Save Albert Park Newsletter – Issue 170, March 2009
MELBOURNE GEARS UP
...... to lose $50 million on staging a car race
While Victorians are still recovering from the shock of the Black Saturday disaster, and the
world is in the grip of a financial crisis, the Victorian Government continues to pour public funds
into staging the Formula One Grand Prix car race.
The event will cost $85-90 million to stage, and is now expected to produce an operational
loss of at least $50 million. According to the Herald Sun of February 26, this loss ‘could push
the state budget into the red for the first time in 15 years.’
The Brumby Government appears oblivious to the offensive nature of this event, which at this
time has the effect of cancelling out much of the public’s generous donations to bushfire relief,
and mocks the dire situation faced by thousands who are faced with loss of their jobs and the
ability to pay mortgages and support their families. Added to this is the effect of prolonged
drought, and the need to finance the new infrastructure necessary to cope with it, when the
state’s finances are under severe strain.
The loss on this year’s race is likely to be exceeded next year, as the corporate sponsors
dump their support. ING, the event title sponsor, and the major sponsor of the Renault F1 team
is getting out of Formula One after massive losses and having to be bailed out by the Dutch
Government. The Royal Bank of Scotland (RBS) has incurred the biggest loss in British
banking history and is withdrawing its support of the Williams F1 team, and its corporate
support of the Melbourne race. Fosters has withdrawn its sponsorship and BMW has
abandoned its spending on hospitality at the event.
The branding myth In defending its continuation of the Grand Prix event the Brumby
Government claims that it creates ‘destination branding’, meaning more awareness of
Melbourne as a tourist destination. In his 2007 report on the Grand Prix, the Victorian AuditorGeneral stated:
‘The issue of branding and media exposure has been addressed, however, due to the absence
of quantitative evidence, no value has been factored into the economic assessments”.
If any ‘branding’ effects actually exist, they are more likely to be of the negative nature
portrayed in the Michael Leunig cartoon.
Grand Prix is ‘value for money’?
Save Albert Park has lodged a freedom of information
request with the Office of the Premier, John Brumby. The full
text of the request is given below.
We request supply of the information on which Mr Brumby
relied in making the statement that ‘the Grand Prix delivered
value for money for Victoria’.
We refer to the media release issued by the Premier of
Victoria dated Friday, 4 July, 2008, and headed ‘MELBOURNE
SECURES GRAND PRIX FOR ANOTHER FIVE YEARS, which
included the following paragraphs:
“Mr Brumby said the Grand Prix delivered value for money for
Victoria in terms of the event itself, the international exposure for
Victoria and its capacity to act as a drawcard for other major
events.”
“The massive television exposure that Melbourne receives year
in year out has helped to build our world-wide reputation as a
great place to visit and a great place to live.”
We assume that the information we are requesting would be
in the form of a cost-benefit analysis, as this is recognised by
mainstream economists as essential to provide proper guidance
to governments in matters of investment in major projects and
events. The extension of the Grand Prix contract for another
five years involves expenditure of over 500 million dollars in
event staging costs, and it seems highly unlikely that this level of
spending would be embarked upon by any responsible
government without a proper assessment process
We note that the Victorian Auditor-General recommended that
‘the major event Assessment Statement (MEAS) be revised to
ensure that there is more evidence-based justification for the
recommended level of funding relative to the projected net
benefits to Victorians’, and that ‘consideration be given to the use
of cost benefit analysis at the pre-event stage to determine the
degree to which anticipated net benefits match the funding
sought’. (State Investment in Major Events, Victorian AuditorGeneral’s report, May 2007, Section 1.3 Recommendations.)
Such a cost-benefit analysis would be expected to show the
information we are requesting, viz,
- the beneficial effects of the international exposure in terms of,
for example, the numbers of tourists attracted to Victoria after the
event, and the specific business opportunities which have arisen
and their outcome,
- the ‘other major events’ for which the Grand Prix was the
‘drawcard’, and the net economic benefit to Victoria resulting
from these events,
- details of the ‘massive television exposure’ received by
Melbourne as a result of the Grand Prix, in terms of audience
numbers, the countries in which the event was viewed, what the
numbers represent (peak, average, including or excluding news
items etc), and most importantly, who compiled the numbers, an
independent organisation, or Formula One Management itself.
