Chase Carey, Silverstone, 2019

What Carey’s latest take on the state of Formula 1 told us


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Back in the day when Bernie Ecclestone headed Formula 1 – whether for his family’s account, a syndicate of bankers who acquired the F1’s commercial rights by default or CVC Capital Partners, to whom they sold the majority rights – the only inkling the specialist media had about the sport’s financial performance was revealed each September, when myriad F1-related entities filed annual accounts with Companies House.

Still, there were challenges, for some were registered and operated offshore, while banks and investment funds are adept at making only statutory disclosures, thus often camouflaging the full picture. Through ‘sight’ of various agreements and covenants and by piecing together numerous bits and pieces – for example, team payments schedules – it was possible to construct an accurate picture of F1’s financial performance.

However, since early 2017, when Liberty Media acquired F1’s commercial rights, NASDAQ and Securities Exchange Commission regulations make it mandatory for the listed entity (FWONK and FWONA) to publish quarterly results, and provide disclosures.

Thus Liberty Media Corporation, the holding company for numerous entities including F1, hosts quarterly earnings calls, during which headline numbers are revealed and explained to analysts. The last such call – with 11 analysts – took place last week, with Liberty revealing its performance in the second quarter of 2019.

The report shows that the Formula One Group registering a turnover of $620m (up from $585m in the same quarter last year) – of which $531m (versus $491m) was directly attributable to F1 activities, with the rest being generated by associate companies – delivering operating income of $26m (versus $14m).

Start, Albert Park, 2019
Melbourne extended its F1 deal
Expressed differently, these numbers equate to an overall return of 4.1%. More worrying, given that F1 currently carries $2.9bn (yes, billion) in debt, projected annualised operating returns of little more than $100m mean Liberty could still be settling its loan commitments for the nest 30 years unless profitability improves dramatically.

Who knows what shape the overall motorsport landscape – more particularly F1 – will be like in 2050?

Encouragingly, though, payments to teams increased by 9% from $307m to $335m – a stark reversal from previous quarters, when revenues dropped due to increased expenses and overheads, primarily due the costs of the new St James offices, increased head counts and marketing/research programmes.

During the investor call F1 CEO and chairman Chase Carey had much good news to crow about: race contract renewals in Australia and Great Britain, through to 2025 and 2024 respectively (although Silverstone’s deal was, strictly speaking, signed in Q3), plus the signing of Zandvoort.

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Ditto, much was made about thrill-a-minute races in Austria, Britain, Germany and Hungary – but these fell into Q3, while the controversies and torpidity of Canada and France respectively were glossed over…

F1 TV remains a “work in progress”
Understandably, Liberty’s report and painted a rosy picture of the state of F1, yet Carey’s subsequent responses to questions from analysts suggest that F1 remains very much a work in progress for Liberty, particularly with respect to television coverage and regulatory matters. Some responses to fundamentally straightforward question about the state of F1’s various TV offerings – F1 TV, free-to-air and pay channels – were bemusing.

Having told analysts “F1 TV is steadily improved throughout the first half of the season and we’re getting closer to our targets, both in terms of content and reliability,” Carey’s answer to a direct question from an analyst about the product’s (well-documented) issues was less than illuminating:

“In a nutshell I’d say that Formula 1 TV, the over-the-top product, is certainly still a work in progress and certainly I think probably improving, expanding, and enhancing the content component of it, it is certainly a part of that.

“If we think about it, there are sort of three steps you have to get through to really build this and they have to happen in sequence, first, which is we’ve been working on.” He described the steps as follows: “The platform has to be reliable, then we need to find the content experience that’s how somebody is going to buy it and then you need to sell and market it.”

Carey finished off his answer to the questioner by admitting F1 TV was still a ‘work-in-progress’: “We had a foundation, but it’s clearly a foundation to be enhanced and I think what we expect, [we] will have there. I think there is something that it does, can and will appeal to the passionate fans we have for the sport, which is significant around the world.

“And I think we believe it’s an important opportunity for us to continue to build on, but it is a work in progress.” F1 TV has been under development for almost two years now.

