Lewis Hamilton, Mercedes, Interlagos, 2018

Why Formula 1 made another loss in 2018

2019 F1 season

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The latest filings posted by Formula 1 commercial rights holder Liberty Media show that for 2018 the Formula One Group posted losses for the second consecutive year. Its deficit grew from $37m in 2017 to $68m.

However F1’s revenue for the same periods grew from $1.784bn to $1.827bn. Of these, ‘primary F1 revenues’ made up $1.487bn of 2018 turnover and ‘other’ activities contributed the balance.

According to Liberty, race promotion fees contributed 33.8% of revenues, broadcast and electronic media contracts provided 33.1% and trackside ‘bridge and board’ advertising and sponsorship adding 14.6%. The balance is made of unspecified ‘other’ activities.

The company described primary 2018 F1 revenue performance as “essentially flat”, and attributed the increased losses mainly to “significantly” increased logistics and travel expenses, higher costs associated with supplying F2 and F3 chassis components to teams, and increased spending on digital media activities and fan engagement. Liberty will promote F3 from 2019.

Increased spending on marketing and research also pushed costs up, as did a rise in bad debts due to “payments issues with two commercial partners”. Although not specifically referred to, during 2018 TV broadcast broker MP & Silva went into administration. It is believed this affected income from the Middle East and other territories.

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Liberty also indicated that the revenue from two races which returned to the schedule – the French Grand Prix and German German Grand Prix – did not offset the lost income from the demise of the Malaysian round. F1’s overall advertising and sponsorship revenues also decreased.

However Liberty is upbeat about the future. F1 CEO Chase Carey said in a prepared statement that “we now have the right organisational structure in place and expect that the majority of future investment will be revenue-generating.”

Carey indicated revenues from its over-the-top streaming service F1 TV will improve, saying in an investor call, “2019 will, in many ways, be a true commercial launch of the product.”

[smr0901]”After using 2018 as our beta test, we strengthened the platform and we’ll have a more full-some marketing launch as we kick off the F1 season next month.

“F1 TV is a long-term strategic priority. We will continue to evolve the platform, enhance the content and build on distribution opportunities in the coming years.” He also referred to previously-announced agreements to bring F1 TV to The Netherlands and Germany.

He also confirmed four fan festivals in 2019, the first of which will be hosted in Shanghai to coincide with F1’s 1,000th race.

“We will celebrate this milestone in many ways, so stay tuned. We also plan to hold fan festivals in Chicago, Los Angeles and Brazil. We’re excited that we exposed other audiences in the U.S. to Formula 1 after a very successful fan festival in Miami last October,” said Carey.

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Dieter Rencken
Dieter Rencken has held full FIA Formula 1 media accreditation since 2000, during which period he has reported from over 300 grands prix, plus...

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  • 20 comments on “Why Formula 1 made another loss in 2018”

    1. I wonder if they can examine whether the Malaysian grand prix will return…amazing track and great races every single time. Nothing compared to nooz-fests French and German grand prix – especially the French one which is almost as bad as the Russian one.

      1. As someone from Malaysia, I can say probably not.

        The race costs us way too much money that needs to be paid versus the promotion we get out of it (which is really the only reason we’re doing it from an economics standpoint) which is why our previous governememt administration ended it. The value just wasn’t there.

    2. So basically Liberty are going to further lock down the ability to watch F1 unless through the Liberty portal. Add more razzamatazz and hope like hell gen Y & Z start paying to watch…good luck with that.

      1. @johnrkh

        So basically Liberty are going to further lock down the ability to watch F1 unless through the Liberty portal.

        It’s just the way TV & sport in particular in going.

        I’ve been saying for a few years now that the overwhelming feeling in the industry is that in the next 10 years sport on traditional TV isn’t going to be the way most people watch. OTT direct to consumer platforms like F1TV is going to be the primary way people follow sport just as streaming services like Netflix, Amazon & Hulu (Among others) are becoming the primary way a lot of people watch TV & movies.

        1. And if like Netflix that means 10 bucks a month, that’s pretty good. Free-to-air was never free anyway. One has always needed at least a basic cable/satellite package as is still the case in Canada. We don’t have acces to F1TV at this point, but we do have the Sky coverage via one of our main sports networks TSN which can be had with a basic package. That’s still pretty much $100 a month for all the channels we get entirely. So ya, new people to F1 were always going to have to pay to watch, Liberty, or some other entity post-BE, or not.

        2. My concern with the OTT trend is that there is growing fragmentation, particularly in the movie/TV space, and that is likely to be replicated in the sporting space.

          We’ve already seen how Marvel properties are moving off Netflix, since Disney wants to launch their own streaming channel.

          Likewise, I’m concerned that access to things like F1 might go that way. Today, I can stream a variety of sports (football, cricket, etc.) via a single and cheap Hotstar subscription, but I fear that this might go the Marvel route, with Liberty electing to keep F1 behind their own paywall sometime in the future. And if it comes to that, I am likely to heavily question the need for me to add on yet another subscription to my already burgeoning list of digital media subscriptions.