The relevant documents, as described above, are requested in
the public interest.
Investigation of Crown and
public authority land
As reported in our last issue, the Victorian Environmental
Assessment Council (VEAC) is undertaking an investigation of
Crown land and land controlled by public authorities. Save Albert
Park has lodged a submission (now on the VEAC website)
focussing on the effect on Melbourne’s liveability on the staging
of the F1 Grand Prix in Albert Park Reserve.
Formula One file
The Formula One organization is now divided into three
camps:
Formula One Management (FOM), with Bernie Ecclestone as
its CEO, which controls the commercial aspects of the business
and collects the revenues.
The Federation Internationale de l’Automobile (FIA), headed
by its president, Max Mosley which represents a group of car
racing clubs around the world. The FIA owns the Formula One
racing series, but has leased the commercial rights to FOM for
one hundred years.
The Formula One Teams Association (FOTA), headed by its
chairman, Ferrari president, Luca di Montezemolo . FOTA was
only formed in September last year, but is now vigorously flexing
its muscles.
The three groups are in a state of considerable turmoil, caused
by four main factors:
- squabbling over the distribution of revenues. Under a
current agreement, half the revenues go to the F1 holding
company Delta Topco which is based in a tax haven on the
island of Jersey, and the other half goes to the teams. FOTA
wants more of the money, and more control over the business.
- the costs of F1 racing. Costs have been escalating to
ridiculous levels over some years as teams try to extract minute
speed advantages, and the financially weaker teams can’t
compete, and are forced out.
- the global financial crisis, which is undermining F1’s
sponsorship revenue stream, and exacerbating the existing
racing costs problem, and threatening to destroy some teams.
The Honda team has already gone (but will continue as Brawn
Racing), and Toyota, Williams and Renault are wobbly.
- the declining popularity of F1 racing. People around the
world are not flocking to watch the races. Apart form the fact that
fewer people can now afford the tickets, the entertainment is not
compelling. In Melbourne, F1 racing has to be bolstered by the
V8 Supercars, and a rock music concert.
Ecclestone now wants to take F1 to the people by running
races in cities rather than in isolated circuits, but he’s been
turned down in London and Paris, and now has his sights on
Rome. Ecclestone also wants to jazz up the competition by
presenting Olympic style gold, silver, and bronze medals to
drivers, instead championship points.
FOTA doesn’t seem to like either of Ecclestone’s ideas,
nor does it like the current management and ownership situation.
FOTA has seized the initiative and has just issued a set of
proposals covering the evolution of F1 racing, under the
categories technical, sporting, and commercial. It has carried out
a comprehensive survey of F1 fans (and even non-fans, but left
out SAP) over 17 countries.
FOTA chairman Luca di Montezemolo has said publicly that
F1 should be ‘a normal sport that is not connected to single
people’ and at the top there should be ‘the teams, who invest and
innovate’. Fellow FOTA member and Red Bull owner, Dietrich
Mateschitz, a close friend of FIA’s Max Mosley, has launched a
stinging attack on F1 ‘s current commercial rights owners,
saying: “They have neither the expertise nor passion about and
for motorsport. Their engagement .... is simply a financial one,
geared towards maximising profits.” He believes that the only
way forward is for the teams to come up with a plan to take over
the sport. “Everybody can see that the value of Formula One is
not that which it was a year ago.” All this suggests Ecclestone’s
grip on F1 may be loosening. (Source: pitpass.com website).
Skate park – Community
Reference Group appointed
At its meeting on Monday, February 23, Port Phillip Council
decided on the membership of the Community Reference Group
which will provide advice to the Council on the location of the
skate park.
The Council appointed the following eight people to represent
the community: Hunter Tye, Michael Mulcahy, Lisa Rodwell,
David Myer, Ingrid Barry, Ann Birrell, Michael Markham and
Renton Millar. These include young people, skaters, community
members and/or experts in open space and recreation planning.
Two Councillors, Cr Serge Thomann and Cr. John Middleton
were also appointed. While Save Albert Park’s nominee for the
group was not selected, we are confident that our interests will
be well represented.
