedule resumed through to the Brazilian Grand Prix.
Then it gets tricky: Every attempt is being made to accommodate both Bahrain and China after Sao Paulo, but weather is not at its best in Shanghai from November. However, moving Abu Dhabi out a week enables Bahrain to be accommodated, while a two-week delay permits both China and Bahrain to be accommodated, albeit extremely hectically.
Thus, the provisional calendar could look as follows:
|6||19 July||Great Britain|
|18||29 Nov/6 Dec||Bahrain|
|19||6/13 December||Abu Dhabi (likely the former date)|
How likely is such a schedule, be it 17, 18 or even 19 races? The smart money is on 19 races if Covid-19 is fully under control by May and Monaco goes ahead and 18 without, with China falling away only after every attempt is (seen to be) made to save the race. That would bring the calendar down to 17 – five down on the 22 originally scheduled, but still well up on pre-CVC era schedules.
Either way, as Lewis Hamilton said so eloquently in Melbourne – and only half-shot down by Carey in the face of F1 wriggling every which way to stage the race in the face of insurmountable odds – “cash is king”, which is evident in every option Liberty throws at F1 in desperate efforts to prop up its share price and ensure the short-term survival of teams. Long-term plans can and must wait.
A Thursday conference has been called by F1 and the FIA to discuss a draft calendar with all teams, so watch this space – but don’t expect the schedule to be firmed up just yet.
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