US GP in Austin Discussion and Speculation...

Bernie's $25 million fee, divided over 100,000 seats is over $250 per ticket.....did anybody ever think an F1 race could be profitable?

If i'm not mistaken Bernie has control over the track advertising during the event as well, does he get all of that revenue too?

The only way a GP will work in America is the way Tavo and crew are going about it....

 

And he wonders why we question the finances.

 

...which brings us to what I said. If the F1 race loses money so that the other things make money, then why does it require an F1 race to build the facility, if the idea is that profit from all of that covers the loss from the race? Why didn't an enterprising person build the facility previously and make money on that.

And if the facility existed (like Indy), why would they want to add an F1 race that will lose money? I bought a new CNC machine this week - it cost $75k. I would love a high end machine that costs $385k, but I can't justify it. If I bough it, then it would only be for personal gratification, not business sense. Same with an F1 race.. why drop $400mm on a track that makes money on A (supposedly) but will lose money on B? That only makes sense if there is significant interest like with football. There isn't that interest in the USA, which is why Indy declined.

Assuming Indy's facilities are paid for, then their only need is to cover the $25mm fee and turn a profit on top, and they declined. And they are $400mm ahead right from the starting line.

Indulging in our desires is great, but it usually doesn't work that way for big business - the bottom line is what matters. If Slim was paying for this for personal reasons, then it would be believable... but as a claimed profitable enterprise? No way. That's why they can't get the money together - those who can afford it realize it's a money pit.

 

If you're going to make that much of an investment of capital, you want it to be utilized as much as possible, right? Cowboy's stadium holds plenty of concerts.....same concept here.

Indy might have the advantage of a facility that is paid for, but if they can't get tax incentives to pay the Bernie fees then there is no incentive for them to host a race that doesn't make a profit.

 

Actually I don’t think those numbers are that far off:

4 Hotel nights at $ 250 = 1,000
Transportation (cab, rental car) = 250
Food & Drinks = 350
F1 Tickets = 300
Souvenirs = 100
Total: $ 2,000

Attendance is somewhere between 50k and 100k spectators, so this alone will generate 100 to 200 million USD. And that's not even counting for airfare (where Austin airport will get a part of the action) or any local vendors catering for the event etc.

Granted some fans spend less money than that sleeping at a friend's house but there are also a lot of folks who spend a lot more partying wildly and getting VIP tickets etc.

So a 200 million USD injection to the local economy for the price of 25 million looks like a political no brainer to me. If you're applying a 10% tax on the 200 million the community even gets almost all of its money back (plus the multiplicator effect of a true stimulus package).

Plus Austin gets its name put on the global map, which certainly helps in tourism, not just for the city but also for the wider Texas area and to some degree the US as I'm sure a lot of the folks attending will come from Europe combining it with a US trip or folks from South America (Texas being of the two major hubs to South America). Having their name on the F1 calendar and being televised to the biggest global sports audience is certainly not something they would mind. A Superbowl is a once in a lifetime (or at least decade) event. F1 would be an annual event generating an annual buzz about the town. Much bigger long term impact. And on top of that they get a neat motorsports facility that serves a purpose for year round events.

 

The problem with al the calculations is... How much of that is "new" money?. Local people will be spending the money at F1 instead of going to the movies, restaurants,... etc,.. so it is a shift of spending, not new revenue.

In F1's favor, is that it does bring in a signif percentage of out of towner's... which is new revenue (if they are out of state).

But I would wager that 50-75% of attendees would be Texans... thus not new revenue.

 

I disagree. I think 25% max are Texans. The majority will be South Americans and Europeans who will combine this race with a great US vacation (it has never been cheaper for them to come here!). It was similar in Indianapolis.

And don't forget all the US Americans from out of town/state. I know I would make an annual pilgrimage to Austin and drop the money I listed above (and more) every year. Whereas without the GP I have no interest to ever go to Austin.

PS: I'm still very much on the fence or actually on the doubters side that this race will ever happen. My point is that a city like Austin actually does itself a big favor by coughing up the 25 million USD. They'll get that back ten fold.

 

Aren't you one of the people saying that this project won't work because there's no interest in F1 in America? That defeats your theory and would mean that most of the revenue IS "new" money. I think Andreas said it well here

 

Find a post where I ever said that. (trust me, you can't).

I have believed this project is not viable because no F1 track has been built in modern times w/o nearly full gov't funding. And all of the new F1 tracks have lost massive amounts of money.

That doesn't mean someone can't make money getting a track built (the construction companies for example)...

