Formula One has given some of its teams advanced payments in order to ensure they survive the current economic downturn linked to the coronavirus pandemic, Liberty Media CEO Greg Maffei confirmed Thursday.
Several Formula One insiders have raised concerns about the financial health of certain teams and the possibility that as many as four could struggle to return to the grid when racing resumes
McLaren, Haas, Renault, Racing Point and Williams have all made use of the U.K. government’s furlough scheme to protect jobs, but with no certainty over when racing will resume, the balance sheets of all F1 teams are looking bleak this year.
All ten teams receive revenue from F1 in the form of prize money, which is directly linked to F1’s own revenues and is largely generated by holding races and selling TV rights. The current hiatus in racing have impacted both of those revenue streams, but Maffei said the sport was using some of its cash reserves to make sure it still has a full grid of cars when racing resumes.
“We’re not encouraging using our cash in an unwise fashion, but we are trying to balance the operating business of F1 and its current results against the operating results of our partners in the form of the teams, who do incur large costs,” he said on an investors conference call. “We have advanced money in advance of team payments for certain teams already.
“There are cases where we may do more of that and there are other things that we might do to bridge teams that need help. We are certainly not viewing this as an open cheque book … but Major League Baseball advanced $170 million to all the players in advance of potentially having a season or a lack of a season or a partial season in baseball, and here you have much the same issue but actually a higher burn rate among teams and we need teams that are solvent.
“The teams are part of what we need to race successfully in 2020, 2021 and beyond.”
Five teams — Ferrari, Mercedes, Red Bull, McLaren and Williams — have guaranteed income in the form of bonus payments from F1 each year, but the amounts vary significantly and teams lower down the grid are more reliant on F1’s profitability than the bigger ones.
“There are teams which will incur costs, particularly those that don’t have minimum guarantees from Formula One, and, really, their major source of revenue is their share of the profits of F1. If we are running marginally profitable or not profitable races they will still incur all the costs of running their teams, and that’s a challenge.
“That’s one of the reasons we need to be thoughtful about how we begin [the 2020 season], in a way that is not only good for us but good for the ecosystem [of F1]. Chase [Carey, F1 CEO] and his team have run multiple scenarios, and if you are asking what does it take to get it going, it’s not only when we are allowed by authorities and in what format — a TV-only race or a fan race — but also how does it work for the teams?
“How do we do something that is beneficial for the fans but also doesn’t have the teams bankrupting themselves by having no-profit or loss races?”
Maffei confirmed F1 is looking at various different scenarios for 2020, including the possibility of no season at all.
“We have scenarios for zero races and anywhere between 15 to 18 races — races that begin with no fans and, at present, we really have a host of opportunities and challenges on all fronts,” he added.
“Chase and his team are presented with multiple options but until you have the timing, how do you ask somebody to move an existing race in place of another race that you don’t know will be open?
“So we are watching how the opening of certain events is happening in certain countries in Western Europe and looking at options around that. That may be the starter counter, no guarantees yet, but that is certainly something that would be attempted.”