Formula 1 looking to drive up value as Melbourne GP gets new long-term deal

Melbourne will continue to hold Australia’s Formula 1 Grand Prix as local government officials have signed a new deal to host the race up to 2023, proving that in Australia there is nothing like a little local competition to spur people on to act.

The Australian Grand Prix has taken place at Albert Park in Melbourne every year since 1996 and the city already had an agreement, inked last year, to host the race until 2020.

But Daniel Andrews, the State of Victoria premier, has announced that the city has extended its deal with Formula One Management, despite speculation earlier this year that the race could switch to Sydney.

Mike Baird, the premier of New South Wales, said in March that he wanted Sydney to host the Australian Grand Prix by creating a street track that would include a stretch over the Sydney Harbour Bridge.

Speaking shortly before this year’s Australian Grand Prix, Baird said: “I want the Formula One to come to Sydney, because no other city in the world could provide a more spectacular backdrop for this event.” 

But Andrews’ announcement, made directly to Baird via a video released on Facebook, confirmed that Melbourne would retain the race for the next eight years.

He said: “Mike, the Australian Grand Prix is staying exactly where it belongs, in the great city of Melbourne – the sports and major events capital of our nation.

“The good news is that you, and tens of thousands of others from New South Wales and right across Australia and the world, are more than welcome to come to Melbourne to be part of the great race. In fact, I’ll even shout you a ticket.”

The trigger for Melbourne to grab the F1 race from Adelaide in the first place was down to the announcement that Sydney had secured the 2000 Olympic Games. Melbourne considers that the income and global reputational benefit is has derived from the annual F1 competition outweighs the benefits to Sydney from a one-off three week event 15 years ago.

Several politicians and local officials in Melbourne have expressed their dissatisfaction in recent years at the amount of taxpayer money that is used to keep the race in Melbourne, which in turn lead to theories that the race could be held elsewhere.

But the new deal extends the F1 history of the 5.303km Albert Park track, which replaced Adelaide as the host city of the Australian Grand Prix 19 years ago. The Melbourne circuit was recently voted 16th in our JA on F1 poll to find the ultimate F1 calendar.

James Allen writes: The long deal is all part of the strategy of F1 commercial boss Bernie Ecclestone and majority owners CVC to lock value into the F1 business with long contracts for race hosting and TV rights, wherever possible. These are crucial to setting a high valuation on the business with CVC looking to maximise its return on investment and investors swimming around. The mooted Qatar/Miami Dolphins bid has now gone quiet, according to sources familiar with the matter.

Other potential investors like Liberty Media have done due diligence on F1 and even made bids, but valuation of the business has consistently been a problem.

F1 turned over in excess of $1.8 billion last season, with over 60% of the earnings before interest, tax, depreciation and amortisation being shared among the 10 teams.