More on Long Beach sale rumors to F1 (12th Update)
The United States remains the world's largest consumer market with around 30 percent of global consumption. There are various estimates as to when other countries will catch up, with management consultancy McKinsey & Company reckoning that China will overtake Japan to become the second largest market in 2020, while the Boston Consulting Group says that this will happen in 2015, Euromonitor thinks it will happen this year. It is not that important who is right, because the key point is that even if China does overtake Japan, no-one is estimating that it will reach more than 22 percent of global consumption by 2020. Perhaps in terms of luxury cars and fancy handbags this will happen sooner but overall, the US remains ahead. In the longer term analysts reckon that India will outstrip both the US and China as it develops vast middle classes, but in the short- to mid-term it is fair to say that the US is still the place you want to be if you are selling consumer products. And that is a key part of what F1 does.
There is much negativity about the prospects of New Jersey and Long Beach. The problem with all these stories is that the people writing them do not seem to understand how the F1 business model works, no matter what claims they may make about being business experts. The suggestion that the Formula One group might buy the Grand Prix Association of Long Beach (GPALB) is patently ridiculous. This company has run the Grand Prix in Long Beach since the 1970s but at the moment it has no contract with IndyCar for 2014 and no contract with the City of Long Beach after 2015. The City has a non-binding option to extend to 2020 if it chooses to do so.
By all accounts, the Long Beach GP is not doing the business it used to do. Hotel rooms are not selling as much as they were and while the crowd is being boosted by giving away free tickets and putting on other support events, such as drifting, the race is not giving the city the same kind of returns as it used to do. It is a transient party audience rather than the high-spending race fans who used to be there each year.
And that is just on the ground. In terms of TV figures, the race is getting only tiny amount of coverage, compared to what could be achieved by Formula 1 and it is not just the numbers in this case, it is also about geographic reach. F1 will put the streets of Long Beach on TVs across the world.
There is little doubt that if the City was offered a Formula 1 race, at the right price, it would take it. If GPALB could raise the money needed to pay F1 race fees, it could switch back to Formula 1 and the City would almost certainly give it a new contract, but unless that happens, there is ample opportunity for a rival promotional company to step in and do a deal with the City.
You do not need to be a rocket scientist to understand that in modern America there is not going to be financial assistance from the authorities. There may be tax breaks, loans and money to aid construction, but spending money on promoters is something of a no-no. Thus all the Grands Prix that take place on US soil require private funding. In the case of Austin private investors built the racing facility and then won grants from the state to promote economic growth. On the streets of New Jersey and Long Beach it will be a case of the local council doing the necessary building work and then renting the streets to promoters. The sort of money required for this is justifiable given the benefits that a race will bring to a region.
The trick is to find someone who gains enough from a Formula 1 race to pay the race fees, which are impressively large. That could be people who are involved in the hotel business or in retail. It can also be based on the effect that F1 will have on real estate prices in the area. A race can multiply land values and make very large profits for those with sufficient property to rent or sell. This is the raison d'être of the race in New Jersey, and the reason I believe the race will happen. There are billions of dollars to be made by the real estate developers who are paying the bills. A very large parking garage, which doubles as an F1 pit building, has already been completed. It is there. There is still a lot to be done, but I am confident that it will happen in 2014 and I am absolutely sure that Bernie is 100 percent behind the project, even if he is making negative noises on occasion. He has never been someone who talks a lot about deals that are in the pipeline. In my experience Bernie always talks down the races that he is keen to see happen, in order to make sure that expectations are not raised unnecessarily and to keep the pressure on the promoters to make things happen. I believe that New Jersey has the potential to do for F1 what Singapore did with its night race back in 2008.
Long Beach is more of a challenge because there are no obvious large real estate developments that need to have their value increased. But, bear in mind, investors in the race promotion, do not need to have local interest at heart. There are some parties who would like to see F1 successful in the United States who might be willing to invest in a race to ensure that the sport has three successful US venues in the near future.
I would not listen to the naysayers, even if they think Bernie as told them exclusive things.
