If the numbers are correct, a 70/30 split in Formula 1 revenue is really not too bad for the teams but the question really is down to the overall health and viability of Formula 1’s business model given waning interest.
Mercedes boss Toto Wolff commented earlier that ticket prices was a culprit in empty seats for the German and Italian Grands Prix. That may very well be true but the price of tickets is one of the few revenue streams that promoters are left with in doing any deal with Formula 1.
This means that there is no broadcast revenue and even trackside advertising is claimed by F1. Tickets and concessions are all that’s left. Given this, you can understand why promoters charge the prices they do.
This brings us back to the notion of the teams receiving 70% of the revenue generated by F1. In response to Wolff’s assertion that ticket prices were too high, F1 boss Bernie Ecclestone explained very plainly how those prices could come down:
“Has he told you how?” asked Ecclestone. “You should tell him about reducing what they want for racing, and then we can reduce the fees.
“That is the problem. We collect money for the teams – the teams get 70 per cent of the revenue that comes from the promoters.”
There are many more elements at play in the financial structure of F1 and it has been interesting to see the media call for more distribution of the revenue to the teams in order that the small teams can remain on the grid. Last I checked, 70% is pretty good all things considered.
The issue in this concept is that 70% is quite a lot but how that 70% is divvied amongst the teams is what may be killing the small teams. The small teams get nowhere near the portion of revenue that big teams get.
Also, one could argue that track revenue could be handed back to promoters such as trackside advertising etc, but that would reduce to overall take the teams currently enjoy.
The short answer is this, when the series has massive fan involvement and the economy is good, then the system might work but waning interest and a sluggish economy have fans staying home. Some are not jazzed about the new look of F1 and everyone is feeling the pinch.
Ecclestone feels that it is a case of too many choices for sport and leisure and F1 is suffering from the ability to remain in the guppy-like attention spans of fans saying:
“With sport, there is so much of it – and only so much time – that everything has lost a little bit,” he said. “It’s the same thing with the promoters.”
That may be true as well but F1 has reached a point where the revenue stream is paired with waning fan interest levels, waning sponsor interests, technological advancement and radical material manufacturing costs as well as regulations that have increased the cost of participation. You throw that in a cauldron with single or limited revenue stream opportunities for race promoters and you get a complicated business model that may not work very well all things considered.
Majority owner CVC Capital is interested in divesting themselves of their F1 shares and perhaps it is time to look at a master plan for F1’s future centered on acquiring that controlling interest and re-working the revenue distribution in order to make a more sustainable business model moving forward.
In short, it’s not about asking the teams to take less than 70%, it’s about the overall total. That 70% could be either $900 million or $500 million, it just depends on how much F1 charges for a race and if it can live with three, four of five hundred million less. I somehow doubt it.
Teams, race promoters, F1 owners and investors, sponsors and fans—everyone has a knife in the fight its just that some knives are sharper than others. The first guy to bring a gun to this knife fight will win.
Hat Tip: AUTOSPORT