Adam Cooper

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

Last May’s weekend might not have been perfect, but the first Miami Grand Prix was a hit. The fans made the journey, we’ve never seen so many celebrities gathered at one track and in the end the race wasn’t too bad, with the intervention of the safety car to spice it up. Formula 1 has therefore managed to take another step in its attempt to invade the United States.

“The verdict is that it’s okay”said Stefano Domenicali, CEO of F1 at the end of the Miami GP. “I think what we are going through and this achievement is incredible. Do you see all the people that were there? To be honest I have never seen so many requests. Everyone wanted to be there.” From a global perspective, it’s incredible. There was nothing here nine months ago.”

“As always we will do a good debrief to see things in detail but that is part of the normal process. You have done an incredible job. Everyone is already wondering when we will be in Las Vegas. Another year!”

A tasty success for F1 as this race came just weeks after the announcement of the future Las Vegas GP to be added to the calendar in 2023. Note that many key Nevada players supporting the project were present as distinguished guests in Miami.

If racing around Hard Rock Stadium marked a fresh start for Formula 1, as Stephen Ross and the Miami Dolphins (South Florida Motorsports, to be precise) formed a joint venture to promote the GP, Las Vegas will be another step. The city and the casinos adjacent to the circuit will be partners, but the promotion will be ensured by F1 in cooperation with Live Nation, a subsidiary of Liberty Media. F1 has now set up a separate 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 getting all the agreements and permits needed to use the city’s streets and get past the big casinos. But where would the vast pit and paddock infrastructure that takes weeks to set up in Monaco and Baku go? Would the city really tolerate this disruption every year?

The teams had heard rumors that the paddock would be several kilometers from the track and that the pits would only be rudimentary, with no real garages. Finally, Greg Maffei solved the mystery days before the Miami GP when the CEO of Liberty Media revealed the championship had acquired downtown land for $240 million to build permanent boxes there.

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

Instead, F1 will benefit from permanent stands like those in Singapore and Miami. During the roughly 360 days of the year following the race weekend, the uses of the site are endless: it can be transformed into a revenue-generating space, or a souvenir shop serving as a reminder of the November race is another possibility. How about an F1 style 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 that will be organized with our structure. This shows Liberty’s commitment to F1. It’s very important for F1, you can see what’s behind it, everything we do and more because we really believe F1 can move forward.”

Las Vegas 2023

Las Vegas 2023

The acquisition of these 15 hectares of land is a fascinating development and underscores why F1 and Liberty are confident in taking on the role of sponsor. “I think our decision to promote Vegas alongside Live Nation and local partners was driven by several factors.”said Maffei. “The first is proximity. Getting from Denver to Vegas is pretty easy [où se trouve le siège de Liberty, ndlr] so 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 to increase our knowledge of the business and understand how we can be the best F1 product on track for other promoters as well. […] and possibly to promote other races in the future.”

“In closing, I think Vegas will be an important and perhaps unique opportunity. Financially, we think this project is worth the extra time and effort to become a promoter.”

Miami’s plethora of showbiz stars may not have gone down well with ‘old’ F1 fans, but that’s the path this championship is taking, boosted by the success of Drive to Survive. We therefore take no chances when we announce that the Las Vegas GP will go further.

“I would say Vegas has always been a place where we believe the combination of F1 values ​​and the glamour, the appeal and the opportunity to be in this community is key.”said Domenicali. “And I think it’s a great achievement 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 is the best [solution] to ensure that we have a race next year in November, a spectacular and unique event. We felt that in Miami.”

The Las Vegas GP is a big bet for Liberty and F1 but judging by the success of the Miami GP it should definitely be a winner. Nevertheless, it remains exciting where the funds come from and how they are used. Will the investment for the Las Vegas GP be made by the Liberty Media unit or under the F1 banner? What percentage of earnings goes to the championship piggy bank and what percentage goes elsewhere? In other words, where does Live Nation fit in?

Knowing where the money is going is important as it is from the F1 treasury that the ten teams on the grid take their bonuses and it is obvious they will be demanding clarification on how the Las Vegas event will operate.

“In general, we are the main partner, Live Nation is a secondary partner from a financial point of view”added Maffei. “They play a very important role. But most of the capital investments and expenses will come out of our pockets, not Live Nation’s. And we don’t expect that to be specifically mentioned in our accounts, it doesn’t matter. Everything is broken down into organizer fees, sponsorship, hospitality, etc.”

F1 sales are broken down into key categories. Most of this relates to primary revenue ie from race promotion rights, sponsorship and broadcasting, the first two being directly affected by an F1 organized race. Hospitality, which will play a big role in Las Vegas as it did in Miami, falls under the “Other” category.

“We will consolidate”said Brian Wendling, Liberty Media’s chief financial officer. “Receipts and investments will be on our books, as will expenses. And we expect to have to refine this post-race. Expect earnings to flow into their traditional categories.”

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

The future Las Vegas race track

The future Las Vegas race track

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

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

What will be the next step for F1 after Las Vegas? Interestingly, and somewhat confusingly, Maffei hinted that the championship was considering getting involved in other races.

“I don’t think we announced anything”he guessed. “We’re going to start and see how we approach it, hoping to do it [du GP de Las Vegas] the success we think we can have. I just want to say with caution that we can’t be sure that we won’t end up self-promoting in emblematic places. I would not ignore this opportunity.”

Liberty is therefore aiming for ‘iconic’ Grands Prix, which makes sense given destinations such as Spa and Monza are said to be on the calendar, but clearly struggles to keep up with other paid races. As joint ventures with Formula 1 or with 100 percent support from Formula 1, these races would make more sense for Liberty.

One might suggest that Monaco will make that sort of deal as well, given Liberty’s apparent frustration at the preferential treatment the principality is getting with low fees and control over the TV stream or hospitality that “no other circuit has.” This special offer has endured for decades because F1 needs Monaco more than the other way around.

Additionally, Domenicali acknowledged that the Las Vegas GP may not be the only race promoted by F1, although careful not to make too many waves: “What Greg said is never to be said. In that sense I would say that we are very satisfied with the promoters that work with us. They are very, very loyal and reliable partners with whom we will become even stronger together in the future.”

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