In any case, time will tell… Joe Saward
05/02/13 Speaking by phone from Switzerland with speedtv.com, Zak Brown, who is in talks to lead the IndyCar Series on behalf of Hulman & Co., said the recent stories about an F1 takeover at Long Beach rely on antiquated quotes and information.
"I've read the stories, and as they relate to my involvement, are completely untrue," he confirmed. "I did speak to Bernie about the possibility of F1 at Long Beach 12 months ago which ran in a later issue of MotorSport; the interview was done in May, and I did float the idea past Bernie then and got a lukewarm response, at best, and never pursued it any further.
"I'm not aware of anyone being up to anything else to replace IndyCars there, and my supposed role in such an attempt couldn't be any more false. And to set the record straight, I don't even know Chris Pook, whom I'm supposedly working with…"
Brown also confirmed he has not had the topic raised by his close friend Ecclestone since their original discussion in 2012.
"No one spoke with me on this latest story or bothered to ask if it was true, and I'm also not aware of any conversations being held by the folks at Long Beach with F1," he explained. "I think I would be included in those conversations with Bernie as we had that discussion in the past and I see him all the time. If there was any sort of substantial conversations going on, I'd expect to hear about it straight from the source." speedtv.com
04/30/13 Interesting tweet from Zak Brown for the record: "Seen the rumors about my involvement in buying Long Beach GP. Categorically untrue. I've never met Chris Pook."
04/30/13 Bernie Ecclestone says he has held talks with the organizers of the Long Beach Grand Prix about Formula One replacing IndyCar when its agreement to race on the Californian street circuit expires next year.
"We are not in deep discussions with Long Beach but we have spoken to them," he said.
His comments follow mounting speculation that F1 is considering making the circuit its west coast home in the United States. It also follows the inaugural United States Grand Prix in Texas last year which was widely considered to be a success.
Sponsorship agent Zak Brown and Chris Pook, the original founder of the Long Beach Grand Prix, are reportedly attempting to buy the contract to the race from its current owners, motorsport entrepreneurs Kevin Kalkhoven and Gerald Forsythe.
However, Kalkhoven has said that "Gerry and I are not interested in selling Long Beach" and would only consider it if "stupid money" was on offer. Jim Michaelian, the president and chief executive of the race added that "this is a story that keeps bouncing around every year or so, despite the fact that the race isn't for sale and there's been no contact between anyone and Kevin about a sale."
The race was launched in 1975 as a round of America's Formula 5000 championship. It became an F1 race the following year and stayed until 1984 when it switched to CART then IndyCar.
Ecclestone says he still has hopes of resurrecting the stalled race in New Jersey which was meant to take place this year. He adds "we are talking to different people in the States but who knows." ESPNF1
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| If Gordon Kirby is right, Zak Brown (left) is playing IndyCar like a fiddle – talking to them about becoming their CEO while negotiating with Bernie Ecclestone (right) to steal their prized Long Beach GP right out from under their noses. |
04/29/13 My blog in this space two weeks ago – about the possibility of Bernie Ecclestone and some partners making a bid to buy the Long Beach GP – evinced denials from owners Kevin Kalkhoven and Jerry Forsythe. Long Beach boss Jim Michaelian, who was particularly aggrieved, grumbled to me about dragging up old news. But from all I'm told there's no doubt that Ecclestone, Zak Brown and Chris Pook are going to make a bid to buy the race in 2015 with plans to install F1 back in Southern California in 2016.
It's been reported that Long Beach mayor Bob Foster will fly to the Canadian GP in June to meet with Ecclestone to begin discussions about Bernie's sales pitch. If that happens, it will be clear the game is on and you can be sure that Ecclestone's pitch will be lucrative for Long Beach while the global exposure figures the city would receive from a contemporary F1 race would dwarf today's tepid IndyCar numbers.