Equally, a question on F1’s overall TV’s ratings, particularly in the UK – where the loss of Channel 4’s free airings have hit eyeballs – did not elicit a direct response, but rather a vague blaming of the aftermath of the (Russian-hosted) FIFA World Cup, which was said have affected Brazil’s ratings.

Carey also spoke about the return of the ‘Formula 1: Drive to Survive’ Netflix documentary, humorously asking ‘who’ll be the Guenther Steiner of season two?’ – with Carey confirming all ten teams are participating in the new nine-part series. It will be interesting to see how they intend forcing 10 teams into nine programmes…

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Although Carey spoke about F1’s 70th anniversary in 2020 – by referencing the season’s opening round in Australia – he steered clear of mentioning (rumoured) plans to produce a ‘Seventy Years of F1’ documentary on a multi-part style basis. A production deal is believed to have been inked between Liberty and Sky TV in early August, with the series scheduled for next summer.

Giuseppe Farina, Alfa Romeo, Silverstone, 1950
F1 will mark 70 years of the sport next season
A pertinent question homed in on the crucial balance between viewership and income, and how he saw the situation evolving.

“There’s no question that’s the ongoing dynamic, they both are important,” he said. “We don’t have a formula to look at it, I mean there are too many factors to try to sort of put a formula in place that plays over, and each market is different.

“I think what I’d say is generally, which had been true and sort of all sports content, probably content in general, [is] the trend continues to certainly be toward pay platforms.”

Carey believes that Liberty “will continue to move toward pay platforms, because that’s where the world is going. I think also as you look forward, people have to realize and get educated that reach is taking on a very different meaning. Realistically, if you want to reach a 20-year-old today, it’s [via] a device you hold in your hand, it’s not [with] a 60-inch screen you put on a wall.”

The good news for fans, though, is that a recent expansion of the partnership with Magneti Marelli means, “This will enable our ability to transfer more live data from the Formula 1 cars to the broadcast centre, and improve the quality and quantity of race information that can be shared with audiences worldwide.”

An modified version of the tracking data feed was recently introduced to the media which vastly improves our ability to ‘read’ races by visually tracking cars in smaller segments, and here’s hoping that the final version eventually flows to a screen near you.

Liberty recognizes that Esport is a massive growth area, one the company hopes will eventually cross over to the bricks and mortar F1 circuits and thus in his address Carey provided demographics on F1’s latest contest:

Over 109k participants took part in qualifying across 156 territories, with 79% of participants being below the age of 34, and half being under 24. All 10 teams selected their drivers during the Pro Draft on July 17th and these will join their official teams to prepare for the Pro Series comprising of 12 races contested over four live events.

Carey alluded to Liberty’s plans for a new sustainability programme which, as revealed here previously, will include the introduction of synthetic fuels.

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“One of our priorities, and we are going to [reveal] more in the fall, is really an untold story in Formula 1, [in] the strides we’ve made to date in terms of sustainability.

Lando Norris, McLaren, Circuit Gilles Villeneuve, 2019
F1 intends to trumpet its ‘sustainability’
“The hybrid engine that was launched a few years ago was an incredible step forward in terms of fuel efficiency while retaining power, and we are working aggressively on things like synthetic fuels, actually working with the oil industry as a whole on synthetic fuels, biofuels, hydrogen fuels.

“I think you’ll see between now and year-end, the sustainability issue becoming a much more front and center part of our story, and something actually, we think – we’ve talked in private with a number of our partners that are quite excited about [it] – that the environmental issue is important to everybody.

“A big part of making strides forward in that is how do you reduce carbon emissions from the combustion engine, and I think that it could be as important as anything out there.”

According to sources, F1 plans to undertake a root-and-branch analysis of its activities across the entire sport with a view to developing sustainability projects in conjunction with partners, sponsors, teams and suppliers. Initiatives could even include ‘green’ companies as race title sponsors and partners.

While such a project is welcome and overdue, the sport would still trail Formula E, which appointed a sustainability officer almost two years for a carbon footprint about a tenth that of F1, understandably in view of the electric championship’s different structure and calendar.

