Formula 1 Makes a $240 Million Paradigm Shift With the Latest Las Vegas Grand Prix Decision
The inaugural Miami Grand Prix has gone into the books as a success. The circuit for the Formula 1 race on May 8 worked as well as could be expected for a first attempt, and promoters experienced only minor hiccups in executing their plan for the week.
The sense of relief in the F1 executive suite must be immense. The sport will introduce another American city to the schedule in 18 months, and the logistics will be more daunting. At least now, officials know they can focus on the Las Vegas Grand Prix without worries about fixing Miami first.
And the Las Vegas effort is off to a flying start, courtesy of a surprising development.
Formula 1 makes a $240 million paradigm shift for the Las Vegas Grand Prix
Tourism officials in Las Vegas were ecstatic to complete a three-year contract this spring to bring Formula 1 races to Las Vegas beginning in 2023. There are fewer than two dozen races per season, scatted around the world. Bringing a third annual F1 event to the United States, joining Miami and Circuit of the Americas in Austin, Texas, says a lot for the persistence of business and tourism leaders.
In return, F1 officials have already done Las Vegas a solid with an announcement Friday that smooths out logistics and sheds light on the new approach to event management.
Liberty Media CEO Greg Maffei, whose company owns Formula 1, said they have resolved the crucial issue of carving out a paddock area. Liberty Media has bought a site in the city, with the reported $240 million transaction expected to close this spring.
That will allow for construction of a permanent pit structure alongside the course that will include a long stretch of the famous Las Vegas Strip. Given the size of the investment and the ability to build permanent facilities, it signals that Las Vegas is in line to continue hosting races well beyond the initial three-year contract.
It also represents unprecedented spending on the part of F1, an organization traditionally more familiar with cashing checks than writing them. Formula 1 committed to covering some of the start-up costs for Miami, but not anything approaching paying $240 million to buy 39 acres of land.
It’s usually the cities laying out major money for Formula 1 races
Front Office Sports reported that the Las Vegas Convention and Visitors Authority has committed $6.5 million per year from 2023-25 to support the Las Vegas Grand Prix.
It’s a substantial sum by LVCVA standards but a drop in the bucket toward what other cities pay to host races. Those fees, media rights, and corporate sponsorships comprise the bulk of F1’s revenue, some of which is funneled back to the 10 teams.
No one has disclosed the total annual fee Las Vegas will pay. Under the normal F1 business model, it likely would be around the average of the current range between Monaco ($15 million) and Saudi Arabia or Qatar ($55 million), in figures published by RacingNews365.com.
The Las Vegas Grand Prix could be a sound investment
Formula 1 owner Liberty Media has changed its business model with the introduction of the Las Vegas Grand Prix. Rather than taking the hosting fee upfront and leaving the operation (and the P&L statement) to the host track, F1 has joined with Live Nation to serve as the promoter.
In return for settling for the modest visitors bureau funding, the Liberty Media-Live Nation alliance will cover expenses and then keep the revenue for themselves. If the races themselves aren’t profitable, Motorsport.com points out that the venture will have 50 weeks a year to use the planned garages and paddock area on 39 acres for other ventures. In a vibrant tourism center and so close to the Las Vegas Strip, that’s practically a license to print money.
Like Sportscasting on Facebook. Follow us on Twitter @sportscasting19 and subscribe to our YouTube channel.