This year's race drew 375,000 viewers on NBC Sports Network in the United States, down 20% from 468,000 last year. Through this year's first three IndyCar races NBCSN is averaging 343,000 viewers, 10 times smaller than a typical NASCAR race. Twenty years ago, when Nigel Mansell was racing for Newman/Haas in CART's IndyCar World Series, the domestic TV audience for CART equaled NASCAR, but those days are long gone.
Similarly, the media centers at Long Beach and most other IndyCar races these days are quiet, almost deserted, unlike the raucous crowds from the Mansell days that continued through Alex Zanardi's three years in Indycars with Ganassi's team a few years later. But today, IndyCar is almost entirely absent from the mainstream media across the United States. Outside the city of Indianapolis, the series has little or no identity and sadly has become one of America's smallest, most irrelevant sports. A big part of Bernie's sales pitch to Long Beach will be the transformation in the global media exposure F1 would bring the race.
Of course, the return of F1 to Southern California would bring a similar transformation to the race's current comfortable ambience and accessibility. Like all modern F1 races it would become much more restricted, segregated and expensive for all.
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| From Left, Zak Brown of Just Marketing, F1 czar Bernie Ecclestone, and the man who destroyed IndyCar racing Tony George |
It will also be expensive for Ecclestone and his partners. They will have to spend a lot of money to upgrade the track and pitlane and it might be a challenge to find the room and suitable location for today's spacious F1-spec media center.
Without doubt, the loss of Long Beach would be a blow for IndyCar. The race is by far IndyCar's biggest and best street race and the series' second most important race behind only the Indy 500, so Kalkhoven and Forsythe will be reluctant to cede control of the race. More from Gordon Kirby at Motor Sport Magazine
04/20/13 We hear there is a City Council meeting in Long Beach in about 6 weeks and renewal of the race contract is on the agenda. We think it will remain an IndyCar race. The City Council has no stomach for an expensive F1 race, all of which historically lose money.
04/20/13 Michael Andretti said he won’t be looking to add the Toyota Grand Prix of Long Beach to his portfolio that includes races in Milwaukee and Toronto because he doesn’t think it’s for sale. Event co-owner Kevin Kalkhoven has said as much even though some don’t believe him.
"There’s no way it’s for sale," Andretti said. "Why would they sell it? It runs along every year, making enough money. They have things in place; it works. I don’t think it’s a headache for them at all."
"They don’t need the money," he said of the owners.
"They’d have to spend $100 million to bring (the circuit) up to where F1 would want it," he said. "No one would do that."
04/20/13 We spotted Chris Pook and his lovely wife in the paddock here in Long Beach Saturday and asked him about the rumors he is working on bringing F1 back to Long Beach. He told AR1.com, "It would be inappropriate for me to comment at this time. We are at a critical stage in the discussions and therefore cannot comment." So the fact he says they are at a critical stage, means the talks are in fact happening, so this rumor certainly is no longer 'false.' We did hear second or third hand that Pook is saying F1 will be back in Long Beach in two years (IndyCar has two years left on its contract.)
04/19/13 OK, so Kevin Kalkhoven and Jim Michaelian both told AR1.com Friday in Long Beach that the race is not for sale, but who did we spot roaming the grounds and checking out the race – none other than Kim Green and Kevin Savoree of Green-Savoree race promotions, one of the groups said to be interested in buying the event. But unless they are prepared to pay 'stupid money' for the event, said to be in the $200 million range, it's not for sale. But remember that the race contract with the city expires soon so we are looking for some movement in that direction.
04/17/13 This rumor is downgraded to 'false' today. As far as Long Beach Grand Prix officials are concerned, there won't be any "for sale'' signs in the windshields of IndyCars driving Shoreline Drive this weekend.
Reports emerged Monday evening that a bevy of suitors, led by Formula 1 owner and CEO Bernie Ecclestone, are lining up to buy the 39-year-old Grand Prix despite the fact that its owners, Kevin Kalkhoven and Gerald Forsythe, have not expressed interest in selling it.
