Why the big money era in Formula 1 has only just begun

(Motorsport-Total.com) – It wasn’t too long ago that investing in a Formula 1 team was pretty much the worst financial idea you could have. Unless you were a top team, at best with the backing of a big company, you probably wouldn’t have been able to sell a team for even a penny, because the losses were so great.

Liberty Media CEO Greg Maffei (left) and former Formula 1 CEO Chase Carey (right) have paved the way to make Formula 1 more profitable than ever


However, times have changed. In 2016, American media company Liberty Media bought Formula One Group from then-major owner Bernie Ecclestone for US$4.4 billion, and turned motorsport’s premier class into a profitable business for the teams.

Liberty Media has made Formula 1 accessible to a wider audience with numerous measures around the world: from an increased social media presence to a Netflix series to bigger offers for fans at racetracks.

In 2022, Formula 1 will have achieved its highest turnover so far, which will also have a positive effect on distributions to teams.

In the first three quarters of 2022, sales amounted to around 1.7 billion euros and therefore only 300 million less than in the whole of 2021. In the last quarter of 2022, well over 600 million euros should have been won, although the official figures still stand.

This is how Formula 1 makes its money

Formula 1 sales are made up of “primary income” and “other income”. “Primary revenue” includes the fees a promoter has to pay to host a Formula 1 race, but also Formula 2 and Formula 3 events, the sale of media rights, sponsorship, advertising rights and F1 revenue TV. These revenues represented approximately 1.73 billion euros in 2021.

Income Formula 1

Formula 1 revenue trends since Liberty Media acquisition in 2016 Zoom

“Other income” refers in particular to the sale of tickets for the Paddock Club, but it also includes ancillary activities or the inclusion of support races such as the Porsche Supercup in the support programme. This has earned Formula 1 around €270 million in 2021. However, ticket sales on the route are taken by the respective promoter.

In the Corona year 2020 still more than 350 million euros loss

The rapid resumption of the 2020 season was particularly important for Formula 1 when the first races had to be canceled due to the coronavirus pandemic. You could only drive 17 races in total, which also meant you had to skip lucrative track contracts and sometimes upgrade to historic courses, where you made a lot less money.

As a result, Formula 1 had to register a huge loss of around €362 million in 2020, which also had a negative impact on payments to teams.

Victory in Formula 1

Formula 1’s revenue history since its acquisition by Liberty Media in 2016 Zoom

The ten teams only received around 667 million euros. In comparison: before the 2019 pandemic, it was 950 million euros, while in 2021 even more than a billion euros were distributed.

Teams ahead of record payout in 2022

In the first three quarters of 2022, the teams received almost 800 million euros, the fourth quarter of 2022, which has not yet been published, also setting a new record in terms of team distributions.

F1 payments to teams

The evolution of Formula 1 payments to teams since its acquisition by Liberty Media in 2016 Zoom

For the teams, however, not only is the financial development of Formula 1 good in itself, because with the introduction of the budget cap for 2021, costs have fallen dramatically, despite numerous exceptions in the financial regulations, while revenue on the other hand increased due to higher dividends, but also increased interest in sponsorships.

Formula 1 teams are now making so much profit

As a result, 2021 has seen some teams turn a profit for the first time in a long time, and top teams like Mercedes and Red Bull, where the budget cap had the biggest impact, were even able to multiply their previous surplus. Mercedes was able to more than quintuple its profit in 2021 compared to the previous year, from 15.4 to 77.8 million euros.

And even smaller teams like Aston Martin or Williams, some of which have suffered heavy losses in recent years, have at least been able to increase to such an extent that losses in 2021 were still limited.

Winning Formula 1 teams

The evolution of the profits of Formula 1 teams over time Zoom

The only exception is the McLaren team, which interestingly made the biggest profit in the team’s history during the peak of the coronavirus pandemic in 2020. However, this was due to the fact that financial difficulties forced the team to sell and lease the Woking factory in a so-called ‘sale-and-lease-back’ process to raise new capital.

Additionally, US sports investment group MSP Sports Capital announced an investment in McLaren Racing at the end of 2020, which gave the team additional financial resources. As a result, in 2021 McLaren suffered losses similar to those before the 2019 pandemic.

Nevertheless, one can deduce from the figures that Formula 1 is well on its way to making the company even more profitable. The continued expansion of the calendar is financially beneficial for both Formula 1 itself and the teams, although there are concerns about staff workloads and possible fan saturation.

Owning a Formula 1 team has never been so profitable. It’s no wonder, then, that potential buyers – led by Andretti – are lining up to get a slice of the pie. The high barriers to entry surrounding the $200 million dilution fund, as well as opposition from existing teams to adding an 11th team, only add to the value.

Since Liberty takeover: Formula 1 shares have tripled

The value of Formula 1 is also constantly increasing since the takeover by Liberty Media, which can be deduced from the share price. At the time of the takeover by Liberty Media in September 2016, the share could still be bought for 18 euros, but it then tripled to more than 60 euros, to currently stand at 52 euros.

Formula 1 share price

The evolution of the share price of Formula 1 (Liberty Media (A)) since the acquisition by Liberty Media in 2016 Zoom

Incidentally, one of the shareholders is Ferrari. However, the Italians own the C share of Liberty Media, where, in addition to the Formula 1 business, other Liberty Media subsidiaries are also included.

In total, Ferrari owns Liberty Media’s C shares worth more than 9.6 million euros, making it even far from being one of the largest shareholders. Moreover, Ferrari does not mean the only Formula 1 team, but the whole group, whose shares can also be bought.

Why the time for the big bucks has only just begun

The big question remains how Formula 1 wants to continue to develop. This is currently relatively easy to do by expanding the schedule and focusing on the most profitable events, but at some point the number of races will reach a limit.

With the 2022 Miami Grand Prix, Formula 1 has already taken a step in a new direction by promoting itself alongside local interest groups, which means it hasn’t collected huge fees, but that she was able to participate in the sale of tickets. It is therefore no coincidence that ticket prices in Miami have exploded.

But the icing on the cake will be when Formula 1 returns to Las Vegas in the 2023 season, for which it bought a $240 million site to make way for the paddock and other infrastructure.

Photo gallery: Formula 1 in Las Vegas: The first 3D renderings

Again, Formula 1 itself will act as promoter and assist with ticket sales. Seats cost $2,500 for a weekend ticket, and overnight hotel prices are skyrocketing.

The model used in Miami and Las Vegas could possibly be the future for the company to grow even further. One thing is clear: with these prices, sales of more than 100 million dollars are achieved and circuits like Hockenheim & Co., which pay a low double-digit amount for the organization of an event, simply cannot not follow.

The days of big money in Formula 1 have only just begun.

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