Wednesday, October 26, 2011

Gentlemen Start Your Engines – Formula One in Jersey

The current economic recession has impacted the sports industry on many different levels; none greater than sponsorship. Corporate America is looking at cutting back expenses. One of the biggest areas they have cutback back, other then payroll, has been sponsorship; supporting and buying into sports properties. Automobile racing - NASCAR, F1 and Indy Car Racing - is driven (pardon the pun) by sponsorship dollars. Racing teams unable to secure needed sponsorship dollars have been forced to skip races on both the NASCAR circuit and what’s left of the Indy Racing League series. The tragic death of Indy Racing League star Dan Weldon casts a shadow on the future of the open-wheel racing series. And now, a New York based group has announced their plans for a Formula One race for New Jersey in 2013. Based on the history of Formula One racing in the United States, that could be destined to fail even before the cars start their engines.

The Grand Prix of America hopes to run a Formula One event along the banks of the Hudson River (the Jersey side) with Manhattan’s skyline serving as the background – stunning to say the least.

"New Jersey remains a leader in hosting all types of national and international sporting events," New Jersey Governor Chris Christie said, adding the Grand Prix of America to a list that includes last winter’s East Regional NCAA tournament in Newark and the Super Bowl in 2014.

The race’s lead organizer, Leo Hindery, is behind the bold business move. According to the Newark Star Ledger, Hindery has a 10-year agreement for the Grand Prix of America with Bernie Ecclestone, the British billionaire who controls Formula 1 racing. Hindery said the race had been approved by the Formula 1 sanctioning body, the Geneva-based Federation Internationale de l’Automobile. Ecclestone reportedly in one of the “silent” investors in F1’s first New York City based event. Ecclestone has long coveted holding an event in the New York area.

Hindery is Managing Partner of InterMedia Partners VII, LP, along with Peter M. Kern.

Until October 2004, Hindery was Chairman, and until May 2004 Chief Executive Officer, of The YES Network, the nation’s largest regional sports network. He founded the network in June of 2001 as the television home of the New York Yankees.

"We are standing next to what will soon be the state-of-the-art Formula racing track in all of the world," said Hindery, who told reporters Formula One is the safest form of auto racing in the world.

“The Jets play in New Jersey, and they’re called the New York Jets. Same with the Giants,” Hindery told The New York Times. “And the local government has been just a spectacular ally.”

Austin is scheduled to host a Formula One event in November 2012 and has a contract through 2021 to host an event in Texas. Texas taxpayers are supporting the Austin event with $25 million in taxpayer dollars. According to Hindery the New Jersey event won’t be asking for any public support.

“From the start we’ve said that we’d pay for the privilege, without public expenditure,” he said. During a Q&A period after Tuesday’s conference, Mr. Hindery told The York Times that tickets to the weekend event would cost “on the order of $360 for the three days,” accounting for two days of practice sessions before the race, which would be held on the Sunday following the Montreal Grand Prix in June (the 2013 Formula One calendar has not been set.) The Montreal event traditionally has been held the second weekend of June, moving the Jersey event to Father’s Day weekend.

Mr. Hindery mentioned the cost savings of running a race on existing streets rather than a purpose-built course, like the one in Texas.

“There’s not a yard of dirt being moved,” he said. “We’re pennies on the dollar compared to Austin.”

Optimism aside – Formula One’s history in the United States has been anything but successful, littered with failed events.

Formula One style events have been run in the United States on and off since 1908, when it was known as the American Grand Prize. The race later became part of the Formula One World Championship. Over 41 editions, the race has been held at nine locations, most recently in 2007 at the Indianapolis Motor Speedway.

Recent history (the last 35 years) has to make one wonder why anyone would seriously consider holding a F1 event in the United States.

In 1976, the Long Beach Grand Prix became a Formula One event, making the United States the first nation since Italy in 1957 to hold two Grand Prix in the same season (the other was at Watkins Glen, New York which held an event from 1961 through 1980). The United States Grand Prix West, as it was called to distinguish from the United States Grand Prix East at Watkins Glen, was held until 1983, after which CART became the headliner series. The Caesars Palace Grand Prix was a non-starter in 1980, debuting in 1981; it would only last two years with Formula One, before CART took over the race for another two seasons. 1982 saw the inaugural Detroit Grand Prix, making 3 Formula One races in the United States that year. Detroit would last until 1988, after which it too became a CART event. A one-off Dallas Grand Prix was held in 1984, plagued by track problems exacerbated by extremely high temperatures. The CART racing series folded into the Indy Racing League after their 2007 racing season.