"This is a story that keeps bouncing around every year or so,'' said LBGP CEO Jim Michaelian, "despite the fact that the race isn't for sale and there's been no contact between anyone and Kevin about a sale. Nothing is happening. You can contemplate all kind of scenarios, but nothing is happening. To keep speculating, playing this what-if game, just encourages more rumors that don't amount to anything." Kalkhoven, when asked about the rumors Monday, said he would only consider a sale if there was "stupid money'' being thrown at his feet. "Gerry and I are not interested in selling Long Beach,'' he said. Michaelian said the owners have every intention of keeping their company.
"My reaction is that it's their company, they run it well, and they have every intention of keeping it,'' Michaelian said. "Kevin is invested in the IndyCar series with his own team (KV Racing). If he was seriously looking at a sale, he wouldn't be pouring resources into his own team.''
IndyCar currently has a contract with the city of Long Beach through the 2015 race. This weekend's race will be the 39th Toyota Grand Prix of Long Beach.
In today's economy, a case can be made that everything is for sale at the right price, and there are a lot of logical reasons for considering the prospect of the race changing hands. All of the reports are an extension of changes in the sport. Formula 1, the international behemoth of motorsports, has had a checkered history in the U.S. Several deals have fallen apart over time and the 2012 U.S. Grand Prix, in Austin, Texas, was the first F1 race in the U.S. since 2007. A second U.S. race in 2013 in New Jersey fell apart over track issues. CEO Bernie Ecclestone wants more F1 races in the U.S.
"It's a world championship, so you need the U.S.,'' he said in 2012. "America is about as big as Europe. So we should have the same number of races.''
Ecclestone said that the success of the Austin race was that the track was built specifically for F1. He has long admired Long Beach and said F1's parting with the city in 1983 was a mistake. Adapting the current track for F1 purposes would be expensive, but far less so than building a brand new street course.
"I'm an advocate of F1 buying the Long Beach Grand Prix,'' Zak Brown told MotorSport magazine last month. Brown is a former driver and CEO of Just Marketing who has close ties with Ecclestone. "I think I can facilitate that and I've been having those conversations. You can make an argument that Long Beach would be a good investment. It's got so much heritage. One (U.S.) race (for F1) certainly isn't enough. "
Green-Savoree Promotions, which owns the Mid-Ohio IndyCar race and operates two others, has also said it plans to expand and has said Long Beach would be a logical target.
And United SportsCar Racing debuts in 2014 and considers buying a landmark race as the best way to expose its product to the country. USCR is the result of the merger of two rival sports car groups, Le Mans and GrandAm.
Finally, concern over the future of IndyCar continues despite the success of the 2012 series. Its CEO, Randy Bernard, was fired after the season and it appears the Hulman Family – longtime owners of the International Motor Speedway (IMS) and the Indy 500 -want to retake control of the sport.
Tony George, who caused the IndyCar split in 1996 when he created the Indy Racing League, was ousted from the IMS board of directors in 2009 but has rejoined them. The Hulman family has indicated plans to merge the IndyCar and IMS operations into one.
Influential IndyCar team owners like Roger Penske have said they do not believe that is the answer to IndyCar's lack of promotion and insufficient TV contracts.
The LBGP was launched in 1975 on a whim and a prayer by British travel agent and race fan Chris Pook. The race featured Formula 5000 cars that first year and F1 for the next eight.
The Grand Prix split with F1 in 1984 and Championship Auto Race Teams (CART) IndyCars took to the streets, with Mario Andretti winning the first Long Beach CART race. The race has stayed with IndyCar ever since despite an industry-wide split into rival camps. The two sides merged in 2009 and the 2012 race, fueled by new engines and full fields, was considered the best since the CART days.
In 1998, Pook sold the LBGP and two other races to Dover Motorsports for $98 million in cash and stock. In 2005, a failing Dover sold the LBGP to Kalkhoven and Forsythe for $15 million.
