Why Jaypee invested $400 million in F1 race when the project will make the group lose $35 million every year – The Economic Times   Leave a comment

“The current operating structure of F1 is such that it gives nothing to race circuits except a global calling card. But it’s a card opens many, many doors….”

“F1 is controlled by Formula One Management (FOM), in which private equity firm CVC Partners holds 70% and financial services firm JP Morgan holds 20%. But the face, voice and spirit of FOM is minority shareholder Bernie Ecclestone-a diminutive, 80-year-old, with a clump of white hair.

He is the gregarious power broker who negotiates with teams and circuits, among others. He tends to give them a deal they resent, after they see what he has kept for the people he represents, but grudgingly play along because what is left is still a fair bit. Fom is the supreme power in the sport. So, it receives all revenues from the sale of TV and Internet rights, gaming rights, and event and track sponsorships.

And the $1.5 billion entity doesn’t pay a circuit to host an F1 race-the circuit pays it an annual fee. Since FOM is a private company, official numbers are unavailable, but it’s widely quoted that 50% of its revenues are divided among the teams in a certain formula. However, nothing from that central pool comes to circuits. Circuits reportedly pay FOM $35-45 million a year as licence fee; the initial contract is for five years. Jaypee will also spend $15-20 million in operational costs-track and event management, logistics, and transport. That’s a total operating cost of $50-65 million.”

via Why Jaypee invested $400 million in F1 race when the project will make the group lose $35 million every year – The Economic Times.

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Posted September 22, 2011 by arnoneumann in F1, Sports

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