DECEMBER 27, 2005
Circuits going broke
The cost of hosting Formula 1 races is a nice little earner for Formula One Management, bringing in around $200m a year, with many of the contracts featuring clauses which increase the cost of the fees by 10% a year. Circuits are pressured into signing such deals because they do not want to lose the races but, increasingly, they are not able to make enough money to run operations in profit. Spa has been losing money for years while Magny-Cours has slashed prices in an effort to pull in more people. Australia, Malaysia and such races all lose money but the local government pays the difference.
In Germany it seems that the local authorities are not very keen to follow suit but reports in the German media suggest that Hockenheim, the home of the German Grand Prix, cannot afford the race. The daily newspaper Bild is reporting that Hockenheim's accountants are advising that the track cannot sustain its current operations. A week ago the track came up with a deal which brought in money by selling the grandstands but leasing them back from the buyer. Clearly if the race is to be saved there needs to be either a deal with FOM (which is not very likely) or assistance from either the local government or the German car companies. They have little to gain from helping out FOM in the current political situation in F1.
Meanwhile in Japan there mat be similar problems as Suzuka as it has been announced that the Suzuka Circuitland Company and Twin Ring Motegi (both Honda subsidiaries) have been merged to form a new company company called Mobilityland Co., Ltd. This is a cost-cutting measure as the two circuits will now be run by the same management.
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