By Chip Le Grand
The full extent of F1’s financial gains from its negotiations with the Andrews government are contained within the fine print of an inches-thick contract.Credit: Matthew Absalom-Wong
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A high octane bidding war over the keys to the Australian Grand Prix, and a personal intervention by Premier Daniel Andrews’ to keep the race, resulted in Victoria paying an inflated price for an event which is this year expected to post its first $100 million loss.
The sagging bottom line for this year’s Albert Park race, to be revealed when the Andrews government tables the Australian Grand Prix Corporation’s annual report, comes despite a world record crowd of 440,000 people surging through the turnstiles to witness a spectacular weekend of Formula 1 racing.
It reflects dramatically increased costs baked into the event following a monster bid by the former NSW government to shift the race to the far reaches of western Sydney, the eagerness of F1’s corporate owners to exploit the rivalry between Australia’s two most populous states and Andrews’ judgement that whatever the cost of keeping the race, Victoria couldn’t afford to lose it.
Well-placed sources from both states, inside Formula 1 and Australian motorsport, speaking confidentially to discuss commercially and politically sensitive issues, agree the Victorian government ultimately secured the grand prix for a cost outweighed by the event’s economic benefits.
Australian Grand Prix Corporation executives doubted the F1 wanted to move the event from central Melbourne to Sydney’s outer fringes.Credit: Getty
There is also a view that, had the Victorian government held its nerve and trusted negotiations to those most qualified to conduct them, it might have kept the race for less.
As Victoria and NSW were emerging from COVID lockdowns in the spring of 2021, signalling an end to a public health crisis which had forced the cancellation of consecutive Albert Park grand prix, including the 2020 race aborted as fans were arriving at the gates, there were speculative reports that the Perrottet government was eyeing off the event.
It wasn’t the first time. Six years earlier, then NSW premier Mike Baird had floated a bold but short-lived proposal to stage the race at a postcard street circuit around Sydney’s Rocks. With Seven News rolling out the same file footage of former Aussie driver Mark Webber cruising over the harbour bridge in an F1 during a promotional stunt, neither the Victorian government nor the Australian Grand Prix Corporation had reason to think there was a real and present danger of losing the event.
All that changed in February 2022 when, unbeknown to the Victorian government or its grand prix chiefs, NSW minister Stuart Ayres led a small, high-powered delegation to London armed with a 10-year, $1.5 billion bid to prise the event out of Albert Park and stage the race at a purpose-built, permanent circuit at Penrith Lakes.
Within Australia’s F1 community, there was less concern about how the government kept the race than relief that it did.Credit: Eddie Jim
During a series of meetings held over several days within the St James Market corporate headquarters of F1, Ayres, Destination NSW boss Steve Cox and global sports marketing consultant Craig McLatchey – a key figure behind Sydney’s bid for the 2000 Olympics – walked the sport’s senior executives through their well-developed plans.
At a meeting with F1 chief executive Stefano Domenicali and Chloe Targett-Adams, F1’s trusted in-house lawyer who since the time of Bernie Ecclestone had handled all negotiations with host cities, Ayres revealed the financial details of an eye-watering offer; an annual $USD 100 million licence fee, an investment of between $200 million and $300 million in a new circuit and to top things off, a share of revenue from ticket sales.
When word of the secret NSW visit to London reached Victoria’s minister for major events, Martin Pakula, his boss Daniel Andrews, and the Australian Grand Prix Corporation leadership team of Andrew Westacott and Paul Little, Victoria shifted gears.
Westacott and Little had begun preliminary negotiations with F1 to extend Melbourne’s contract to stage the race beyond 2025 but, for the first time since the Andrews government came to power, there was a genuine fear that one of the city’s most important events could be wrenched from their grasp.
“People in government were getting shit scared and thinking it’s an election year, we don’t want to lose this,” a source familiar with the episode said. Westacott and Little, who were due to travel to Bahrain for an annual meeting of the sport’s promoters from around the world, were given instructions to fly to the Gulf nation and do whatever it takes to keep the race.
Instead, when Westacott and Little met with Domenicali inside the well-appointed paddock club of the Bahrain International Circuit, they found the former Ferrari team principal in no rush to ink a new contract. They reported back to an increasingly nervous Pakula that they were being stonewalled.
Australian Grand Prix Corporation chief Andrew Westacott and then Victorian sports minister Martin Pakula in June 2022.Credit: Daniel Pockett
The Australian Grand Prix Corporation pair, having dealt with Domenicali and other F1 executives for many years, thought the delay was a negotiating tactic. They believed the NSW offer was serious but doubted whether F1 wanted to move the Australian Grand Prix from central Melbourne to the edge of the Blue Mountains. A helicopter ride over the proposed site had reportedly left the F1 boss unconvinced about the location.
South Australia, under newly elected Premier Peter Malinauskas, had also joined the fray, making a late bid to return the race to Adelaide, but the offer was not seriously considered by F1.
Andrews was not prepared to leave anything to chance. Taking matters into his own hands, he began dealing directly with Domenicali. From Domenicali’s perspective, this was a crucial change in negotiation dynamics, one that would ultimately result in Victoria paying more to keep the race. “Formula 1 knew they had the pollies by the balls,” the source said.
To land the deal, Daniel Andrews needed help from a friend.