“We’ll also have other initiatives in terms of environmental steps around our live events [and] freighting things to events, so it’s a multi-dimensional story around this,” Carey added.

“But I think the part we’re putting particular energy into is the degree to which we’re reducing – [the target is] reducing carbon emissions with the combustion engine, and I think that has more upside for us than anything.”

F1 Festival, Miami, 2018
Carey hasn’t given up on bringing the sport to Miami
As regards future calendars and revenues, apart from stating that Liberty’s Miami and Vegas dreams are still alive, Carey was guarded, saying the 2020 F1 calendar would shortly be announced, but adding “In general what I’d say about the calendar is I think we expect the number of races over the next few years to increase a bit.

“I think there is a limit to how much, but I think we do expect it to go up marginally. And, as we announce the calendar, we’ll provide more insights [as] to when and where that occurs.”

There’s little new in those comments, not even a definition of ‘marginal’, but his later references to the number of events proved more illuminating, for he referenced ‘supply and demand’ before adding. ‘We value our historic relationships, but it’s important to carve out opportunities to add a new race when demand is there.”

“I think there are some places where, and I’ve touched [on] them before, we inherited situations where we were not receiving what we should be receiving when we came in,” he added. What was this in reference to? Possibly Brazil, said by our sources to be on a zero sum contract, or Monaco, which has long had among the most favourable terms due to its perceived status.

Carey’s response to questions about progress towards the 2021’s technical, sporting and financial regulations were brushed off with comments about the complexity of the ongoing discussions, which must produce a resolution by the end of October. Surprisingly, apart from the word ‘Concorde’ being mentioned thrice and fleetingly at that, no reference was made by either side about the expiring teams agreements, which lapse at the end of the 2020 F1 season.

These lapsing agreements dictate team payments – and thus Liberty’s operating income – so it seems a surprising omission, or was it by design on Carey’s part? Either way, it’s the big elephant on the grid, particularly given that team payments made up $335m of F1’s primary Q2 income of $531m – or 63%. Movement in either direction will surely affect Liberty’s share price commensurately.

As updates go, this one provided very little in the form of hard information save for statutory information being revealed. That said, the analysts may consider themselves fortunate: While Carey takes questions from analysts every quarter, that is four times the access the F1 media as a whole has had to the boss of F1 lately.


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35 comments on “What Carey’s latest take on the state of Formula 1 told us”

  1. team payments made up $335m of F1’s primary Q2 income of $531m – or 63%

    Interesting. Would you know what is the second big contributor to their income, and how much it brings in? And is this 63% in this quarter due to the timing of the payments, or is 63% of the annual income also provided by the teams?

    It is a bit odd – teams pay Liberty to race in F1 (entry + points fee), and Liberty then pays them for their attendance + performance. I would think we could net out a part of those values, but that’s also why I don’t work in finance :)

    1. Payments TO teams is £335m

      1. The teams don’t pay Liberty to race: the entry and points fees (effectively one balloon payment made up of a basic entry fee plus an amount per point scored in the championship) is paid to the FIA, and is used to cover the costs of adminstering the championship.

        1. Does it really cost the FIA (The FIA, not Liberty Media) $16.5 million USD to administer F1? I mean, the FIA is all about cost-cutting, but telling the winning team to chip in $4-5 million a year just to participate again, seems a bit steep. :)

          1. The FIA needs to maintain a team to do the regs, the scrutineers, other race support, etc. I’m sure those costs add up.

  2. Dieter – thank you, I wrongly conflated FIA and Liberty here.

    @gardenfella72 – gah, I misread that, thank you. :)

  3. Carey believes that Liberty “will continue to move toward pay platforms, because that’s where the world is going. I think also as you look forward, people have to realize and get educated that reach is taking on a very different meaning. Realistically, if you want to reach a 20-year-old today, it’s [via] a device you hold in your hand, it’s not [with] a 60-inch screen you put on a wall.”

    So we can also expect F1 to go electric by 2030?

