WE ALL know that motorsport is expensive, outrageously so, in some instances, but sometimes the numbers really are ridiculous.
This week The Race Torque published a story about the real costs of promoting a round of the Virgin Australia Supercars Championship, a culmination of several weeks of research and effort prizing figures out of key people in the business who know such things.
I’ll spare you the nitty-gritty, but basically if you own a circuit and want to put on a Supercars round it’s going to cost you about $1.4 million, give or take a few hundred grand.
For that $1.4m you will get a return; if the stars align, you get a sponsor, the weather gods are kind and a crowd rocks up then there’s a good chance you’ll be in the black.
But if it pours down with rain for three days and people make the sensible decision to stay at home on the couch, you’ll be tearing up cash as quickly as if you had a drug addiction. Probably, quicker.
The concept we modelled is one of a few ways to promote a racing event and is perhaps the most traditional: Pay to attract a big, headline act and then hope that you can cover the costs by drawing a crowd, corporates or sponsorship – or a combination of those and more – to at least make your money back.
Another model, and an infinitely safer one, is to hire the track out to the championship in question and let them take the risk. This is the model Supercars employs for several rounds; they basically take control of the circuit and then use their own resources to add to the facilities, promote the weekend. The circuit banks a cheque, the series has the control and then gets the reward if people turn up but takes the risk anyway.
Outside of the big events, the other model can be defined as ‘User Pays’.
Let’s say a circuit knows that to put on a national-level race meeting for a weekend is going to cost $200,000.
They go to a group of categories and attract six of them to join the program, with each category paying $40,000 to get on the program. The categories then charge entry fees to their competitors at whatever price they need to make their money back.
The circuit gets a small profit, the categories get a place to race and for the most part everyone is happy. The problem, however, with this model is that there’s no incentive to actually promote the event.
Sure, the circuit could take a risk on spending $10 or $20 grand on a marketing campaign – but with only a marginal chance of making that back by increased attendance.
Better off banking the money and taking whatever extra you can make from a few hundred paying punters, a thousand if you’re lucky, buying tickets, food and drink from the venue to add to the bottom line.
If this all sounds pretty grim.. it’s because it is. It’s also ironic – because if you use your racetrack for motor racing, it’s not a particularly viable business.
Where circuits (the term ‘promoter’ doesn’t really apply any more) make their cash is in corporate events; Track day hires, Manufacturer days and more. That’s where the cash is and from a circuit’s point of view, it’s much better and safer making $15K a day renting your track to AMG for a customer experience than it is putting on a major event.
Going back to our original point about promoting a Supercars round. Our model worked on the basis that if all went well the event would make a profit of about $200K, which on paper isn’t bad.
But consider this: if they rented the track to a major brand for a week-long corporate booking, the same circuit could make the same money for the same time period.. but without any of the hassle, stress, expenses, liability issues and people dramas that come with promoting a major event. When you look at it that simply, it’s a no-brainer.
Fortunately, there are still promoters in this world who see the value in spending money and taking the risk on promoting a major motorsport event. And there is value, make no mistake: hosting a Supercars round, for example, is often the only weekend in a given year where the circuit in question will attract a crowd. It is, in effect, a shop-front to your potential customers. A massive marketing exercise.
But these days the margins are so tiny and the risk so great that there may come a point where race tracks give up on the racing component of their purpose entirely.
It’s up to the sport to make sure that the business of going racing remains one viable to not just the competitors and the fans – but the venues that host them as well. Because without them, there’ll be stuff all racing at all.
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