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The confirmation of the postponement of the Dutch, Spanish and Monaco grands prix is just the tip of the iceberg of the extreme financial challenge facing F1 in the wake of the coronavirus pandemic.
That challenge is very much behind the unanimous vote of the teams to delay introduction of the new formula from next year to 2022.
The development costs associated with an all-new car unrelated to any existing are very significant. This is potentially about survival for at least some of the teams.
Before the postponement of the new formula, the big teams were at an advantage in that they could develop the new formula cars for ’21 with no budget cap applied. That will no longer be the case and in theory should make things more equal between the teams
The originally-scheduled 2020 calendar featuring 22 races would have stood to net F1 around £500 million in race hosting fees. The teams derive a major part of their income from their share of this total. With Ross Brawn recently talking of potentially being able to salvage a total 18 races given an early June start to the season, that would take the gross income down to around £415 million.
Increasingly, given the spread of the virus, even that early June start is beginning to look questionable. The minimum number of races required for a world championship is eight. If it came to that, depending which specific eight races they were, that would take the gross race-hosting income down to around £180 million.
Race fees are not the only financial consideration. The other major strand of F1’s income is from television broadcasting rights.
These invariably have clauses in them relating to the number of races. F1’s total prize fund, comprising race fees, broadcasting fees and sponsorship has hovered at around £850-860 million in recent years. The 2021 fund is likely to be significantly lower; it’s just a question of how much.
Thus the urgency to finding economies through the whole of F1 as it tries to weather the storm of the virus.
The new-for-’21 team budget cap of $175 million will remain, meaning that the 2022 cars will be largely developed with the budget cap applied.
Before the postponement of the new formula, the big teams were at an advantage in that they could develop the new formula cars for ’21 with no budget cap applied. That will no longer be the case and in theory should make things more equal between the teams.
But the smaller teams will have extreme challenges, regardless.
All the teams receive their share of F1’s income one year after the fact, so it will be in 2021 that the reduced race-hosting and TV broadcasting fees will be felt by the teams. In the meantime, Liberty is scheduled to make the team payments this year based on the full calendar of last year.
It’s clear that F1, the teams and even the organisers and TV companies are probably going to need to work together to keep this challenge from spiralling into a crisis.