The current value of the LBGP is estimated by industry sources at $25 million to $35 million. Long Beach Press Telegram
04/15/13 A reader writes, Dear AR1.com, I saw your rumor about Long Beach and Bernie's interest in it. I find it funny that the guy (Zak Brown) that IndyCar was rumored to be considering as CEO is one of the people that is in the discussions for F1 to buy Long Beach, as mentioned in Motor Sport Magazine. I don't think the sport needs a CEO that is trying to sell one of the most popular and successful events outside the Indy 500.
It’s almost like a CEO candidate at McDonalds working behind the scenes to sell their most profitable franchisees to Burger King. This doesn't show that he has the passion for IndyCar, which is what the next CEO should possess more than anything.
Turning IndyCar around is going to be a tough road, and it will take someone with an incredible amount of passion for the sport that is going to be willing to put their blood, sweat, and tears towards climbing the mountain. That person should not be someone who is working towards sending one of its key events to the competition. Steve S. Charlotte, NC
04/15/13 Kevin Kalkhoven and Gerry Forsythe claim the Long Beach Grand Prix is not for sale unless somebody makes an offer that was “stupid money" in Kalkhoven’s words.
Longtime LBGP president Jim Michaelian isn’t aware of any potential buyers but wouldn’t be surprised if another entity was interested in the southern California treasure started by Chris Pook in 1975.
And there may not be any official offers on the table yet but SPEED reports that at least one group is taking a serious look at making a bid for the longest-running, most successful street race in North America.
All signs points to Kim Green and Kevin Savoree trying to raise their already robust profile in promoting and track ownership.
Green-Savoree Racing Promotions, which owns the Mid-Ohio road course and also operates races at St. Petersburg and Toronto, is thought to be taking a serious look at trying to acquire the second most prestigious event in the IZOD IndyCar series.
Asked if they were bidding for Long Beach, Savoree would only say: “Kim and I are always interested in expanding our business if the right opportunity presents itself."
It’s also been rumored that Jim France and the newly formed United SportsCar Racing Championship could be a potential buyer.
In his latest Motor Sport magazine blog, Gordon Kirby speculates that Bernie Ecclestone and Pook are interested in re-acquiring the venue that hosted Formula One from 1976-1983.
Kalkhoven, who along with Forsythe owned Champ Car from 2003-2007 and purchased Long Beach, flatly denied anything was in the works last weekend at Alabama.
“We haven’t received any offer from Green-Savoree and I haven’t spoken to Jim France or anyone else," said Kalkhoven, who also co-owns KV Racing out of Indianapolis along with Jimmy Vasser.
“Gerry and I are not interested in selling Long Beach."
At any price?
“Not unless it was stupid money," he replied. “Then we would probably have to listen." More at Speed.com
04/15/13 This year, Long Beach is the third round of the IZOD IndyCar series and it will be interesting to see if Ryan Hunter-Reay and James Hinchcliffe can keep the ball rolling for Michael Andretti’s team. Defending champion Hunter-Reay won the weekend before last at Barber Motorsports Park and Hinchcliffe won last month’s season-opener in St Petersburg.
IndyCar’s agreement with Long Beach expires next year and there are rumors that Bernie Ecclestone, Zak Brown and Long Beach founder Chris Pook are attempting to buy the contract. Ecclestone and Pook are known to have met a time or two last year to discuss the idea and Brown expressed his interest in the pages of last September’s Motor Sport Magazine.
“There’s a lot of talk about a third [US F1] race on the West Coast," Brown told Motor Sport Magazine editor Damien Smith. “I’m an advocate of F1 buying the Long Beach GP. I think I can facilitate that and I’ve been having those conversations. You can make an argument that Long Beach would be a good investment. It’s got so much heritage. One race [in America] certainly isn’t enough."
One of Bernie’s few regrets is making the decision back in 1983 not to continue at Long Beach. It’s in the heart of Greater LA and a return to F1 would surely be good for F1 and help revive the race’s old glory and huge crowds.
The Ecclestone (through his daughter's big real estate transaction) name is widely-known in LA, well beyond motor racing’s narrow corridors, and it seems all but inevitable that Bernie will buy the Long Beach GP for F1’s return to Southern California in 2015. More at Motor Sport Magazine