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F1 sets its sights on new markets

As Formula 1 gears up for the start of the new season in Melbourne, Australia on March 25, the drivers and teams face a more challenging journey than ever.

A bumper schedule of 21 races will keep fans satisfied between March and the end of November, when the season finishes in Abu Dhabi, but it threatens to put huge pressure on those criss-crossing the globe going from one race to another.

Although races tend to be loosely bunched geographically to help the situation, their frequency presents a challenge. Teams face a particular squeeze this summer, with five races in six weeks through June and July – a consequence of fitting around the Fifa World Cup final weekend in Russia.

But F1 does not feel it has hit its limit on the calendar. Since completing its takeover of the sport in January 2017, Liberty Media has made clear it wants to expand the footprint of F1 in several new markets, typically by taking a race to the targeted countries. As many as 25 races are expected on future calendars. By comparison, there were only 17 grand prix races in 2009.

We have a long list of places that have expressed interest in hosting F1

Interest in hosting an F1 race is high. Countries such as Singapore, Azerbaijan and Abu Dhabi have made it a key part of their tourism push, creating a model that others are eager to follow.

“We have a long list of places that have expressed interest in hosting F1,” F1 chief executive Chase Carey said last year. “I guess I would say at this point we’re more in a listening mode and trying to understand the opportunity. We’ve probably got multiple places in every continent around the world. We’ve got a pretty full slate.”

One key area of focus for Liberty is the United States, a market that has traditionally proved difficult for F1 to crack. While a race has been staged in Austin, Texas since 2012, F1 is eager to make a bigger mark on the American sporting landscape, with New York, Las Vegas and Miami among the cities it is targeting – Miami being the most likely at the time of writing.

“Our expectation is to go to large cities and have races on more street circuits,” F1 commercial chief Sean Bratches said. “We are going to add street circuits. The majority will probably be traditional tracks. But our expectation is to try to go to city centres and activate large fan bases with our brand.”

More traditional events are also being considered besides additional American rounds. F1 is in talks with Copenhagen about a street race, and Hanoi is known to be eager to host the inaugural Vietnam Grand Prix in the near future. F1 is actively pursuing Buenos Aires, 20 years after it last visited Argentina.

We have reached the tipping point where we can no longer let our passion for the sport rule our heads

But while F1 looks outwards, there is a challenge for existing races to stay afloat. Most significantly, officials at Silverstone, the host circuit for the British Grand Prix, announced last summer that they would trigger a break clause in its contract after 2019 due to an escalating hosting fee agreed with F1’s previous management, led by Bernie Ecclestone.

“We have reached the tipping point where we can no longer let our passion for the sport rule our heads,” said John Grant, the chairman of the British Racing Drivers’ Club, which owns the circuit. “Put simply, it is no longer financially viable for us to deliver the British Grand Prix under the terms of our current contract.

Silverstone is not the only track feeling the pinch. Malaysia lost its F1 race after 18 years as a result of spiralling fees, while the sports minister of Azerbaijan called the contract for Baku’s grand prix “unacceptable” despite it only debuting on the calendar in 2016. Ecclestone himself admitted said year: “I charged [races] too much for what we provide.”

There is a tough balance for Liberty to strike as it looks to add more races to the calendar and boost F1 income via the hosting fees all circuits pay. In its end-of-year financial results, Liberty attributed part of its 1 per cent fall in revenue to the revised agreement with the Brazilian Grand Prix that saw a reduced fee accepted to keep the race on the calendar.

Promotion revenue accounted for 34.1 per cent of F1’s $1.784 billion revenue in 2017, making it a crucial source of income to the sport. The trade-off is even harder for teams to negotiate. More races would boost this revenue, which in turn would lead to bigger prize money for the teams on the grid. However, the pressure of more races would not only cause a greater logistical challenge, but it would also drive up costs, with some outfits believing they would need a second set of personnel for the race team to prevent burnout.

Not only are you doing 21 races, but all of us have a normal day job as well

Mercedes F1 boss Toto Wolff said: “Last year with 20 races and it was already very difficult for the organisation, so this is what I see as the limit. It is very difficult for the team because not only are you doing 21 races, but all of us have a normal day job as well. It is pretty stressful for the organisation and pretty stressful for the individuals.”

Additional races are a lucrative proposition, yet Liberty has to keep a number of stakeholders happy. Fans have favourite circuits and events they want to see succeed, but will they be sacrificed in favour of higher-paying races that could allow F1 to break into new markets?