The first year of Liberty Media ownership left Formula 1 teams more out of pocket than under Bernie Ecclestone’s leadership, numbers have revealed.
Though not entirely unexpected – both teams and circuits have been complaining of increasing costs for some time – Liberty say the cost of relocating to London, additional staff, and expenditure on fan-related activities (among other things) has increased the cost for teams by more than reduced payments.
As well as rising costs, teams will also be hit with reduced payments from Formula 1.
A pot of roughly $324.5 million is shared between teams equally based on their classification over two of the last three years. This money was shared between nine of the ten teams for the last two seasons however, with Haas F1 Team now entering its third year in the sport, the pot will have to stretch further – reducing the payment from $36 million to $32.4 million and leaving teams (with the exception of Haas) further out of pocket.
The reason costs have increased, Liberty said, is because of both their spend on fan-centric costs and the additional staff they’ve brought in.
“Cost of F1 revenue increased primarily due to spend on fan engagement, filming in Ultra High-Definition and higher freight costs, which more than offset reduced team payments.
“Selling, general and administrative expense also increased for the fourth quarter and full year 2017 as a result of additional headcount and new corporate offices.”
Chase Carey, F1 CEO, said that the company has relocated to London, and has plans to expand its staff.
“We’ve settled into our new London headquarters,” he said on Thursday. “With headcount currently around 120, expecting to settle around 150 by mid-to-late 2018.”
The cost of the extra staff and new headquarters is considerable – roughly $50 million says Carey.
“Overall we expect the associated incremental step-up in overhead to be $50m annually compared to 2016, excluding marketing and development expense tied largely to new initiatives.”
2018 will be Liberty’s second year in charge of Formula 1, having taken over the sport at the start of the 2017 season. A lot has changed since then, Carey says, particularly in the finances of the sport.
“A year ago we had over $4bn in external gross debt, and today we’re at $3.2bn, with approximately $115m in annualised interest savings and an improved tax structure.
“We also eliminated the potential overhang in prior share sales from prior F1 owners.”
As for the future Carey remains positive, though he says he’s putting emphasis on long-term money rather than quick fixes.
“We were positively surprised by the excitement from existing partners to expand and grow their relationships with us, and the level of interest from new commercial sponsors.
“There’s real enthusiasm from new potential sponsors, promoters and video entities to engage with F1.
“Many of these will take time to develop in the right way, and our priority again is building long-term value, not a short-term buck.”