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SBD Global/October 10, 2013/Franchises

Concern Among Independent F1 Teams Rising Regarding Rapidly Increasing Racing Costs

Independent F1 teams, such as Marussia, face an uncertain financial future.
Sources said that they "fear Formula One is headed slowly but surely towards a series formed of manufacturer and customer teams," according to Tom Cary of the London TELEGRAPH. The news that "private equity firm CVC Capital Partners, Formula One’s largest single shareholder," took a $865M dividend in '12 caused "much eyebrow-raising within the F1 paddock." CVC, which paid roughly $1B for the sport in '06, has now gained more than $2B from it "in the last 24 months, while reducing its stake" from 63% to 35%. It has "been able to do that" because F1 CEO Bernie Ecclestone has "made the sport so commercially successful." The figures "stand in stark contrast to the balance sheets of virtually every team from midway down the grid backwards." The "new commercial pact signed between the teams and Ecclestone" gives teams 63% of the profits -- $751.8M last year -- but it is estimated that 60% of that money "goes to the top five teams, with the next five sharing" the other 40%. Marussia, which "finished 11th last year, only recently agreed a deal with Ecclestone and currently have no share of the revenues." Set "against the teams’ profits are costs which are set to rise sharply next year with the move to new turbo-charged V6 engines." Toro Rosso Team Principal Franz Tost estimated that the move will cost independent teams an extra $15M-$20M. The decision to "host two tests out in Bahrain prior to the start of next season, and the return of in-season testing, will put a further strain on resources" (TELEGRAPH, 10/8).

COSTS RISING: In London, Kevin Eason reported it is a "little-known fact that F1’s 11 teams have to pay race promoters for their hospitality suites, down to the hire of cutlery and even coat-hangers, which angered one team manager to the point of fury." Teams face an average charge of almost £186,000 ($296,500) "just to go racing at each of the 12 'flyaway' events from Brazil to Japan." That equates to £1.8M ($2.9M) a race on average "collected from the 11 teams by circuits desperately trying to offset the fees" -- ranging up to £25M ($40M) annually. A source said, "We are effectively paying a tax on racing. The promoters have to make their money somewhere and they make it from the teams. It is like a football team turning up at Old Trafford for a match against Manchester United and discovering they have to pay for the changing rooms, the hot water and the soap." One team said it was asked for almost £9,000 ($14,300) to "hire three forklift trucks to move around their boxes and pallets at one race." The source added, "It would have been cheaper to buy one and drive it into the river when we were finished." At another race, "the hire of a fridge" was equivalent to £1,200 ($1,913) for the weekend (LONDON TIMES, 10/9).
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