South Korea has managed to reduce its bill
The negotiations were lengthy, but the Korean organizers achieved their goal: they secured a substantial reduction in the payment made to Bernie Ecclestone's FOM, ensuring the presence of the Land of the Morning Calm at least until 2016.
As early as last October, the organizers announced their intention to renegotiate their contract to reduce their financial losses. They achieved their goal, a sign that the country is an important commercial target for Bernie Ecclestone. Indeed, the F1’s main financier asked the Spanish (Valencia and Barcelona) and German (Hockenheim and Nurburgring) events to consider alternating their races rather than granting them a reduction in their fees.
The effort made by FOM is quite significant as it has decided to waive the television fee previously required. The initial contract stipulated a payment of 15.6 million dollars per year, until the expiration of said contract in 2016.
Moreover, FOM agreed to end the initial 10% systematic increase. Thus, if the Yeongam circuit had paid $36 million to FOM for its inaugural event, the bill had risen to $40 million for the 2011 edition. With the new agreement, FOM will maintain this amount of $40 million until 2016, without any increase. This annual increase mechanism is the scheme that was adopted by Silverstone when signing its 17-year contract, which includes a 5% increase in its annual fee until 2026.
Nevertheless, this new agreement, while it allows for a reduction in the total bill, will not prevent the organization from recording new losses during the 2012 edition as the deficit for the 2011 event was very significant: though ticket sales generated 23 million dollars in revenue, organizers spent 79 million dollars, resulting in a net loss of 56 million dollars. This deficit is not far from what is shouldered by taxpayers in the State of Victoria (50 million Australian dollars) following the Australian Grand Prix. However, this figure does not include the economic benefits related to hosting tens of thousands of fans for local dining and hospitality.
With this new economic plan, the organizers expect to reduce the deficit to “only” 26 million dollars.
With the participation of RacingBusiness.fr