    The good news for fans, though, is that a recent expansion of the partnership with Magneti Marelli means, “This will enable our ability to transfer more live data from the Formula 1 cars to the broadcast centre, and improve the quality and quantity of race information that can be shared with audiences worldwide.”

    That’s just BS.

    1. Sadly I think many people seem to think that formula e’s draw is the electric cars when in fact it is the fact that the races are available online for free. More people watch fe because they can very easily do so.

      1. @socksolid yeah that’s a fair enough statement too.

      2. …the races are available online for free

        If you are reffering to their YouTube live streams, that depends on the country. In most places in Europe, there are TV channels like Eurosport who broadcast the races live, so the YT stream is not available (blocked by IP). So, except for UK and a few other countries in the world, the online avalability is not a factor in FE’s popularity. I’d say it’s the novelty, the close racing, and the fact that is cheap(er) and conveniently placed inside city centers that brings in the fans.

        1. I have to agree with that @gechichan – Eurosport is the main reason I do not watch it as often anymore as when quali, races were still viewable via youtube, as often times they only show it on repeat with Eurosport1, and I don’t have Eurosport2 (LeMans largely on the 1st), and it is more effort than I have wanted to spend on it. But, have been to the Berlin races at Tempelhof, because that was just fun and easy.

      3. 100% this

      4. Actually, I can watch Formula-E any time I want– coverage is included in the same streaming package I use in place of cable (Youtube TV). But the pitch of the electric motors is just wrong for my particular range of hearing, and it grates.

  4. The debt is scary as ever but at this level it is peanuts, almost as if intended, big businesses have big ceillings.

  5. Is the team payment comparison quarter-to-quarter or year-to-year? If it’s year-to-year, then I would have expected an increase (albeit perhaps not so much), given that Force India wasn’t paid for one month in last year’s Q3 due to there being no solvent company to which payments could be made…

    1. All numbers are for Q2 as the analysis clearly states, apart from one annualised projection. As for Force India’s payment, that fell Into Q3, which runs 1 July to 30 September, obviously…

  6. If F1 going greener and more sustainable was an actual concern rather than the marketing exercise it really is, all of the races should be held at Silverstone. The enormous amount of fuels required to transport this “show” around the world, and all the emissions produced by the jumbo-jets and transporters, that’s F1’s real impact on the environment. Not 20 cars circulating a track for a few hours.

    1. @schooner: Exactly. But don’t spoil the mealy-mouthed moment for the FWONK marketing department.

      As suggested before, if F1 truly wanted to go ‘green’ it would ship the all gear and teams by sailing ship. Miami would then have a better chance of getting a race than Las Vegas.

    2. I actually am not too sure about that @schooner, @jimmi-cynic.

      What is the better option? Having millions travel to silverstone for a bi-weekly race and the teams not having to travel, or moving the teams around so that people can come to races nearer to where they are?

      Since visitor airmiles by far outrange the F1 circus’ airmiles (especially since all “big” kit gets shipped instead of flown in to flyaway races) and the pollution tied to that, it might not be that clear a choice at all.

      1. @bascb: True if there is only one global race track… but what if each region/continent had its own F1 series, culminating in the F1 Olympics every 4 years. At a track provided by the host country of the FIA’s choosing after several rounds of ‘influence’ – of course this Olympic track would have to be near a deep sea port.

        The only downside is that eventually the F1 teams would compete to have the fastest sailing ships and Newy would leave car design behind for good.


        1. Oh, god no. Just imagine how many port cities in the Middle east, Russia and China would suddenly be F1 Olympics sites boasting tracks that might even make Abu Dhabi look exciting.

          Only to be used once and then never again. Talking about wasting our environment!

          So maybe in a decade or two you’d have regional F1 series (replacing current F2/F3??), who would want to compete in each of those? There is not enough money to go round to make it possible for all of them to develop their cars – they would probably end up being single make series – and more or less drop further and further away from the top level the cars are now.
          The biggest teams would set up a “world series” really quickly where they would try to dictate the terms and cement their role in that championship before you even get done – see what the biggest european football teams are trying to do with the champions league in the last decade or so.

          1. @bascb: Some good Olympic-sized points.

