Analysis: The Silverstone battle F1 cannot win
The news that Silverstone has activated the break clause in its contract with FOM is an emotive minefield. It does not necessarily mean that there will be no British Grand Prix after 2019, nor does it mean that Silverstone will cease to be on the F1 calendar, as memories of Donington’s non-starter contract in 2009 shows. However, it does herald the starting-gun for a deluge of contractual disputes crossing the desk of F1’s new administration.
And yet, in many disputes, particularly in Silverstone’s case, these appear to be fights that Liberty Media and Chase Carey cannot hope to win. On the one hand, the loss symbolic of a historic event, an acrid black mark on the record of an otherwise nascent new regime, running directly counter to its audience led doctrine.
On the other hand, in giving Silverstone a more affordable contract Carey exposes himself to a ravenous scramble from the many other circuits also forced over the breadline by the previous regime, a scramble that would have a price tag in the tens of millions; money that could have reinvested into the F1 product. In essence, Liberty’s challenge is to hold together an outfit already bursting at the seams due to Bernie Ecclestone’s relentlessly exploitative mindset. To evoke a term with a newly politicised resonance, F1 has been the victim of a ‘deal-maker’: a man with a wantonly counter-strategic, short-term focus, who only sees entities relative to what he can extract from them.
Indeed, it is a crisis – and ‘crisis’ is an entirely proportionate term – with its roots in Bernie’s historic, inexplicable disdain of the Silverstone circuit. You sense that the circuit and its rather dilapidated old paddock complex, became emblematic of the “wellies ‘n’ tents” dimension of the sport that he so hated because it didn’t look as good on-screen, or pay as well as the shinier, sunnier venues on the calendar. The conjecture that might be, but even amid a desperate context in 2010 following the demise of the Donington deal, there was no chance that Bernie would pursue a newly consensual negotiating strategy.
Even with a passionate and lucrative British market on the line, even with the proviso that Silverstone should undergo a refurbishment that would ultimately result in the £27 million ‘wing’, Silverstone was presented with a 5% annual escalator in addition to the £11.5 million race hosting fee, such that had the contract ran its course, it would have cost the circuit £25 million to host the race in 2026.
That 5% escalator runs counter to the fact that worldwide audiences have been falling across the life of the contract, so to a great extent, FOM’s commercial failings can be held accountable for the increasingly unaffordable nature of hosting the race. In the previous two years, Silverstone made a loss of £2.8 million and £4.8 million respectively and is due to make a similarly bruising loss this year.
The subsequent rhetoric from FOM is indicative of the bitter tussle to come: “We deeply regret that Silverstone has chosen instead to use this week to posture and position themselves…[seeking] a short-term advantage to benefit their position.” Indeed; Silverstone has rightly and discerningly chosen to put the awkward and essential topic of the British Grand Prix’s future in the headlines ahead of the biggest event of its year.
Of course missing from this equation is Silverstone’s almost unique status as an entirely privately-funded Grand Prix. The fact that the UK has a uniquely invested assembly of private sector interest in the race, including seven predominantly UK-based F1 teams, is a very sound rebuttal to the notion of government funding. If the UK is the nerve centre of Grand Prix racing, then there must be the will and the reason to preserve British motor-racing’s headline event. And there is, it is simply constrained by a historical background of polemic deal-making from F1’s previous administration.
However, the origins of Silverstone’s contractual conundrum are pragmatically unimportant; what matters is where its endpoint will be. Whilst it will be Carey who dictates where the endpoint of this dispute will be, the options at his disposal are limited. Caught between the prospect of failing one of the most resilient and enthusiastic markets in the world, and a free-for-all, a near-fatal degradation of Liberty Media’s authority so early in its premiership, Carey arguably has only two viable strategies to pursue.
Carey could seek to continue the British Grand Prix, but at an alternative venue to Silverstone. That would enable the continuation of the race, but on a fresh, sustainable contract. The fact that at a stroke, with just 24 hours prior notice, F1 announced the ‘F1 Live London’ event, looked very much like FOM trying to highlight to Silverstone that it had other options for the Grand Prix. But equally, there is no motor-racing venue in the UK so uniquely able to cater for several hundred-thousand fans, nor a venue so uniquely able to showcase F1’s newly overhauled cars.
Also, if FOM was to sign an unusually affordable deal with a new British venue, why would that not be a signal to Monza, Spa and Hockenheim to renegotiate? Realistically, in order to move the British Grand Prix away from Silverstone would require a broader restructuring of the calendar, a likely culling of all but a few historic races, and a possible move towards more city-based races, a la Formula E.
But no amount of city-based venues could deny that Liberty Media would have suffered an extraordinary failure in its initial commitment to historic, stalwart circuits. More specifically, to lose the circuit that hosted the very first F1 Grand Prix in 1950, to lose the Becketts-essesses, arguably the finest complex of high-speed corners anywhere in the world, would be an unforgettable failure by any measure.
The alternative is to use the two years before the contract expires to best advantage. Just as Bernie is to a great extent culprit for this contractual breakage, he can also provide a blueprint for a route out of it. Prior to last September’s agreement to extend Monza’s deal to 2019, Bernie had spent two years being openly pessimistic about the future of the race, even earmarking an alternative venue, Imola, with a provisional deal. However, given the gratuitously last-minute nature of the deal, the extent to which Bernie was truly doubtful about the race is questionable.
If Carey can spend the next two years investing in the F1 product, if he can arrive at the negotiating table with a stronger sport and with at least one credible alternative venue, he will be in an infinitely stronger position than he is now. Only then can he believably diffuse the circuit’s utterly legitimate fears of ongoing losses, only then can the British Grand Prix at Silverstone stand up as a remotely viable commercial event.
Silverstone’s spiralling losses was always due to being the first bump in the road for F1’s new regime, and an aggressive announcement strategy from the circuit is set to put the dispute under an uncomfortable amount of scrutiny over the grand prix weekend. If the so-called “threewise menn” are as wise as billed, they will spend the weekend partaking in open-minded, consensus-building discourse, and two years heavily investing in the F1 product.