Lance Stroll, Racing Point, Circuit de Catalunya, 2020

Where F1 goes after today is at the mercy of Coronavirus

2020 F1 season

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Wander about the Circuit de Catalunya paddock and wherever F1 folk are huddled you can bet there is a single topic of conversation: Coronavirus.

[f1tv2020testb]Discussions about the disease dominate eclipsed those about DAS in the second week in Spain. Everybody holds an opinion about it, yet nobody has a definitive solution, for here for the first time in recent F1 history is an invisible disruptor over which the sport has zero influence.

F1 is an extremely complex sporting business. But the can-do attitude which has served this global activity so well over the years has seemingly met its match in a contagious microbe.

To date only a single round in China been postponed. But as the virus takes hold in further reaches of the globe including Italy – home to Ferrari, AlphaTauri, Haas chassis builders Dallara, tyre supplier Pirelli and many other F1 staff – the potential for further disruption is obvious. The fear in the Barcelona paddock is that the season could well dip to 15 races, or a 30% reduction.

What options does Liberty have to keep its 22-round show on the road? Very few, bar hoping that a cure is found PDQ.

Unsurprisingly, the potential financial impact of Coronavirus was a major talking point during Liberty Media’s Q4 investor call earlier this week. The FWONK share price dipped from over $47 to under $37,50 in a week – six-month low, negating much of the solid work put in by commercial rights holder Liberty Media over the past three years.

F1’s various revenue streams depend upon Liberty honouring its side of contracts, and/or that no-event insurance policies cover illnesses such as Covid-19. If not, the sport stands to face losses running to hundreds of millions or more.

For example, a cash-sensitive outfit such as Williams derives around $60m annually from Liberty, split approximately $30m each from race hosting fees and television income. Therefore a reduction in F1 revenues of 20% (five rounds) would hit the team to the tune of $6m. Assuming, that is, that broadcasters continue paying their full fees despite a truncated calendar. If not, the penalty could easily double to $12m or more.

Red Bull and AlphaTauri motorhome, Circuit de Catalunya, 2020
AlphaTauri told some of its factory staff to work from home
Given that the team last year posted an estimated loss of $25m, the loss of $12m could prove crucial. And Williams is far from being alone in this predicament.

Shifting races to other venues is no solution, either: Not only would such a switch require unanimous team agreement, but what use moving Shanghai’s race to, say, Imola or Kyalami – a move that would take up to three months to effect – only to discover that country is now grappling with the virus too?

Nor would Imola’s promoters be able to stump up the estimated $40m paid by the Chinese promoters at such short notice. And it is unlikely that insurance will cover any shortfalls, plus the goodwill that Liberty has generated in China could be damaged.

“In the event, if the [Chinese round] is not held, we will not receive the promotion revenue, but given the early notice on this postponement, we’re working hard to mitigate these effects, and project the impact to adjusted [operating income] to be relatively minimal,” F1 CEO Chase Carey said in the investor call to investors.

Guenther Steiner, Haas, Circuit de Catalunya, 2020
“We could plan anything and it could be obsolete tomorrow”
Understandably the official F1 line is that the season is going ahead. This is for two reasons: First, the fervent desire to reduce losses wrought by the Chinese postponement at both Liberty and team levels. Second, there are as yet no medical reasons or travel advisories that make it imperative to cancel further events. But the latter could change at any stage.

Where other sports such as football are able to stage matches without spectators – effectively full international games require just 22 players plus a handful of officials – and conjure up venues at short notice, grands prix cannot be held safely without (at least) 50 staff per team in addition to hundreds of officials and medical staff. Plus, there are no guarantees that 1,000 or so heads and 250 tons of freight will even reach the venue due to air travel disruptions.

“I think [Liberty] is dealing with it behind closed doors because everything you say now, it could be obsolete in an hour,” said Haas team boss Guenther Steiner in Barcelona on Thursday evening. “I looked at the news maybe at lunchtime, if I look now for sure there’s something else going on.

“We need to get [to Melbourne], and we could plan anything and it could be obsolete again tomorrow,” he added. “At some stage it will be [that] if we [try to] get the planes which you can go without stopping, in for example Hong Kong or Singapore or wherever it is not allowed, they will be full.”

Decisions need to be taken with regard to Melbourne, then Manama and Hanoi. Leave matters too late, and unnecessary costs mount; take decisions prematurely, and subsequent losses could prove enormous, indeed even fatal for some. But that it outside the hands of those running F1, leaving the only realistic option to carry on until a final decision is forced by circumstances outside its direct control.

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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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17 comments on “Where F1 goes after today is at the mercy of Coronavirus”

  1. I have a feeling that any decisions taken for the Olympics will set the trend for other international sporting events around the world. As of now, the official line is that it will go ahead, particularly with the change of seasons naturally helping in tackling flus.

