2015 United States Grand Prix - Austin, October 23 - 25

[bill shoe]

COTA lost part of their state funding because their current management failed to lubricate the political machine that supplies the funding.

It's not a coincidence that the state audit committee did not audit the F1 race subsidy for several years and then suddenly they did. These are political consequences of things that do and do not happen behind the scenes.

Tavo was the consummate player at lubricating the political machine. That's how he got an amazing guaranteed 10-year state subsidy complete with signed confirmation letter from the Texas state controller.

The recent COTA president was not the consummate political player. This is why he was let go shortly before the 2015 race, because the track owners were notified the previous guaranteed subsidy was magically decreasing. The owners realized the president failed to understand and play the political game that kept the subsidy coming.

[sgth0mas]

Well there was an administration change...so thats going to impact this obviously. And then you look at falling tax revenue as a result of crashing oil prices....and you get exactly what we see here. More discretion over unnecessary spending. And the first place they will look is the most expensive event on the list. But Thats using logic...so what evidence do you have that states its a matter of "lubricating a political machine"?

Texas can get much greater benefits from supporting other events for substantially less. INDY, NASCAR, NCAA Championships, motogp...etc

[Phil]

F1 fees are around 10 times more expensive than any other racing series fees. If you think F1 is 10 times better than any other racing series then you may agree with Bernie´s fees. I don´t, and I think that is one of the main problems for F1, excessive fees wich force orgainzers to increase ticket prices, audience go down, and sponsors interest go down too because less people is watching. Both for track organizers and TV channels.

No one calculates on premise of better. F1 offers more exposure, plain and simple. If it does on the scale of 10 times more or 5 is hardly relevant: fact of the matter is that the sport is at the limit of packaging all the races into the season with its 19-21 races. What a race costs is simply a matter of demand.

Sure, the race venues might be struggling because for them, it's a matter of costs to secure the deal and have the race in first place, against what number of tickets they can sell and how many sponsors they can accumulate to offset those costs. Sometimes you gamble high but the weather might lead to less people visiting the track and buying [general admission] tickets.

To what degree this is Bernies fault, I don't see it. Irregardless of the cost of his deals, he secures 19+ races a year, year by year. Most exposure of F1 does not happen at the venues, it happens on television. Pay TV is a problem, but I wouldn't shift the blame entirely to Bernie for it going there; First you need [free] TV broadcasters willing to broadcast the sport in the first place and Motorsport always has it inherently difficult here against other more popular sports by the masses.

As I said previously; F1 is prestige and securing a race at your venue encompasses advantages that extend over simply getting people to your race and selling tickets. Cities like Singapore and Melbourne among others have made it a great exercise to promote their city to the point it attracts tourists beyond a simple F1 race. They have achieved global awareness through it and as a result, have lured more tourists and therefore more money to their country.

People should be thinking outside the box. Venues like Hockenheim have not, either because it's in the middle of no-where (and the effects of tourisms throughout the year is close to zero) and sadly, this will mean that venues like that will disappear, unless Germany as a country, or the state of the venue jumps in with additional money because they want to be kept on the calendar. It's as simple as that.

[bill shoe]

...so what evidence do you have that states its a matter of "lubricating a political machine"?

Good question, and there was admittedly weak support in my earlier post. Of course there is no public quid-pro-quo, so consider the public evidence and apply healthy skepticism:

1. The law that controlled the Texas major events subsidy was changed to allow car races, shortly before announcement of the F1 race. Coincidence?

2. The award ($25 million per year for 10 years) dwarfed any other use of the fund until then. Coincidence?

3. This award went to Tavo Helmund on a secret no-bid contract. No other bidders were sought or accepted, despite the unprecedented size of the award and despite the fact that Tavo brought no infrastructure or major event experience to the table. Tavo was given a quarter-billion dollar state handout in return for a promise he would do something with it. Coincidence?

4. Tavo received an extraordinary commitment, via a public letter from the Texas State Comptroller, that the $25 million per year was guaranteed. Coincidence?

5. Later on, when we now know that Tavo was trying to sell the contract to Bobby Epstein et al (instead of partnering with them), the Texas State Comptroller issued an extraordinary and weird public press release stating that the race contract could be transferred to a different party and the state guarantee would still be valid. Coincidence?