Domenicali, the erudite FI boss who, through five seasons of the Netflix series Drive to Survive has never been caught on camera raising his voice, is a regular visitor to Australia. He is also a close friend of Andrew Fox, the managing director of the Linfox Property Group which owns the Phillip Island MotoGP circuit. The pair holiday together with their families in Europe and when the F1 circus comes to Melbourne, Domenicali stays at Fox’s Toorak home.
Andrew Fox is also a friend of Andrews. When the premier said he wanted to sit down with Domenicali to discuss the state of the grand prix negotiations, Fox happily put his two friends together. Domenicali didn’t need much encouragement – any negotiator likes to talk to the person who signs the cheques.
At the same time he was talking to the Victorian and NSW governments about the Australian Grand Prix, Domenicali also had a direct line to Prince Albert II of Monaco over the future of Europe’s most famous street circuit. The long-term promoter of the race, the Automobile Club of Monaco, was clinging to its traditional control over the television broadcast. His Serene Highness, after discussions with Domenicali, convinced the club to loosen its grip.
As a consequence of the Victorian premier’s direct approach and more active involvement by Pakula in negotiations, Westacott and Little were marginalised and eventually sidelined entirely from the deal. Both of them learned what the Victorian government had agreed to after the contract was done.
Westacott had led two previous contract negotiations, first with Ecclestone and later with Liberty Media’s Chase Carey, which had extended Albert Park’s race tenure from 2016 through to 2025. He declined to comment on last year’s negotiations but stressed the importance of the relationships the Australian Grand Prix Corporation had developed with senior people in F1 over many years.
Stefano Domenicali (centre), CEO of the Formula 1, walks on the grid during the Australian Grand Prix in 2022.Credit: Getty
“The strength of the relationship that Melbourne has with F1 has always been built on regular contact, open dialogue and solid trust,” said Westacott, who this year resigned from the corporation after 12 years as chief executive.
Little is a self-made billionaire who turned Toll from a small trucking fleet into a global logistics giant. He is renowned as one of the toughest negotiators in Australian business but had no say in the final terms Victoria agreed to with F1. He finishes his term as corporation chairman in September following the government’s decision not to reappoint him. Little declined to comment for this story.
Within Australia’s F1 and motorsport community, there was less concern about how the government kept the race than relief that it did.
On the Saturday night before the 2022 Grand Prix, in a private dining room inside Lamaros, a gastro pub across the road from the Albert Park circuit, Domenicali joined Motorsport Australia bosses Andrew Fraser and Eugene Arocca, News Corp’s global chief executive Robert Thomson, Supercars owner Barclay Nettlefold, Pakula and Westacott for a pre-race nosh-up.
It had been a brilliant day trackside, with a massive crowd, bright sunshine and blistering times set in qualifying. The mood around the long, white oak table was cautiously hopeful. After Domenicali rose to say a few words and spoke positively of the event and Melbourne’s place on the F1 calendar, everyone went home feeling that Melbourne had the race in its keeping.
That night, Sydney thought it had it too. Of all the races run at Albert Park, few people will ever know how close this one truly got.
The Victorian government secured the race for less than what NSW offered. Although the precise licence fee contained within the state’s F1 contract is protected by commercial confidence, multiple sources with knowledge of the deal say it is close to, but still short of, what NSW put on the table in London.
Albert Park is now contracted to stage the grand prix through to 2037; the longest tenure by any host city.Credit: AP
Victoria refused to offer a share of ticket revenue but as a sweetener, it reopened negotiations for the three years it was already held a contract – from 2023-2025 – and bumped up the licence fee it had previously agreed to. The cost to government of this year’s race – a jump of around 30 per cent from the 2022 event – reflects the first instalment of the new licence fee.
F1, which since 2016 has been owned by Liberty Media, a publicly listed, hard-nosed, US-based former telecommunications company, is adept at finding other ways to leverage more money out of host cities in contract negotiations.
The full extent of F1’s financial gains from its negotiations with the Andrews government are contained within the fine print of an inches-thick contract which covers everything from merchandising to pourage rights at trackside venues. It includes a commitment by the Victorian government to more than double the capacity of the permanent, pit lane and paddock facilities at Albert Park from 2000 to 5000 people by 2026.
In negotiations held after the contract extension was publicly announced in June last year – a day memorable for then NSW premier Dominic Perrottet’s sour response that the deal was “a loss for the F1” – the Victorian government requested scheduling flexibility in 2026 so that the race wouldn’t clash with the Commonwealth Games.
In return, the Victorian government gave up its rights to an opening season race it has previously secured. This sliced between $10 million and $20 million off the value of the rights – a contractual bauble F1 can now offer another host city. Victoria last month walked away from its commitment to host the Commonwealth Games.
Andrews declined to answer questions about the contract negotiations but described the Australian Grand Prix as “critical to Victoria’s success” as a major events capital. “The 2022 event delivered a $171 million boost to the state’s economy in just four days and supported thousands of jobs,” he said on Friday. “It’s not leaving Victoria any time soon.” Pakula, mooted as a possible replacement for Little as chair of the Australian Grand Prix Corporation, declined to comment.
Albert Park is now contracted to stage the grand prix through to 2037; the longest tenure currently by any host city. The cumulative cost of that to government, if the financial result from this year’s race is indicative, will run into billions of dollars. The value of economic activity the event generates, according to analysis prepared for the government last year by consultants Ernst & Young, is still projected to be significantly greater than the cost.
“Did they pay overs?” the source familiar with the negotiations asked. “Probably. Did Sydney cost them more? Definitely. Did they make the right decision? Yes.”
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