    Where other sports such as football are able to stage matches with spectators

    I think you meant “without”.

  2. *facepalm*

    What Liberty had to do?!
    Grab their balls, stop hysteria and announce that all races will take place.

    1. Including China

      1. Disappointing comment.

        1. Disappointing but entirely expected….

    2. Dieter – could you please let Liberty know that Dallein will indemnify them for all legal, financial and PR consequences of proceeding with an unchanged F1 season. I’m sure Mr. Carey, and all the people Liberty are accountable to will heave a sigh of relief at this assurance.

      Dude – they’re a for-profit business. And like any business, they’re risk averse and cautious in the face of PR backlash, legal entanglements, and financial penalties (not necessarily in that order).

      1. On another forum, one of the posters is a doctor and knows what he’s talking about. He’s constantly having to correct “interweb experts” like Dallein, who obviously have no idea what they’re prattling on about.

  3. Joakim Tärnström
    28th February 2020, 8:51

    The sport itself won’t make any decisions to cancel events until force majeure will relieve them of any commitments.

  4. One thing should be noted, the figures coming out of China should be taken with a grain of salt. The Chines government has a history of being loos with the truth to save embarrassment and outside scrutiny. Best example being their annual growth and debt figures.
    Last week military moved into Wuhan and almost immediately the number if infections began to slow. as did the information coming out of the region.

  5. I suspect that by the time we get to the Vietnam round, there won’t be any point in cancelling any events because at the rate the virus is spreading there will be no additional risk in visiting venues as it will be just as risky to be in their own countries.

    1. Interesting point

    2. If it gets to that stage, whilst there may be no additional risk in visiting venues, there will be an absolutely massive risk in letting tens of thousands of people amass in one small area at the same time.

  6. Dieter, you mention a loss of income of 20% but would that take in to account the offset of not actually have to shell out the various costs associated with attending those rounds, like shipping, fuel, personnel accommodation and travel, cost of replacement parts from potential scrapes etc? Also would the smaller teams not get to benefit from the reduced mileage and wear and tear on engines, gearboxes allowing for fewer penalties towards the end of the season? Granted this would also benefit teams like Mercedes and Ferrari however a team like Williams may feel a little more confident to push a little harder giving us tighter racing lower down the field.

  7. The China race was suspended (effectively cancelled) on request of the Chinese promoter, based on the Chinese government decision to suspend sporting activities. So their insurance policy will kick in to ensure Liberty still get paid their fee. If any TV deals are effected by event cancellation, those will likely be covered by the Chinese promoters insurance as part of their contract with Liberty, but if not then Liberty’s own insurance will kick in … so teams and Liberty won’t lose anything.

    Liberty are also probably waiting for the individual promoters to initiate cancellations in effected countries before they’re forced to do so themselves. They might even wait for the teams to initiate cancellations if there is a danger, because in either scenario, they can avoid culpability for the decision, & most of the financial implications.

    For an event to step into a calendar gap, they wouldn’t have to find the full promotion fee at short notice … most likely only a small portion of the fee (if any) to cover any difference in the costs of teams and Liberty changing the venue, since Liberty will already be receiving the fee via the promoters inruance.
    I suspect we might see a German GP after all if any more races are cancelled elsewhere.

    1. Liberty are also probably waiting for the individual promoters to initiate cancellations in affected countries before they’re forced to do so themselves. They might even wait for the teams to initiate cancellations if there is a danger, because in either scenario, they can avoid culpability for the decision, & most of the financial implications.

      Very interesting point there about who pulls the trigger. As stewards of the sport I hope Liberty are better than this. I think they are better than this. However, it wouldn’t surprise me if what you say is what eventually transpires.

      1. The host promoter / country will almost always err on the side of least bad publicity … so Liberty have the luxury of taking a “if you’re certain it’s safe for us to come, we’ll come” approach.

        As stewards of the sport their primary agenda is to make sure every event goes ahead as advertised.

        Teams are responsible for the well-being of their staff on the job … legally and ethically, so if there are significant risks and the promoter hasn’t cancelled (as I suspect we’ll see with Vietnam), the teams will likely address it before Liberty anyway … although they will undoubtedly pressure Liberty to make that decision … which Liberty will do, as long as the teams agree to forego any claims against the event not happening.

  8. Jeez… you know why people are talking about Coronavirus constantly? because the media simply cannot stop talking about it…

    Here in Spain there’s nothing else happening at the moment it seems. It’s like the world has stopped. We’re all gathered in our houses watching coronavirus news.

    I’m not saying the shouldn’t be taken seriously. But man… if they talked this seriously about all the other problems in this world, we’ll be living in the Garden of Eden.

    The calendar shrinking to 15 races?? get outta here…

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