6. Later still, when we know now that Bobby Epstein et al were threatening to promote the race and claim the state money without Tavo, the Texas State Comptroller issued yet another weird press release stating something to the effect that the state money was now not guaranteed and the race would be audited vigorously to determine how much of the money would be paid. Coincidence?

7. Austin F1 races have featured a Paddock Club suite for the Hellmund family. This was Bernie's real estate provided to Tavo. Why? Once Tavo had sold out the contract to Bobby Epstein et al, he had nominally provided nothing of value to Bernie and FOM. But Bernie still rewarded Tavo handsomely. Is it simply Bernie's nature to reward people at significant cost to himself if they didn't do anything for him? Coincidence?

8. Several weeks before the 2015 race, COTA was notified that a state audit had suddenly occurred regarding the "guaranteed" state subsidy. The state would no longer be providing the previous subsidy. Because, you see, the wrong accounting method had been used before. Darn!, these mistakes do sometimes happen despite the size and publicity of the initial award. Coincidence?

9. In response to this, Bobby Epstein et al fired the COTA president. Quickly. Even before the upcoming 2015 F1 race. If the state subsidy was changed purely on the basis of honest accounting then there would be no logical reason to blame/fire the COTA president. Yet he was promptly fired. Coincidence?

Now ask yourself: Would the above 9 events plausibly occur if the Texas major events fund was awarded without consideration of any political donations or kickbacks?

Finally and most importantly, read "The Power Broker: Robert Moses and the Fall of New York" by Robert Caro. This staggeringly well-researched book details all the corruption and political machinations that greased the skids of New York City Highway construction for several decades. Robert Moses was not remarkable for his level of corruption, but he is unique for having been so exhaustively deconstructed by a serious historian. This book is a rare look at how the world really works. Read, digest, then think about the realistic likelihood of Tavo Hellmund being an honest boy scout who successfully brought F1 to Texas (??!!??) without any political greasing of the skids.

[Andres125sx]

F1 fees are around 10 times more expensive than any other racing series fees. If you think F1 is 10 times better than any other racing series then you may agree with Bernie´s fees. I don´t, and I think that is one of the main problems for F1, excessive fees wich force orgainzers to increase ticket prices, audience go down, and sponsors interest go down too because less people is watching. Both for track organizers and TV channels.

No one calculates on premise of better. F1 offers more exposure, plain and simple. If it does on the scale of 10 times more or 5 is hardly relevant: fact of the matter is that the sport is at the limit of packaging all the races into the season with its 19-21 races. What a race costs is simply a matter of demand.

Sure, the race venues might be struggling because for them, it's a matter of costs to secure the deal and have the race in first place, against what number of tickets they can sell and how many sponsors they can accumulate to offset those costs. Sometimes you gamble high but the weather might lead to less people visiting the track and buying [general admission] tickets.

To what degree this is Bernies fault, I don't see it. Irregardless of the cost of his deals, he secures 19+ races a year, year by year. Most exposure of F1 does not happen at the venues, it happens on television. Pay TV is a problem, but I wouldn't shift the blame entirely to Bernie for it going there; First you need [free] TV broadcasters willing to broadcast the sport in the first place and Motorsport always has it inherently difficult here against other more popular sports by the masses.

As I said previously; F1 is prestige and securing a race at your venue encompasses advantages that extend over simply getting people to your race and selling tickets. Cities like Singapore and Melbourne among others have made it a great exercise to promote their city to the point it attracts tourists beyond a simple F1 race. They have achieved global awareness through it and as a result, have lured more tourists and therefore more money to their country.

People should be thinking outside the box. Venues like Hockenheim have not, either because it's in the middle of no-where (and the effects of tourisms throughout the year is close to zero) and sadly, this will mean that venues like that will disappear, unless Germany as a country, or the state of the venue jumps in with additional money because they want to be kept on the calendar. It's as simple as that.

I agree with you explanation about how does it work, problem is, like you stated yourself, demand. Prices are dictated by demand, ok, but problem is now only those countries who use F1 as a worldwide advertising think it´s worth paying those extremely high fees, because as a business itself, F1 is not worth.

