F1 profits fell £80m last year due to bigger team & FIA payments

[John S]

 Seems CVC trying to shed Gordon Gekko image.  

Formula One's profits fell by £81.2m to £169.9m last year driven by a new deal with the 11 teams according to an article in the Daily Telegraph by Christian Sylt, says pitpass.com.

In the year to 31 December 2013 the teams' prize money increased 6.1% to a record £473.8m making it the single biggest cost for F1's Luxembourg-based parent company Delta 2.

It calls into question the claim, which has long been advocated by some teams, that F1's controlling shareholder, the private equity firm CVC, gets an unfairly-high share of the spoils. In fact it is the latest in a series of revelations which has cast doubt over the validity of this claim.

Analysis in the CityAM newspaper, and reported in detail by Pitpass, which revealed that CVC only takes home 8.4% of F1's annual revenue compared to 44% to the teams

Now we find out that their prize money has increased to such a high amount that it has contributed to F1's profits reversing by £81.2m. Yet still some of the teams complain that they are not getting enough money from F1.

Last year Pitpass revealed that the teams' prize money had accelerated nearly 400% over the previous five years and F1's boss Bernie Ecclestone quipped that they "have all got more money than God." It is no exaggeration.

F1 fans can be excused for not feeling sympathetic towards teams which say they aren't getting enough. It really makes you wonder why they say they need more. In fact, there is a good reason for it.

For most businesses, the yardstick of success is profit but not F1 teams. They tend to break even, or sometimes make a loss, as they spend all of the money they receive in a bid to win on track. This leaves them with very little profit and little money in the bank to tide them over if there is a dip in their performance which in turn reduces their prize money and sponsorship. The only solutions available are to get into debt, to get money from their owners or to demand more money from F1. If their performance does not pick up then the first two solutions eventually lead to the team going under whilst the latter is not guaranteed to come off.

The teams' prize money is calculated as a percentage of F1's underlying profits and their new commercial deals that began last year boosted their share from 59.6% to 63%.

Further pressure was put on F1's profits by the beginning of a new agreement with the FIA. The annual fee it receives from F1 increased four-fold last year to an estimated £25m. There was less money coming in to pay it as the cancellation of a second Grand Prix in Spain led to Delta 2's revenue dropping 4.3% to £772m.

Edited from longer piece on Pitpass.com, Today.

[Irisado]

A very interesting read, thanks John.  I'm still on the side of the teams here though.  The way Formula 1 operates means that they need a massive slice of the cake to survive.