The Circuit of the Americas group offered a press release earlier today stating they have proffered a contract to Formula One Management's (FOM) Bernie Ecclestone that was inclusive of the initial payment for sanctioning fees to host the race in Austin in 2012 should the F1 boss agree to it.
The statement did contain a key element that suggested they had countered the contract received by FOM as they felt it was "unrealistic and unfeasible". This normally is boardroom details and negotiating but COTA chose to take their counter offer public in what could be construed as an attempt to show good faith negotiation with FOM on behalf of American F1 fans.
Ecclestone spoke about the situation while in Brazil for the final race of the year which is being held at the Interlagos circuit in Sao Palo:
"The truth is they're not complying with the terms and conditions of the contract. And as we make the contract, we will award the event or not award the event. They are not awarding anything to us.
"It's normal," he added.
"They have been messing around now for four months, there's two partners arguing and two different groups arguing with each other and in the end none of them have got the money."
COTA boss Bobby Epstein is no junior league investor in his own right and knows an onerous contract when he sees one. While Ecclestone may have his way with emerging markets and nations desperate for a race, COTA may feel that a egregious contract with no upside for the risk investors are taking is worth it.
When asked if Ecclestone felt his contract was "unrealistic and infeasible", the venerable boss of F1 said:
"Yeah, well they shouldn't sign it. My advice to them is don't sign it. And they probably won't get the opportunity."
Patience has always been a key negotiating tactic of Ecclestone's. He doesn't need COTA because he has a race already scheduled in America for 2013 in New Jersey--or at least that's what we understand. The biggest question now is will COTA be willing to walk away from the investment they've made so far pushing dirt around in Texas or will they concede and give Ecclestone what he wants no matter how "unrealistic and infeasible".
There is most likely a revenue generation vehicle in Ecclestone's contract for the circuit owners but how much that vehicle can produce and the comfort of signing the contract is really up to each individual group willing to take the risk. If it is ticket sales and concessions only, one has to ask if that contractual stipulation is still tenable given the current economy.
It is rumored that nearly all revenue generation from a race weekend is claimed by FOM leaving tickets sales and concessions for the circuit owners. Epstein--like most prudent investors--probably doesn't see that as realistic for feasible.
It's similar to race promoter and COTA member Tavo Hellmund's position. Taking risk is the business of those willing to do so but with it comes upside and where F1's concerned, most of the upside is held by FOM. If that is the case, then there is little reason to take the risk. Hellmund--a family friend of Ecclestone--originally held the promotional contract but with little or no skin in the game, he had very little leverage to claim the upside for the promotional rights he secured.
One could argue the very same about FOM. They do have a product to sell and it is valuable but how much risk is involved for FOM? The real risk--one would assume--is taken by the circuit owners in building a purpose-built track for $400 million. If Ecclestone's contract is so onerous that one can see no upside, then Epstein's Hail Mary press release starts to make sense.
If there is to be no race, Epstein is keen to let American F1 fans know that COTA tried but Ecclestone's contract read like a blood pact for your soul. If Epstein is a keen investor, there is little about an F1 contract that would make sense. One has to respect that he isn't willing to risk his investment for a stipend and leverage his investor's cash on Ecclestone's egregious stipulations.
If you're Ecclestone--a person either wants an F1 race (and all that entails) or you don't. He isn't in the business of decreasing the value of F1 to suit a person or groups cash flow interests and if FOM isn't the main benefactor of the race weekend, there is little reason in going to Austin.
It's merely business between two shrewd businessmen and if a deal isn't struck; Epstein is keen to leave the blood on Ecclestone's hands--in the form of no race in Austin for 2012--and not his. Ecclestone has been down this road many times before and one could assume that Epstein has as well leaving this at an impasse.