Running and maintaining a formula 1 team is not an easy proposition. But the revenues from the race organizers to each team use to take care of the perpetually escalating costs of maintaining a competitive F1 team. But if the financial results of year 2018 is any indication then that revenue source for the F1 teams is falling each year. According to the financial numbers release by the Liberty media, the income paid to the 10 F1 teams has continued to fall, from $966m in 2016 to $919 in 2017 and $913m in 2018.
The trend clearly shows that the teams’ revenues for the teams are falling in spite of a symbolic 2.5% rise in the F1 revenues.
The news comes at the time when F1 and the teams continued what are likely to be increasingly complex negotiations over the sport’s rules and the commercial arrangements for 2021 and beyond. Liberty
Media’s annual results issued yesterday (Thursday), however, indicate that F1’s revenues rose marginally by some $44 million from $1,783 million in 2017 to $1,827m last season.
Primary revenue sources – – income from race fees, TV and advertising/sponsorship – contribute a mere $6 million to this figure. The rest has come under the “other revenue” heads. F1 had reported a profit of $47m in 2016, followed by a loss of $37m in the next fiscal. A reported increased loss of $68m for the 2018 season meant that the team’s share from the central pool revenue has gone down to $913 million during the financial year.
Liberty Media has noted that income from race fees was “flat”, despite an additional event – from 20 in the previous year to 21 in 2018. According to Liberty Media, the combined fees from the German and French GPs could not match the fee lost due to the absence of the Malaysian Grand Prix.
“Race promotion revenue increased modestly primarily due to contractual increases in race promotion fees, as well as a contract amendment for one event that provided for an increase in promotion revenue which was fully offset by a reduction in advertising revenue related to that event.
There is no change in the TV income as problems with a partner affected the prospects of any growth. “Broadcast revenue was essentially flat for the full year 2018 as contractual rate increases and favourable foreign currency movements were offset by the early termination of one contract with a failing broadcast rights broker.”
Liberty has also admitted that advertising and sponsorship income, considered a key area of growth since it bought the business, too crashed in 2018. “Revenue from new sponsorship agreements and growth in certain contractual agreements did not fully offset the aforementioned contract amendment that saw a reduction in advertising revenue fully offset by an equal increase in promotion revenue (which was neutral to primary revenue),” states the report.
The increase in “other” revenue derives from several sources, and is “primarily due to higher logistics revenue, higher digital media and TV production related revenue, increased revenue from various fan engagement activities and higher spare part sales for the F2 and GP3 support series”.
The company is also hit by bad debts associated with partners: “Selling, general and administrative expense increased primarily as a result of increased marketing and research costs and increased bad debt expense due to payments issues with two commercial partners.”