(by Tim Tuttle si.com 12-26-12)
Watkins Glen International owns the distinction of the longest running home to Formula One in the United States, hosting 20 races from 1961 to 1980. The Long Beach Grand Prix, hosting eight from 1976 to 1983, ranks second. Even the iconic Indianapolis Motor Speedway, on a road course carved out of the infield and incorporating part of the oval, only held seven races. Six other tracks have tried making a go of F1 in the USA, but they all ended because of the high price of doing business with the world's most popular racing series.
With all that history against it, does the Circuit of the Americas (COTA) in Austin, Texas, really have a chance to successfully fulfill its 10-year contract with F1?
Yes and, perhaps, beyond. COTA has some things going for it that other promoters and tracks have not. The inaugural event -- the U.S. Grad Prix held Nov. 16-18 -- was a smashing success; but so was the first USGP held at Indianapolis in 2000. Prior to that first race in Indy, F1 had not raced in the U.S. since 1992. Indy had an estimated 200,000 spectators that initial race day, 150,000 the second and third and was down to 125,000 after that. According to sources, Indy made money for the first three years, lost in the last four. There's clearly a novelty effect that wears off.
It should be noted that Indy had some bad luck on the track. In 2002, Michael Schumacher pulled over nearing the finish line on the front straight on the last lap and allowed Ferrari teammate Rubens Barrichello to win, damaging the race's credibility with ticket buyers. Sources say it did more harm than the tire fiasco in 2005 (Michelin's teams withdrew following the warm-up laps and only six cars ran the race).
COTA had a capacity crowd 117,429 on race day, 82,710 for qualifying and 65,360 for practice, bringing in substantial revenue from suite, hospitality and sponsorship sales. All good, but what delivers the difference between profitability and loss is funds from the Texas Event Trust Fund. Essentially, COTA has to earn the money each year based upon the economic impact created. COTA received a check for $29.3 million for this year's event.
"The government relationship is the most critical to keeping the race long term," Zak Brown, the Just Marketing International CEO and an F1 expert, said. "The difference in making money and not making money is the state funding. Any F1 race requires in a government subsidy."
NFL, NBA and MLB teams have frequently received funding from cities for new stadiums and other sweetheart deals. It has happened rarely in auto racing and never at the level of support for COTA's F1 event.
"The major difference between arenas and stadiums is that we're only rewarded by incremental increases in sales tax," COT President Steve Sexton explained. "It's generated by whatever is brought in is paid back to offset costs.
"The state's participation through the Major Events Trust Fund is very, very important. F1 is very expensive. The state of Texas has established the fund and it enables entities to apply for major events. It's the reason the Super Bowl was in Dallas and why the Final Four has been in Houston. It's an incentive rewarded by economic impact."
COTA doesn't disclose the amount it pays for its F1 race, but industry sources put the fee at about $25 million per year. However COTA has to consistently bring in a substantial crowd that can create an economic impact that will keep state funding at a high level. There are no guarantees from the trust fund. But Brown expects the event to grow in popularity after an impressive inaugural.
"It exceeded my expectations, exceeded everyone's expectations," Brown said. "Absolutely thumbs up. I can't think of a single thing they did wrong. They pulled it off. People were nervous about traffic, congestion. They executed the logistics of the event extremely well. [...] It was a major home run, exactly what F1 in America needed, to get a strong start to building for a great year two, which I think they'll have."
Sexton says he's building a happening rather than a race. It's an approach typically used for street races rather than permanent circuits. COTA is unique, that it's the first facility purposely built for F1 in America: a glistening, beautiful track designed by the famed Herman Tilke. It has the amenities of a street circuit to appeal to the casual fan and a track with the visibility and technical racing aspects for the aficionado.
"We had a fantastic launch and it's a great springboard for the future," Sexton said. "First, we realize this is a springboard we define as an experience like fans have at the Kentucky Derby or the Super Bowl. One of our major goals is to have a spectacular event, one that is about glamour and style where they can see celebrities and famous athletes. We want to attract the casual fan who wants to be part of something special, to be part of a major international event."
Brown says there are elements in place to attract racing fans, too. NBC becomes the F1 broadcaster in the USA next season and it has plans to put at least four events on the over-air network. It also will provide programming to the NBC Sports Network.
"They're going to do more network and more programming," Brown said. "Formula One and IndyCar are on the same [cable] channel and that's a good thing, too."
Sexton added, "NBC has an active interest in elevating F1 and our event. It's not unlike what they've done with the Olympics and Kentucky Derby. It will help sustain our event from a marketing standpoint."
Currently, there are no American drivers in F1, but Alexander Rossi of Nevada City, Calif., has well up the development ladder. He was a F1 test driver for Caterham and drove for the team World Series by Renault this season, his second year in the series. Rossi won't be in F1 in 2013, but he could be by 2014.
"I think it's important to have an American in F1, but it's not critical, "Brown said. "All the sports these days are pretty international and diverse, but it would be nice to have an American in F1."
Sexton says an Amercan driver "would be very, very positive" for Americans following F1. Both he and Brown agree that Mexico's Sergio Perez, who drove for Sauber in 2012 and is moving to McLaren next season, has appeal to Hispanics in North America.
"Without question, Sergio had a very positive impact on this year's race," Sexton said. "Fifteen percent of our ticket sales were form Mexico. The fact he call us is home track is beneficial."
"Sergio Perez will be higher profile with McLaren and the Hispanic market is something very attractive in sponsors," Brown said.
Brown also believes the parity in F1 will keep fans coming back.
"When F1 was at Indy, the racing was boring," Brown said. "There were only two or maybe three teams who could win. There were eight drivers from five teams who won this season. You've got great racing now. That's a big difference."
Can F1 thrive rather than just survive at COTA?
"There's as much going for Formula One in America as there has been in recent memory," Brown said. "How big will it get, I don't know, but the race at Austin this year started building a bigger following in America than it has ever had."
