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F1 cannot count on continued high hosting fees, says Wolff

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F1 cannot count on continued high hosting fees, says Wolff
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By Alan Baldwin

LONDON (Reuters) – Formula One can no longer count on raking in huge sums of money from race hosting fees and is right to chase fresh revenue streams, according to Mercedes team boss Toto Wolff.

A number of race promoters were in Monaco last weekend for talks with commercial rights holders Liberty Media, who took over in January last year and ousted former supremo Bernie Ecclestone.

Several have called for revised contracts, while there has been speculation that a proposed new race in Miami for 2019 will have much cheaper terms because of its strategic importance.

“Sanction fees were one of the three key revenue generators in the old Bernie Formula One business model. And he was exceptional at these deals,” Wolff told reporters.

“I am not sure that is sustainable. It is clear that when there is a change of regime, people and promoters will negotiate and try to restructure the business model.

“Bernie was squeezing the last cent out for the benefit of the shareholders and the teams but it left certain promoters in a very difficult economic situation.”

Silverstone activated the British Grand Prix’s break clause last year while Hockenheim, which hosts Germany’s race, says it needs a no-risk deal after this year.

Monaco, the flagship race, pays far less than others.

Formula One’s other main revenue generators under Ecclestone were television broadcast deals and trackside advertising and sponsorship.

Liberty are building up a digital strategy, that includes an F1 TV streaming service, to tap new revenue streams and audiences.

Wolff expressed confidence in Formula One’s management to make the right decisions.

“But it is also clear that maybe that one pillar (hosting fees) is going to be difficult to maintain on the levels we have seen before,” he said.

“We have to grow in other areas, we have to grow broadcast deals and digital revenue and monetise alternative revenue streams.”

Any drop in overall revenues hits the teams, who receive a percentage of the total.

Although contracts are confidential, the global average fee of the current 21 races is around $30.6 million (23 million pounds), and some $40 million for those outside of Europe, according to the website.

Azerbaijan GP promoter Arif Rahimov told reporters in Monaco that he wanted his race to pay closer to the average.

Azerbaijan, Russia, Bahrain and Abu Dhabi are among those who pay most. Baku’s bill, thanks to an annual escalator clause, is estimated to have climbed to more than $60 million since its debut in 2016 when it was first known as the European Grand Prix.

(Reporting by Alan Baldwin, editing by Christian Radnedge)

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