Why F1 spent $240 million on a construction site in Las Vegas

The weekend may not have been perfect last May, but the inaugural Miami Grand Prix was a hit. The fans made the trip, we have never seen so many celebrities gathered on a circuit and, in the end, the race was not so bad, with the intervention of the Safety Car to spice it up. F1 has therefore succeeded in taking another step in its attempt to break into the United States.

“The verdict is that it’s OK”entrusted Stefano Domenicali, CEO of F1, to Motorsport.com at the end of the Miami GP. “I think overall what we’re going through and that success is amazing. You see all those people who were there? To be honest, I’ve never seen so many requests. Everybody wanted to be there. D “from a global point of view, it’s incredible. Nine months ago, there was nothing here.”

“As always, we’ll do a good debrief to see things in detail but that’s part of the normal process. They did an incredible job. Everyone is already wondering when we’ll be in Las Vegas. Another year!”

A tasty success for F1 because this race took place only a few weeks following the announcement of the future Las Vegas GPwhich will join the schedule in 2023. Note that many key players from Nevada supporting the project were present as distinguished guests in Miami.

If the race around the Hard Rock Stadium marked a new start for F1, as Stephen Ross and the Miami Dolphins (or more precisely South Florida Motorsports) established a joint venture to promote the GP, Las Vegas will be a additional step. The city and the casinos bordering the circuit will be partners but the promotion will be ensured by F1, in collaboration with Live Nation, a subsidiary of Liberty Media. F1 has meanwhile created a stand-alone company to manage the Las Vegas GP, and some of its staff have already been transferred.

F1 will go to Las Vegas in 2023.

Plans for Las Vegas looked promising when the race was announced, but one question remained. F1 had hit hard by obtaining all the agreements and authorizations necessary to exploit the streets of the city and pass in front of the large casinos. But where would the huge pit and paddock infrastructure, which takes weeks in Monaco and Baku to set up, go to? Was the city really going to tolerate these disruptions every year?

The teams had heard rumors that the paddock would be placed several kilometers from the track and that the pits would be rudimentary, with no real garages. Eventually, Greg Maffei cleared up the mystery days before the Miami GP, with the CEO of Liberty Media revealing that the championship had acquired land in the city center for $240 million to build permanent pits there. .

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This is an unprecedented investment for Liberty and F1, but it was prompted by something. Finding the space for a temporary compound and renting it out every year was going to be expensive. Moreover, there was no guarantee that the owners would not sell the land one day, or use it to build, which would have left F1 without a place to set up its pitlane. The temporary buildings would also have had to be rented or, more likely, bought and stored between Grands Prix, at considerable cost.

Instead, F1 will benefit from permanent stands like those in Singapore and Miami. During the roughly 360 days a year following the race weekend, the possibilities for using the site are endless: it can transform into a revenue-generating space, while a souvenir shop serving as a reminder for the race November is another possibility. How regarding an F1-themed cafe and hotel?

“We will be very precise very soon”said Domenicali. “But understand that it will be a flagship product for F1 and there will be other activities organized with our structure. This demonstrates Liberty’s commitment to F1. It is very important for F1, you can see what’s behind it, everything we’re doing and even more, because we really believe that F1 can develop further.”

Vegas 2023

The acquisition of these 15 hectares of land is a fascinating development and highlights why F1 and Liberty are taking on the role of promoter with confidence. “I think our decision to promote Vegas in conjunction with Live Nation and local partners was driven by several things”Maffei said. “The first thing is proximity. It’s pretty easy to get to Vegas from Denver [où se trouve le siège de Liberty, ndlr] so that we can do our job. And we have some knowledge of the local US market compared to many other markets.”

“But I think the most important thing is that we see the opportunity to be a promoter as a way to increase our knowledge of the business, to understand how to be the best F1 product on the track for other promoters as well. […] and, potentially, to promote other races in the future.”

“Finally, I think Vegas is going to be an important and, perhaps, unique opportunity. So from a financial standpoint, we think this project is worth the extra time and effort for us to become one. promoter.”

Miami’s profusion of showbiz stars may not have gone down well with “old” F1 fans but that is the road this championship is taking, boosted by the success of Drive to Survive. We are therefore not taking any risk by announcing that the Las Vegas GP will go even further.