          1. @phylyp I get what you mean by adding another subscription, but you would consider dropping following F1 if it was 10 bucks a month? Two or three F1 races a month, meaning a few bucks each?

            1. @robbie
              @phylyp and i from the same country–India. i cant speak for him but there will always be a cost vs benefit question. Today, on a certain streaming platform, a years subscription covering Cricket, Football, Hockey, badminton and a host of other sports including F1 costs us Rs.300 or roughly $4.20 / £3.20. Its a stupendous deal.
              Now if F1 TV comes in and says, pay another 300 for F1 alone, fans will certainly hesitate, as F1 has never been our first love and this only leads to diminishing viewership. Do note that F1’s viewership grew by 87% in the Indian subcontinent in 2018.
              Also, Netflix is struggling in India because of its pricing strategy. More the interests, more will be the questions on affordability.
              OTT gives you more options–it is both a boon and bane.

            2. @webtel – Thank you for your reply. I’d like to say great minds think alike (and not the alternative), because I echoed pretty much the same points as you, and gave almost all the same examples, in today’s round-up. :)

            3. @phylyp
              Ha ha. I read the round up after this one as i normally bunch them up and read all of them at once.
              Anyways, good to know we are on the same page. Three cheers mate.

    3. Fan festivals in the f1 heartlands of Chicago and LA should be the headline bloopers here but seeing the terrible French GP loose money while Sepang, always a great race disappeared seemingly costing liberty cash and continuing the push away from free tv are so stupid. Only question i have is which of the Carey/Bratch/Brawn trio will still be here in a years time.

      1. Free TV doesn’t exist, except I suppose if you move to a new apartment and the cable/satellite hasn’t been disconnected yet;)

        1. Daniel (@bringmontjuicback)
          2nd March 2019, 18:57

          Are you American? In many places “free” TV is indeed free (apart from the antenna and the TV itself, obviously).

        2. It’s still free in America. You just need the 50 dollar antenna. My parents still watch TV like that. Last time I was living in the UK it was free as well. My roommates were worried about the BBC’s van driving around busting people for not have the license. It’s free in Czechia. My mother-in-law watches it like that as well.

        3. @robbie, Well there is no such thing as a free launch, but here in Australia we have 50+ channels from 3 commercial networks and 2 taxpayer funded networks that (tax aside) are completely free to watch. In the USA the big broadcasters got so fat and lazy that they failed to expand their transmission coverage to keep up with urban growth, instead they relied on cable networks to take their product to new residential areas, I’ll bet they thought they were really clever getting Congress to insist that Cable networks include the big broadcasters programs in their basic package, the result of course is the cable networks now own the broadcasters, I imagine the same happened in Canada which is why you have to have a cable subscription to watch.

    4. Liberty are spending money, lots of it, they actually have tens of F1 staff with salaries, cars expenses, hotels etc. Bernie spent zilch by comparison. The cost cap and redistribution of prize money will be essential to Liberty staying in F1.

    5. Increased spending on marketing and research also pushed costs up

      Was that marketing research? Which appeared to be spent on polls so Liberty could hear what they wanted to hear.

      … expect that the majority of future investment will be revenue-generating.”

      Revenue generation from, higher race fees or F1 TV streaming fees? Or by adding more money-losing races? Or reducing the 50% revenue split with the teams?

    6. So in blunt terms, Liberty need to either find a way to increase revenue or reduce costs.

      In the commercial world these days, major corporates generally only focus on one aspect and that’s reduction of costs and almost never increase revenue, which invariably starts at:-

      Laying off a significant number of staff. (There seems to have been a ramping up of the number of “staff/exectutive management” positions – Iexpect to see some of these go as soon as the 2021 regulations are finalised)
      Screwing down all suppliers to a reduced rate and extending payment periods by 90 days to reduce outgoing cash flows. (The teams must be very nervous about this because they’re the ones with the most to lose here)
      Passing the “cost of doing business” (logistics costs) or a higher proportion of it on to teams.
      Selling off assets. (Usually step 2 after staff redundancies – I have no idea what they could “sell” but I’m sure they’ll be looking at it)

      If they do adopt the traditional business model of “cut costs to maximise profitability” (which I expect to be first) at the expense of “increase revenues” (which generally doesn’t get a high priority), I fear that F1 will be a very different beast indeed in a couple of years time.

      That’s the problem when you buy an entity that has already been run (by CVC) with the sole aim of maximising it’s profits to the long term detriment of its longevity – its a very very hard road back. Yet still Liberty bought it.

      I seriously hope they’re committed to the long haul – it will be a rare thing if they are.

    7. It’s a drowning sport with no quick fix, jump ship now and have a better time in the near future, or hang on and pray that it miraculously starts floating again

    8. Brogan (@brogan-fraser)
      4th March 2019, 2:32

      “Made a loss”
      A company I once worked for always “Made a loss”
      Business is a funny thing. So is Tax for that matter.

    Comments are closed.