A new Grand Prix in the New York City area was announced for the 1983 season, to be held either at the Meadowlands Sports Complex, Meadow Lake in Flushing Meadows, or Mitchell Field in Hempstead, Long Island (on the same site as the 1936 and 1937 Vanderbilt Cups). However, the race was first postponed and then cancelled, as CART started their own race at the Meadowlands, and titled it the "United States Grand Prix".

Only the three teams (six cars) with Bridgestone tires started the 2005 United States Grand Prix, and the event was considered a disaster. Many commentators questioned whether a United States Grand Prix would be held in Indianapolis again, but the 2006 United States Grand Prix was held the next year, on 2 July 2006, without controversy.

On July 12, 2007, Formula One and the Indianapolis Motor Speedway announced that the 2007 U.S. Grand Prix would be the last one held at IMS for the foreseeable future, as both sides could not agree on the financial terms for the event. It was thought that the race would return to Indianapolis for 2009 on the track configuration that was used for the 2008 race in the MotoGP championship. The Indianapolis Motor Speedway CEO of the time, Tony George, claimed that the USGP would not return to Indianapolis unless it made financial sense. Due to the expensive fees paid to host a grand prix, the race would require a title sponsor to be economically viable. Ultimately, the United States Grand Prix was not on the Formula One calendar for 2009.

The $25 million Texas taxpayers are paying to hold the Austin event – it’s an annual contribution – is a $250 million investment in F1 racing.

Steve Sexton, Circuit of the Americas president of the Austin based event, said in a statement, "The announcement of a New Jersey-based Formula 1 race is great news for motor sports fans in North America. It will be a unique street course race and is yet another acknowledgement of the viability, demand, economic benefit and prestige a Grand Prix brings to a region.

The New Jersey race also demonstrates F1's strong commitment to elevating awareness of the sport, which can only help build the fan base."

"There's no public subsidy that's being put into the running of the race," New Jersey Gov. Chris Christie said talking about the New Jersey event.

"It won't work anywhere else in the area (the greater New York region)," Hindery said adding that the cities of Weehawken and West New York would be compensated by the promoters for expenses incurred in hosting the race.

The Wall Street Journal asked what could be considered the most important question: “Formula One Coming to New York, But Will Fans Care?

“While such an announcement would electrify Northeastern racing fans who for years have cultivated rumours of a New York F1 venue, it is still unclear whether anyone else will be interested enough to turn out for the races.

Despite its near-religious following in Europe, Asia and elsewhere around the globe, Formula One, with its cutting-edge open-wheel racers hasn’t truly stirred the souls of U.S. spectators since the 1970s when there were two Formula One races in the U.S..

H.A. "Humpy" Wheeler, a former president of Charlotte Motor Speedway in North Carolina (and one of NASCAR’s former kings), spoke at the news conference announcing the New Jersey, New York based F1 event. He believes New Jersey’s is "the best thought-out project I’ve seen since I’ve been in the racing business," and expects local business owners will agree.

"Ask all your local folks to look at their bank accounts after the race," he said, "and compare the amount that’s in there to last year."

Bob Varsha, the Voice of Formula One on SPEED TV (the F1’s American rights holder) offered this on the news that the United States is poised to host a second event in 2013 (after not holding any events since 2007):

“Formula One is predicated on taking the world’s most popular form of motor sports to the world’s greatest cities. I think a glaring omission in recent years – and really throughout the history of Formula One – has been New York City. So, I think this is huge. It’s the center of the world’s financial markets, it’s the center of the world’s media markets and it’s the center of the world’s entertainment markets. If there’s anything that’s bigger than Formula One – it’s New York. It’s just a natural they would go together. Having said that, it’s ironic that there really hasn’t been a race track incorporated in New York, a place where everything imaginable can be seen or done. The Meadowlands (New Jersey) was a compromise. There were some permanent tracks out on Long Island (New York) and events like the Vanderbilt Cup. New York does really loom large in the history of motor sports, so it’s only right that it should have a Formula One race. It’s going to take a significant effort, but I’m just delighted to see that it’s happening.”

Are two events two events too many for the United States after it will have been five years between the Indianapolis 2007 event and the 2012 Austin event? Not if both the Austin and New Jersey events have the right management teams and the financing behind their events.

The death of Dan Weldon has cast a negative shadow on open-wheel racing in the United States and the future of the Indy Racing League is murky at best. IRL could be gone in the next year or two. History tends to indicate that the long-term success for two F1 American based events is questionable at best. However, it does appear, with a real commitment from Texas taxpayers, the Austin event is on solid financial ground. With the Grand Prix of America having Leo Hindery and "Humpy" Wheeler behind the New Jersey/New York event, it appears to have the right management team with a proven record.

At least in the short-term times appear to be brighter for Formula One racing in the United States.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: Wikipedia

Labels: , , , , , ,