            As romantic as a sailing ship filled with F1 gear could be, I willing to sink that idea.

            In exchange for F1 delivering on the promise of the 1960s: Flying Cars.

            Flying race cars that is. Imagine the efficiency gains if each team’s F1 car could fly to each race and deliver vitally important team gear like a couple of logos.

          2. :-D

            Now there is an idea that could make fans sit up and watch @jimmi-cynic

  7. Realistically, if you want to reach a 20-year-old today, it’s [via] a device you hold in your hand, it’s not [with] a 60-inch screen you put on a wall.

    If that 20 year old can’t spring for a display, I doubt they’ll spring for a monthly subscription. I can’t imagine watching an entire race on a 5 inch screen with tinny mobile speakers. Who could possibly find that engaging?

    1. For sure, and there is such a thing now as Smart TVs.

    2. @knewman @jerejj I think your misinterpreting his point. He isn’t saying that 20 year old’s will watch the races on a mobile device (Although i’m sure some do) but more that they are far more likely to discover & begin to follow something on a mobile device rather than by stumbling across programming on traditional TV as many older fans likely did.

      My gateway into the sport for instance was channel surfing & stumbling across an Indycar race in the early days of cable TV. The younger generation of today aren’t watching TV in that way, They are not channel surfing to find something to watch like we did in the past so they are less likely to stumble across programming & get hooked to it.

      Discovery now comes from clips & images posted on social media & streaming platforms. That’s why you see most things now posting the shorter clips on social media & doing things like making list videos as these are the sort of things you can hook people with now. They may not be looking for it but the thing your hoping for is that people re-tweet & share this stuff & then people who follow them that may not be a fan see’s it & is interested enough to dig deeper.

      1. If that was his point then indeed I did miss it. I took it in context as to why their developments in the F1TV platform seem to have plateaued, i.e “there’s your mobile app, all done!” When I learned that the most technologically advanced sport in the world was rolling out their own content platform, I expected more than standard HD at 24 frames with a spoonful of DRM on top of a sub-par app and website.

        As a 20-something who has never had a cable subscription, I discovered F1 watching pirated Top Gear UK episodes in which Clarkson was ranting and raving about the cars, drivers, and various controversies. The movie Rush was also quite influential within my circle of friends. My point is, you reach people through other people. The platforms touted by these guys are simply tools, you need personalities at the other end if you want to pull in non-motorsport 20 year olds. It’s extremely simplistic to think all you need to do is plaster social platforms with small clips and expect the money to roll in.

  8. There’s not much here to hang a disillusioned fan’s hat on unfortunately.

  9. ”Realistically, if you want to reach a 20-year-old today, it’s [via] a device you hold in your hand, it’s not [with] a 60-inch screen you put on a wall.”
    – I don’t agree with this. I’m not one of those types even though I come from essentially the same generation (It was only four years ago when I was 20, so, therefore, close enough to apply to me), LOL.

  10. @jimmi-cynic

    There have been talks of making F1 more diverse led by Lewis Hamilton. Dieter followed up with an article.
    They could combine both diversity and environmental issues by having continental championships, with a grand world finals.

    1. @bigjoe: The F1 grand world finals would transported by pirate sailing ships – or better yet, Alonso joins with Sainz on the Spanish Armada. And Max on the flagship of the Dutch East India Company. And Lewis on the HMS Victory. And Kimi on a Viking longship replica crewed by a few dozen devoted Kimi fans.

      Green and retro all in the same cargo hold.

      1. Meanwhile we Antipodeans eagerly await being discovered by the Endeavour/s of Lieutenant James Cook , whose foresight knowing no bounds, points a couple of us in the direction of Williams.

  11. I’m not sure whether the analysts can really consider themselves fortunate when it seems they have to endure a whole lot of nothing being said.

    Typical quarterly briefings – throw a few hints of “ great things ahead” supply no detail and definitely don’t mention anything that you could be held to account for.

    1. Plus, the analysts for the most part do not even understand the sport itself. So what they get is a guy who says he’s the CEO talking corporate finance speak about a sport he doesn’t understand either.

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