Cost puts Melbourne F1 GP in doubt

[Wizzo]

The future of the Australian Formula One Grand Prix in Victoria is in doubt, with the state government reluctant to pay rising licence fees.

The multi-million dollar fee, charged by Formula One Management (FOM), is understood to increase each year, putting the Melbourne race on shaky ground.

Victorian Premier John Brumby said there was strong international demand for the race and other countries were potentially prepared to pay more for the licence.

After a parliamentary report this week revealed the 2007 Melbourne race cost the state almost $35 million, the government will consider whether it can afford to keep the race beyond the end of its contract in 2010, if costs keep rising.

Mr Brumby told reporters that fees imposed by FOM were the cause of the problem.

"The principle reason for the increased cost of the grand prix is the increased licence fees," he said.

"If you go back to the origins of this event, we were told at the time, I think in 1996, that this was an event that would break even or make a profit.

"The reality is that since then, the licence fees have continued to go up, they're the licence fees that are paid to Formula One."

Melbourne race organisers, the Grand Prix Corporation, confirmed that the fee was paid to FOM, which is headed by F1 supremo Bernie Ecclestone, but refused to reveal the figure.

Mr Brumby said staging the event last year, including fees, cost $70 million.

"It's not costing more to set the event up, in fact we're getting better and more efficient in the way in which we're setting the event up, it's because of increasing licence costs," he said.

"It is an event in demand around the world, so places like Malaysia and Dubai, they're prepared to put more than $50 million a year in licence fees on the table," he said.

Victoria could wear the $35 million loss, but if fees continued to grow the race could become too expensive, he said.

"I think at these costs, they're costs that the state can sustain, but I think the difficulty of the environment that we're in is, post-2010, the likely cost of licence fees is up and not down," Mr Brumby said.

He said he still believed the race was good for Victoria and had been successful in "branding" the state.

"But if you said to me, are we going to pay $100 million a year for the event in the future? I think most Victorians would say to me, 'well, that's too much'," he said.

For the race to stay, it would need to be good for Victoria and good value for money, Mr Brumby said.

Former Victorian premier Jeff Kennett, who lured the race from South Australia in 1996, said he believed the government would dump the race, and warned against letting it go.

"My greatest worry is that this state has a reputation built up correctly of being the sporting capital of the world," Mr Kennett told Southern Cross Broadcasting.

"And, if we want to start damaging our brand, then start losing your international events," he said.

A report tabled in state parliament on Wednesday showed the grand prix ran at a $34.6 million loss and that revenue decreased from about $47 million last year to $43 million this year.

[cosworth151]

It would be a shame if yet another race goes under due to the Bernie Bill. That's what's stopping Indy, too. He already gets the TV money, the trackside signs and so much else. This idea of large annual increases in the licencing fee is insane.

[SennaMan]

of course that is the actual promotional cost of staging the event itself

this has to be wieghed against the revenue it actually generates for the state by visitors' spending and consumption of necessities such as food and accommodation as well as the usual tourist activities while being attracted by the race

and what value to you place on the race itself underpinning the reputation of Melbourne as a place that hosts elite sporting events?

[Alianora La Canta]

Whatever happened to race promoters and series owners making reasonable deals with each other? (Sorry, this is Bernie we're talking about - I should know better...)