Now only countries like Singapour whose F1 GP is a tool to atract tourism are willing to host a F1 GP, but on traditional countries demand is quickly decreasing because now not even with pay TVs and high ticket prices it´s worth as a business.

This means tracks like Hockenheim, Nurburgring, Magny Cours, Imola, Valencia.... any country with a tradition on motorsports today does NOT want to host a F1 race. Only exotic countries like Singapour, Barhein, China, Rusia.... want to host F1 races. So yes, there´s still demand, but F1 can´t survive if it only take into consideration demand.

Can you imagine a F1 season with no GPs on Europe? Do you imagine a calendar where F1 only goes to China, Rusia, Singapour, Azerbayan, Barhein and India?

That´s what we´ll see in a near future if they only worry about demand, because only they think it´s worth hosting a F1 GP for the worldwide exposure, any country wich does not need that exposure, will never host a F1 GP again.

So yes, Bernie managed to keep 19-20 GPs on the calendar, but... what GPs? I still miss Magny Cours, now we lost both german GPs and Valencia (I´ll never miss this tough), and probably we will lose Austing and Silverstone soon too. What´s next? Spa? Barcelona? Suzuka?

That´s Mr.E achievement.

[Phil]

This means tracks like Hockenheim, Nurburgring, Magny Cours, Imola, Valencia.... any country with a tradition on motorsports today does NOT want to host a F1 race. Only exotic countries like Singapour, Barhein, China, Rusia.... want to host F1 races. So yes, there´s still demand, but F1 can´t survive if it only take into consideration demand.

As sad as it is, that's just the reality of it. You either have a globally attractive sport that is viewed in every single country (and expands the viewership), or you keep it local, hardcore and insignificant. There's no room to expand the race calendar and if you have limited races, something has got to give. The positive aspect is that the more the venues cost, the more ends up in the pool that then gets distributed to teams. Yes, the problem is the percentage of what ends up at teams and what ends up at CVC and Bernie, but that's a different problem and a different topic all together.

Look at it from the other side of the coin; By having for instance a Mexican race, or an US race, you increase the awareness of F1 in that country that might turn into more teams wanting to enter (Haas), additional sponsorship money (Carlos -> Perez etc) that feeds the sport. If you keep it local to all the old and traditional venues, you won't have that - and it's not as if the Hockenheim or Nürburgring are fully booked out either all the time. Venues with big cities making a big deal out of a F1 race is not only good for exposure (on TV), but they are also quite attractive for guests visiting.

I don't have to be a fan of it, but that's just the way it is and it's not Bernies fault either. Once demand drops below the number of races deemed acceptable by teams (~19), the decrease in demand will mean that costs of F1 races will also come down too. That hasn't happened yet, but it will when it does.

[bill shoe]

Good discussion about race locations and long-term F1 marketing in general. The lack of traditional racetracks and the dwindling worldwide TV audience are largely due to the majority of Bernie's money coming from exotic countries, i.e. countries that choose to pay beyond strict commercial value for a race.

Here's how teams can expand F1 viewership and make F1 a more attractive space for their sponsors. The current concord-type agreements expire at the end of 2019, so new commercial agreements are needed for 2020 on. Bernie wants lots of money, and the teams and/or car companies wants lots of exposure. The teams should go to Bernie and demand that the new financial arrangements will be as follows: teams get 100% of race-hosting fees, 50% of any pay-TV/media-rights fees, and 0% of any free-to-air TV/media fees. All the rest goes to Bernie/FOM. This gives Bernie a tremendous incentive to maximize profits thru long-term global popularity rather than via short-term local sanction fees in obscure/corrupt countries. Structure it so that Bernie breaks even financially at the initial transition point, but has the potential to make much more money if he grows the sport instead of bleeding it dry. Teams would benefit through more valuable sponsorship rights and more exposure to the underlying car companies that make up the sport. And this can be accomplished without trying to wrest or buy control of the commercial side from Bernie/FOM. Bernie is just like anyone else, he just needs to be incentivized correctly.

The current financial structure of F1 doesn't make sense. It's the only mega-size sport where most revenues come from local fees rather than the global big-audience stuff. Is it a coincidence that the F1 global audience is shrinking? Everyone is focused on who gets what percent of the current pie. Forget it, instead think of growing the pie.