Formula One is running into rough weather amidst reports of over a thousand crore rupee loss in the past nine months.
Lewis Hamilton is surely creating new records at Formula One tracks this year but the new race owners seem to be loosing the plot. Liberty Media Corporation, the new owner of Formula 1, has declared that its F1 Group losses for the first nine months of its operations have crossed a whooping INR 1000 crores. As per the release, the loses have been fueled by increased costs and extremely high interest payments.
Not only this. The prize money paid to Formula One teams also crashed by more than INR 266 crores. The teams revenue share and prize money come to around 68% of F1’s profits. So the more races means, higher revenues and profits for the circuit and better revenue shares for the F1 teams. This year hiatus of German Grand Prix and no significant new sponsorship deals led to lower revenues for Formula 1.
Filings released by Liberty also revealed that F1 Group’s ‘selling, general and administrative expense’ increased by 19% to USD 88 Million (Approximately INR 572 Crores) over the first nine months of this year, primarily driven by higher personnel costs as a result of addition headcount due to the acquisition by Liberty of Formula 1.
These are tough days for the world’s biggest motor sport showpiece. Despite being in the driver seat for almost a year now, Liberty is yet to sign any major sponsor or new races. The existing race contracts are dropping out. Other than German Grand Prix, British Grand Prix cancelled their contract seven years early due to high organization costs and also Malaysian Grand Prix terminated its contract earlier this year.
Not only the races are shrinking but there looms a threat to exit by the most successful team of the F1 history. Ferrari has threatened to pull out in-case Liberty does apply new engine regulations. Former Formula 1 supremo, Bernie Ecclestone had boosted Ferrari’s prize money when the team threatened to quit in the past. It will be interesting to watch the steps new owners take to pacify Ferrari. As per the reports, Liberty Media are expected to announce next week plans to introduce a budget cap and balance the prize money to level the playing field that would put a stop to Ferrari’s bonus.
No doubt these are difficult times for Formula One.
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