“I would say that Vegas has always been a place where we believe that the combination of F1 values ​​and the glamour, attractiveness and opportunity to be in this community is crucial”said Domenicali. “And I think it’s a great success to be able to do business there, also for those who invest there, but especially for our knowledge of the business and our exploration opportunities with our partner Live Nation. It’s the best [solution] to ensure that next year, in November, we will have a race, a spectacular and unique event. We might already feel it in Miami.”

The Las Vegas GP is a huge bet for Liberty and F1 but judging by the success of the Miami GP it should definitely be a winner. Nonetheless, where the funding is coming from and how it will be used remains intriguing. Is the investment for the Las Vegas GP made by the Liberty Media entity or under the F1 banner? What percentage of revenue will go into the championship piggy bank and what percentage will go elsewhere? In other words, where does Live Nation fit in?

It is important to know where the money is going because it is from the F1 kitty that the ten teams on the grid collect their bonuses, and it is obvious that they will demand clarification on the functioning of the Las Vegas event. Vegas.

“In general, we are the main partner, Live Nation is a secondary partner from a financial point of view”added Maffei. “They have a very important role. But most of the capital investment and expense will come out of our pocket, not Live Nation’s. And we don’t expect that to be mentioned separately in our accounts, it won’t matter. Everything will be divided into promoter fees, sponsorship, hospitality, etc.”

F1 revenue is split into key categories. Most of it relates to primary revenue, meaning that from race promotion rights, sponsorship and broadcasting, the first two being directly affected by a race organized by F1. Hospitality, which will be a big deal in Las Vegas as it was in Miami, falls into the “other” category.

“We will consolidate”said Brian Wendling, chief financial officer of Liberty Media. “Revenue and capital expenditure will be on our books, as will costs. And we also expect that we will need to fine-tune that once the race takes place. expect revenues to go into their traditional categories.”

“The Paddock Club will go into other income, sponsorship will go where it’s currently going. And then to the extent that we sell tickets we expect that will go into our promoter income. So the situation will be very similar, except that we consolidate costs and all revenues, whereas in a normal relationship with a developer, we only have these costs [d’organisation].”

The future circuit of Las Vegas

Today, traditional promoters are following developments with some interest. They know they have to raise their level and put on a better show. The 2021 Dutch GP is a benchmark in what can be achieved by a private organization without local or national government support. Domenicali is satisfied that there has been a general awareness.

“I think the beauty of this moment is that the new promoters are embracing a new energy and putting a new vibe into the system”he said. “I think it has an impact on the traditional promoter who has to keep up, with all due respect. And we respect a lot of our promoters because they’re the ones who work with us to make sure we have a good ratio in the whole world. This effect boosts us in an incredible way and ensures that the whole system is very active, to maximize what we bring to the platform.”

After Las Vegas, what will be the next step for F1? Intriguingly and somewhat convolutedly, Maffei hinted that the Championship was considering getting involved in other races.

“I don’t believe we announced anything”he estimated. “We’re going to start and see how we go regarding it, hoping to do [du GP de Las Vegas] the success we think we can have. I would only say with caution that we must not be certain that we will not end up doing self-promotion on emblematic places. I wouldn’t ignore this opportunity.”

Liberty is therefore looking to grab “iconic” Grands Prix, which makes sense given that destinations like Spa and Monza are due to feature on the calendar but are clearly struggling to keep pace with other fee-themed races. As joint ventures with F1 or with 100% F1 support, these races would make more sense for Liberty.

One might suggest that Monaco will also go through this sort of arrangement given Liberty’s obvious frustration with the preferential treatment the Principality receives, with low fees and control over the TV stream or hospitality, which ‘no other circuit has. This special deal has survived for decades because F1 needs Monaco more than the other way around.

Furthermore, Domenicali acknowledged that the Las Vegas GP might not be the only race promoted by F1, although he was keen not to make too many waves: “What Greg said is never say never. With that in mind, I would say we’re very happy with the promoters who work with us. They’re very, very loyal partners. and reliable, with which we will build an even stronger future together.”

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