The Council states that it is its intention to provides as much
public information as possible on the process and outcomes, and
regular updates will be posted on the Council’s website. The
Council contact is Anita Lange, Special Projects Manager, who
can be reached on 9209 6815.
Melbourne should be
‘a city of spaces’
Oft repeated by the State Government’s major events
proponents is the claim that major events are as important to
Melbourne as the Opera House is to Sydney. This has been
refuted by Phillip Cox, one of Australia’s leading architects, who
designed the Rod Laver Arena, also the Melbourne Football
Stadium, now under construction.
He said recently that Melbourne “doesn’t need a Harbour
bridge, and it doesn’t need an Opera House. What it needs is
revitalising the city as perhaps the most beautifully planned
pedestrian city, a city of spaces. That should be the icon.
Melbourne outstrips Sydney as a city; it is better planned, it has
the potential’.
(Source: The Age, March 7, 2009)
Newspaper items of interest
and astonishment
Victorian government’s sponsorship of the Grand Prix
Financial Review, Feb.21-22, 2009
‘Corporate sponsorship of sport is in danger of becoming a
casualty of the economic downturn as marketing departments
slash spending on teams and events.
Almost a third of companies surveyed had dropped
sponsorships due to the economic crisis and 48 percent were not
signing new deals, a Sweeney Research report said this week.
The latest victim is Melbourne’s Formula One Australian Grand
Prix, which will be without a naming rights at season’s end after
ING confirmed it will not renew its deal. Grand Prix Corporation
chief executive Drew Ward said he would cast a wide net
overseas in search of a new sponsor.’
‘Mr Ward said the Victorian government’s sponsorship of
the event which was $40 million last year, was essential to
promote Melbourne’s image among trading partners in Asia
and Europe.’
(Our comment: Drew Ward would know that the Victorian
government is not a ‘sponsor’ of the Grand Prix, but is the event
promoter and the circuit owner. The $40m he refers to was, of
course, the operational loss. However, it was good spin.
Answers seeking questions
A2 section of The Age, Feb.28, 2009
John Clarke filled a column with answers to a set of unknown
quiz questions; for example the answer to question 22 was:
Peter Garrett. Everything Midas touched turned to gold.
The answer to question 17 was:
Ron Walker. The Grand Prix. $45 million a year.
Try your hand at supplying the question, and correcting John
Clarke’s answer.
Linfox offers to build a Formula One track at Avalon
Herald Sun, February 26, 2009.
‘Trucking giant Linfox has completed a secret feasibility study
to build a $200 million Formula One track at Avalon Airport. The
motorsport complex would be capable of competing against the
controversial Albert Park track if the State Government looked at
moving the event, according to Linfox director, Andrew Fox. He
said the plans show it was a viable and cheaper alternative than
maintaining the Grand Prix at Albert Park.
“If the Government could extend the agreement with Bernie
Ecclestone then we believe we can justify a new facility at an F1
standard – world’s best practice – at Avalon”, he said.
Linfox has yet to hold discussions with the State Government
about its proposal. But the alternative option at Avalon may
become increasingly attractive because the State Government is
expected to be forced to underwrite a $50 million loss this year.
“It would be wrong of the government not to address something
that might be of less expense for the taxpayer”, Mr Fox said.
A spokesman for the government said moving the Grand Prix
from Albert Park was not under consideration.’
Thrilling moments at the Grand Prix
The Age March 1 2009, ‘Sport and Style’ magazine insert.
This glossy fashion magazine featured F1 driver Lewis
Hamilton on the cover, and celebrated 25 years of the Grand Prix
in Australia with photos of the seven ‘most thrilling moments’ of
the races. These moments were:
Adelaide, 1985 - the first F1 Grand Prix in Australia ‘when the
City of Churches became the City of Screeches’
Adelaide 1986 - Nigel Mansell gets a blow out.
Adelaide 1991 - Heavy rain reduces the race to only 14 laps.
Melbourne 2001 - Race marshal killed by a flying tyre.
Melbourne 2002 - Crash at the start of the race, resulting in eight
retirements.
Melbourne 2007 - Kimi Raikkonen takes pole position, wins race.
Melbourne 2008 - Lewis Hamilton takes pole position, wins race.