Silverstone to break F1 contract (6th Update)

UPDATE The checkered flag "could soon be waved on the British Grand Prix," after the owner of the Silverstone racing circuit that hosts the Formula 1 race said that "it will cease to run the event because of a dispute over finances," according to Murad Ahmed of the FINANCIAL TIMES.

On Tuesday, the British Racing Drivers' Club announced it activated a break clause in its 17-year contract to host the race that had been due to run until '26. Silverstone will now hold its final Grand Prix in '19.

The maneuver is an attempt to draw F1 owner Liberty Media "to the negotiating table." The BRDC wants to agree to a new deal to "reduce the cost of holding the event" and its announcement is "designed to draw maximum attention to the dispute," with the '17 race set to take place this weekend.

BRDC Chair John Grant said, "We have reached the tipping point where we can no longer let our passion for the sport rule our heads."

The U.K. is a "crucial market" for F1. It is the sport's "most lucrative broadcast market by far." Liberty has been "unwilling to renegotiate the contract for the race," with execs fearing any concessions to the U.K. circuit would result in other tracks around the world demanding "similar negotiation" for their "promotion fees."

These fees make up one-third of F1's annual revenues of $1.8B FT

FINANCIAL RUIN: In London, Jack Austin reported it is the "demands of the hosting fee" which goes up by 5% every year — from £12M in '10, the year in which the new long-term deal started, to £16M ($20.6M) this season and £25M ($32.1M) in '26 — that are "crippling Silverstone."

Liberty "staged a series of talks" with the BRDC and Silverstone, and while Silverstone "wants to continue its relationship with F1," it will "not do so at the cost of financial ruin." INDEPENDENT.

REUTERS' Alan Baldwin reported Grant said that Silverstone, which has the biggest turnout of any race on the calendar, was the "only circuit in Britain that could host the race and hoped a more sustainable deal could be reached over the next three years."

An F1 spokesperson said that "the decision and the timing of the BRDC's announcement was regrettable."

The spokesperson added, "The week leading up to the British Grand Prix should be a week of great celebration for F1 and Silverstone. We deeply regret that Silverstone has chosen instead to use this week to posture and position themselves and invoke a break clause that will take effect in three years' time." REUTERS.

07/11/17 This rumor is upgraded to 'fact' today. The British Racing Drivers' Club have officially announced that they have triggered the break clause in their contract to host the British Grand Prix.

The BRDC initially signed their existing deal with Bernie Ecclestone in 2010, when the cost of hosting the race started at £12million.

However, a 5% year-on-year increase in hosting fees would see costs rise up to an unsustainable £26million by 2027.

This year was the final chance the BRDC had to break away from the current contract in place and will technically host their last British Grand Prix in 2019.

But, the activation of the clause does not necessarily mean this is the beginning of the end for Silverstone.

The BRDC will now open fresh talks with new owners Liberty Media in the hope that a more cost-effective deal can be negotiated for future races.

F1 marketing boss Sean Bratches has already stated that the contract break will have no negative bearing in the negotiations to come and there is every hope that a new deal can be agreed.

Ecclestone (L) knows it's all posturing
Ecclestone (L) knows it's all posturing

07/11/17 Former Formula 1 CEO Bernie Ecclestone believes Silverstone will stay on the F1 calendar "even if, as expected, the circuit's owners activate a break clause in their contract this week," according to Alan Baldwin of REUTERS.

Ecclestone said, "I would be surprised if eventually we lose Silverstone. It's a good event. And it probably falls into line much more with the way Liberty want to see Formula 1 go, in that direction."

Ecclestone added, "I'm surprised they can't make it work, that's all." REUTERS

Will Liberty tell Silverstone to go pound sand, or will they buckle under and reduce their fee?

07/07/17 (GMM) Silverstone bosses are expected to ax their British grand prix contract within days.

The Sun newspaper reports that the call to cancel the historic race after 2019 could come as soon as Tuesday.

"It is then expected that the (circuit-owning) BRDC will approach Liberty about agreeing new terms that are more favorable," the report said.

The news comes as new F1 CEO Chase Carey said ahead of the Austrian grand prix that European races are the backbone of the F1 series.

"As we have said since the beginning, we value the importance of the tradition of this sport very much," he told Kleine Zeitung newspaper.

"Europe is definitely the cradle of formula one, so events that are successful and part of this fascinating history have the best chances to stay."