 

Here's that silly arguement again. I know it has already been lampooned, but I can't resist. If all good ideas had already been done, then only bad ideas would get done 'now.' Therefore Austin makes sense to those who think it's a bad idea? How about these figures: Jonathan Livingston Seagull was turned down by 18 publishers; Gone With the Wind by 38; Harry Potter by 9; and Dune by 23. The 19th, 39th, 10th, and 24th are still counting their money and it's still rolling in. Only 6% of all products offered for sale make a profit. The name of the game is 'risk taking.'

 

You assume that everyone attending is paying full boat which in F1 is never the case.
A lot of whatever the profit is it will pass through Austin on its way to corporate coffers inside and outside of the U.S.

 

Fair enough,... But did Margret Mitchell's previous 10 books each lose $100M?

 

Huh?

I was listing expenses you have to pay right there on site in Austin. Makes no difference whether the folks attending the race are on a corporate sponsorship trip or not. And believe me: If they are, they spend even more than my numbers show. I had once that pleasure and it was service extraordinaire in Indy. And I'm sure it was not gifted by the city.

My numbers are conservative because they only cover what I as a fan can oversee. There are tons of additional bills for services rendered by the local economy because of the fans and the race in town.

Indianapolis might not need the GP because they got the Indy 500 and other races, but what has Austin got? And I'm not saying they need the GP, but it would certainly give them a welcome stimulus once a year plus make them a global household name.

PS: I've made this point before: I still don't understand why a city like Indianapolis (or Austin) not just add a GP tax for the race weekend to recover the $$ they paid to Bernie. F1 fans won't notice a 10% increase on all services, but it could just pay for Bernie's fee.

 

<Cough> I don't think that is reported as a taxable transaction <Cough>

 

LOL

You've obviously been to Indianapolis and Montreal...

I was actually thinking of services rendered by the local police, the clean up crews, the news media etc etc.

 

is there anything we can agree on....?

 

That if and when it comes off we'll all be glad.

 

i think by the end of summer, we'll have reached a consensus as to if its going to happen or not.

The question is, will this thread eclipse the USF1 thread as the biggest in F1 subforum ever.....only 526 posts to go!

 

It's not silly at all - it is the nature of capitalism.

One big difference between the other things you mention is that they don't all require money-losing ventures underwriting them to get done. Another is they aren't all bundled together in some big wrapper and sold as a package. A better analogy in the book world would be like someone coming along and saying they want you to publish their line of R-rated gay novels in Syria, but you need to commit to their whole line of 18 books, you can't do just one. And they want a $400mm retainer.

There's risk taking, and there's stupidity. Investing $400mm in an F1 track in Austin is the latter, if the intent is to make money.

That's why it's not funded - because the people with that kind of money tend to be smarter than to blow it on R-rated gay novels for sale in Syria.

 

You've missed the point entirely, Mike. You are saying that if something is a good idea (exactly what you said), it would already have been done. This is an absurd idea. Period. Apple should never have come out with the I-Pod because if it was a good idea, someone would already have done it, I-Phone: same; I-Pad: same. I am not trying to argue whether Austin is a good idea or not. I would have to see a whole lot of market research and numbers before I would hazard a guess, and even then it would only be a guess. Things change. If this thing happens and they recoup their investment in 10 years, with the Texas subsidy they will have performed extremely well. There are simply too many unknowns. What if the track got built and either Ford or GMC decided to get into the sport? Would that change the outlook? Sure it would. What if we went into a depression. Would that change things? Sure it would.

 

Indy wants nothing to do with local government, they are happily independent. They give far more to the local area than our tax dollars.

 

Interesting question. I'm sure we will pass that record regardless of what happens in Austin: either way there will be a ton of "I told you so"-s flying around.

PS: I want credit for creating a new noun.

 

It is incredibly naive from a business standpoint to think that the Austin F1 track magically fills numerous needs in the local community that have thus far gone unfilled. You keep making reference so singular things like an iPhone, a book. You're not getting what I am saying. The Austin GP people are listing numerous uses for their facility and suggesting these things will all lend to the profitability of the venue.

One of the biggest parts of bringing any product to market is identifying the need. It is a long shot to believe there is a need for all of the things Austin GP claims to provide, and that need has thus far been unfilled. It is evidentiary of an ill planned venture.

When a prospective businessman is standing in front of you looking for investment in their idea, one of the most rookie mistakes they can make is to start going off on tangents about all the various revenue streams they will enjoy that require tasks and investment corollary to the core business. BIG reg flag.

Austin claims to fill numerous needs. If those needs existed to the extent necessary to validate construction of such a facility, some of those needs would have been filled.

That's the point. Not a singular business proposal, but the proposal that numerous needs will be filled in one magical facility.

 

Ok let me get this straight you do not PERSONALY feel that any of the aspect's proposed are needed within a racing facility that can cater to just about every form of racing within Austin,Travis County or even Texas?

 

They have always stated that it's primary purpose was a racetrack, everything else is a possible secondary purpose.