Thursday, July 19, 2007

Indianapolis - goodbye F1, hello MotoGP

It's a funny old world sometimes, and the latest goings-on with Indianapolis Motor Speedway are no exception.

It seems like Tony George has once again shown himself to be a businessman at heart, choosing to not pursue a Formula 1 grand prix, and its $9 million fee, and instead host MotoGP, which will cost only 1/4 of that amount. There's little doubt that there will be just as many attendees for MotoGP as for Formula 1 - despite this nation's preoccupation with Hardly-Ablesons and other decrepit cruisers, the sportbike fans are widespread and loyal. In fact the sportbike industry is growing at a record pace whilst the cruiser market is actually shrinking. The percentage of people who ride sportbikes who also follow MotoGP is quite high, and the opportunity to see a MotoGP race for those riders closer to Indianapolis who cannot afford the time or money to get to Laguna Seca will surely be grabbed.

This is all good for MotoGP, their organizers Dorna, IMS, Tony George, US motorcycle racing fans and the US motorcycle industry. It's not so good for anyone in the US with an interest in Formula 1. The inability of all parties to retain a USGP in one place for an extended period of time is hard to figure out, and all the usual excuses just don't seem to wash with me.

Lack of interest from fans is often quoted as a big issue. I'll concede that interest in F1 in the US is much lower than in the rest of the world, but the bottom line is whether there are enough fans to allow the venue to make money and enough US TV viewers to justify the costs to networks (and their sponsors) to actually show the race. Since it has always been on network TV, I find it hard to believe that money is not being made by TV companies.

However, the staggering fee charged by Bernie Ecclestone to a venue may very well be the most significant issue in the failure of F1 in the US. For an event that costs $9million, and draws 120,000 - 150,000 spectators, each spectator would need to spend between $60 and $75 for the track to just break even on that one expense. Factor in the additional staffing costs (450 staff per day), supplies, accommodation, local fees for police, permits, taxes etc., and each fan is going to need to spend much more. I'll admit that additional income from sponsorship, merchandising, food and drink sales, luxury suites, parking and kickbacks from the City for the additional sales taxes the event generates all help. But the bottom line is that IMS can have just as much income from MotoGP, whilst spending $7million less for the privilage.

These venue fees are theoretically supposed to cover costs for the series. It costs money to transport an international racing series, especially via air on tight time schedules. I used to work for a freight forwarder that did just that, so I know the expenses involved. But the massive discrepancy between what MotoGP charges and what F1 charges indicate that the venue fee in F1 is a profit center, whilst in MotoGP it is a reimbursement of expenses. The sad thing for US fans is that Bernie can get that money from another venue in another country - the list of countries who want F1 is very long, and populated with a lot of heavily-funded plans. Bernie believes the US doesn't offer anything that he can't get from another country. Some of the top teams in his series might have a different opinion, especially Mercedes and BMW. It's this that could ultimately be the biggest fallout for F1 from the USGP issue.

I am aware of the fact that IMS was hoping to host both events, but the more favorable deal from MotoGP surely helped put things in perspective during negotiations with Formula 1. Had MotoGP not been on the table, I don't think the F1 deal would have seemed as stinky as it turned out to be.

1 comment:

Clive said...

It staggers me that Bernie continues to make the same mistake that he always has done with the US. He seems to want only profit for the FIA but, since America is a special case as the most important market for the manufacturers, he should be offering GPs at reduced rates for the States. Heck, he should be prepared to make a loss (easily funded by the ridiculous sums he squeezes out of eager Asian countries) in the bid to keep a foot in the market.

It's an oft-used principle in business; consider how the Japanese initially invaded Britain and ultimately destroyed the local motor industry - offer 'em cheap cars with radios and they'll buy. Once the competition is beaten, you can charge what you like.

I have a feeling that the manufacturer teams will not take Bernie's ineptitude in this lying down. Already Honda has had a grumble and I can see others speaking out as well. If he's not careful, Bernie could be out of a job very soon.