07/06/17 The BBC's Andrew Benson wrote it "has not definitively happened yet," but it is now "almost certain that Silverstone will in the next few days exercise an option to end its contract to host the British Grand Prix" after '19.

The future of the British Grand Prix has been "in doubt" for as long as many people in F1 can remember. The current contract, signed at the end of '09 for a 17-year period, was "meant to end that."

But it "has done anything but." The "devil was in the detail." The current contract — signed at the end of a "tedious few years of speculation and machinations concerning the future of the race" — was for £12M in the first year, '10.

But it has a 5% annual escalator in it. So this year, the race costs $21.9M. By '27, the "final year of the deal if it were to run its course," $35.7M.

These numbers are "massively less than some circuits are paying."

For example, Bahrain pays at least $40M per year, Russia $50M and Azerbaijan a reputed $75M. But those races are funded by authoritarian governments "keen to promote their country to the world." Silverstone is a private members' club that "has to run a viable business."

Silverstone "desperately wants to host the British Grand Prix but it cannot do it at any price." Negotiations with F1 owner Liberty Media are "still ongoing but have pretty much reached an impasse."

F1 said that it "cannot renegotiate an existing contract." So then the question becomes, "what does F1 do next?"

You can "forget right off the bat any suggestion that any other permanent circuit in Britain could host the race." There is "none suitable for a start — and none that could afford it either." F1 CEO Chase Carey and Bratches are "highly accomplished businessmen" but it would take "some kind of miracle to resolve all those issues." BBC

It is all posturing for a better deal. The British GP will not be going away anytime soon

07/05/17 Formula 1's "most historic race, the British Grand Prix, is expected to get the red light" following a decision this week, senior sources close to the race organizer said, according to Christian Sylt for FORBES.

The British Racing Drivers' Club has a contract to stage the British Grand Prix until '26 "and if it wants to pull out it needs to give two years of notice" to F1 owner Liberty Media.

The "next opportunity to do this is before this year's race which takes place next weekend."

The BRDC board "has reportedly been in contact with Liberty about improving its terms but is not understood to have made progress."

In May, F1 CEO Chase Carey said that he "will not be renegotiating the contract."

Carey: "We value Silverstone and we want the race to be a success and will work with them to help achieve that, but we won't be redoing agreements that were previously concluded in good faith between two parties."

As a result of this, BRDC sources said that the race "is on track to be dropped imminently unless there is an eleventh-hour breakthrough."

One BRDC member who is a senior automotive industry figure said, "Apparently there's been no movement from Liberty, who haven't had the time to address all the issues. So no bad will, just a lack of time."

Although a decision "would need to be made before the race if the BRDC wants to pull out, it is likely that it would be announced afterward to minimize disruption" for Liberty.

More by Christian Sylt/Forbes

Wet Silverstone start in 2016
Wet Silverstone start in 2016

07/03/17 Silverstone is "expected to trigger a break clause in its contract to hold the British Grand Prix due to escalating costs," according to Rebecca Clancy of the SUNDAY TIMES.

Formula 1 Owner Liberty Media is "thought to be eager to keep the British Grand Prix on the calendar as it is one of the best attended races."

If the break clause is triggered it will "enable Silverstone to renegotiate the contract" it signed in '10 to host the race.

The Northamptonshire track is currently contracted to host the race until '27 but the deal, signed by former F1 CEO Bernie Ecclestone, sees the costs rising by 5% every year. The first year’s hosting fees were £12M but by '27 the cost will rise to an "unmanageable" $34M.

Silverstone has until the first day of this year's grand prix — which starts on July 14 — to either trigger the break clause or "be stuck with the current deal."

F1 CEO Chase Carey has "been vocal about his desire for more street circuits on the race calendar and has made noises about hosting one in London." However, it is understood that the city "does not want to host a race due to pollution." LONDON TIMES

In London, Jonathan McEvoy reported Silverstone will "gamble on renegotiating a new, improved deal in the next few years in an attempt to keep hold of the showpiece weekend."

British Racing Drivers' Club Dir Philip Walker, who has been involved in talks with Liberty Media, said, "It is highly probable we will have to activate the break clause."

BRDC Chair John Grant has been in contact with Carey since last December. A senior BRDC figure, who asked not to be named, said, "It has come too early for Liberty. They do not yet know which races they want to help keep on the calendar. For example, Chase has never been to a grand prix at Silverstone." DAILY MAIL

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