33 replies to this topic

[jimjimjeroo]

Just read this article, on the Red Bull Duo, Williams and McLaren actually made a profit last year, where the rest made a combined loss of almost £130 million!!

If this continues surely 50-60% will be gone in a year or maybe less...

[Guizotia]

Depends on who is aiming to make a profit?

That won't be everyone.

For example, Red Bull can consider part of the expense an advertising cost.

[Jimisgod]

How did Williams do it and why did Ferrari make a loss? Was it Maldonado's cash?

I'd imagine Ferrari earns the most of any team from merchandise. Surely the McLaren racing is separate from the car maker.

[jimjimjeroo]

Maybe I should post the article....

http://www.pitpass.c...on-in-12-months

[superden]

As an overall proposition, no. That's not to say that some won't make a profit and be financially successful but a series with three or four teams isn't going to maintain interest in the long term. As with everything in the sport, until they modify the model to ensure that all teams can sustain the costs in the medium term, it will fail in the long term. Sadly, the sport is a commodity, designed to make profit. When it stops doing so, it will be discarded. Those who 'own' it, don't give a sh*t about its long term health.

[Nathan]

^ I think that is a crock...

Are todays finances much different than 10 or 20 years ago?  The payment structure has been the same for around a decade.

 

I know the sums are larger, but the portion of the grid losing money surely can't be different.

 

I think F1 is very sustainable, though the move to pay-per-view may change that.

 

If perpetual back markers can make a profit every year, is it really good for F1 to have the "not quites" being subsidized by the sport?  If you aren't a competitive team you will go broke and this opens up opportunities for others to have a go.

Edited by Nathan, 09 December 2014 - 18:31.

[Collective]

How did Williams do it and why did Ferrari make a loss? Was it Maldonado's cash?

I'd imagine Ferrari earns the most of any team from merchandise. Surely the McLaren racing is separate from the car maker.

Early in the year Williams reported a profit for 2013 that was associated to "one time payment". Everyone interpreted that it was the compensation PDVSA paid for breaking the contract. 

Edited by Collective, 09 December 2014 - 18:31.

[Ross Stonefeld]

^ I think that is a crock...

Are todays finances much different than 10 or 20 years ago?  The payment structure has been the same for around a decade.

 

 

10 years ago you had many more manufacturers and their associated sponsors, plus tobacco money. The teams didn't survive on the market rate but by subsidies, basically.

[Fastcake]

^ I think that is a crock...

Are todays finances much different than 10 or 20 years ago?  The payment structure has been the same for around a decade.

 

I know the sums are larger, but the portion of the grid losing money surely can't be different.

 

I think F1 is very sustainable, though the move to pay-per-view may change that.

 

If perpetual back markers can make a profit every year, is it really good for F1 to have the "not quites" being subsidized by the sport?  If you aren't a competitive team you will go broke and this opens up opportunities for others to have a go.

 

Who's going to have a go? We've had empty grid slots for years.

[sabjit]

£130mil loss spread across 9 teams isn't that unsustainable. The "combined" figure is rather sensationalist. A loss at that rate can be sustained easily for a number of years.

[Tourgott]

Most football clubs make loss.

The main problem is that F1 lose its audience and with them the manufactures like Renault, Mercedes and Honda will lose their interest in the "marketing tool" F1.

[KWSN - DSM]

Short answer - Yes F1 is sustainable.

 

Long answer - F1 is sustainable but will in the next couple of years find itself at a cross-roads in how it conduct business, either change and become more relevant as a sport and less as a manufacturers presentation of technology which have no natural part of the sport. F1 will not disappear, F1 will not go bankrupt, F1 have enough money as a whole to maintain itself as a sport and as a business. F1's stakeholders, Federation, Commercial Rights Holder, Manufacturers, teams, drivers, tracks all contribute to the current instability, they contribute in varying degrees, some of the do so at more of a 'forced to' than others born from the difference in how the income is shared between Federation, Commercial Rights Holder and teams.

 

[superden]

^ I think that is a crock...

And I think your viewpoint is equally so. The loss of tobacco sponsorship alone put many teams finances in a completely different position, never mind the numerous other changes in global economies in the last 10-20 years. Have you been locked in a cupboard for the last 10 years?

Edited by superden, 09 December 2014 - 18:55.

[Nathan]

How does F1 financial sustainability compare to BPL?

 

Using numbers published by the Guardian for 2012, only 3 teams had a positive bank balance. 17 teams combine for a debt of over £2.2 billion.  Those 14 of the 17 teams pay over £100 million in interest on that debt (3 of them have interest free loans).
 

Of the 20 teams, 12 lost money... £288 million in total.

NBA and NHL all have  teams losing money each year.  8 of 30 NBA teams lost money in 2013.  Michael Jordan has had to pull out of $100 million USD over 5-years to keep his basketball team afloat.  More than half of all NHL teams have lost money over the last 5 seasons.

Perhaps the question should be, are professional sports sustainable? 

[KWSN - DSM]

How does F1 financial sustainability compare to BPL?

 

Using numbers published by the Guardian for 2012, only 3 teams had a positive bank balance. 17 teams combine for a debt of over £2.2 billion.  Those 14 of the 17 teams pay over £100 million in interest on that debt (3 of them have interest free loans).
 

Of the 20 teams, 12 lost money... £288 million in total.

NBA and NHL all have  teams losing money each year.  8 of 30 NBA teams lost money in 2013.  Michael Jordan has had to pull out of $100 million USD over 5-years to keep his basketball team afloat.  More than half of all NHL teams have lost money over the last 5 seasons.

Perhaps the question should be, are professional sports sustainable? 

 

Yes it is fairly easy, spend less than your bottom line income after taxes. The fact that all sports are littered with clubs and teams not doing that does not change the fact that professional sport is sustainable.

 

[Nathan]

"Who's going to have a go?"

 

5 of the 10 teams that participated in the 2004 championship have since changed ownership through 8 different groups, plus we had the 3 teams enter in 2010, and 1 or 2 coming in 2016. So I think history shows there are a number of people (a dozen in 11 years) wanting to have a go.

So we had all this extra money in 2004, but did that mean teams didn't lose money?  Were Sauber, Jaguar, Jordan and Minardi flush?  3 of those 4 had to sell in this time of riches.

If I look at the 1994 there were 14 teams. 5 went broke and a 6th forced to sell all by 2000.  Only 4 of the remaining 8 are still owned by the same people/group.

Edited by Nathan, 09 December 2014 - 19:28.

[mzvztag]

Perhaps the question should be, are professional sports sustainable?

I was always terribly annoyed to see the amounts of money in professional sport.
Strict salary and budget caps and strong governmental regulative should be applied with no tax evasion tolerance or off-shore business allowed.
Commercialization should be curbed and, in the case of motorsport, all FIA-sanctioned events should be available on public TV.

Whatever remained after all this is applied will be healthy, sustainable and back to the roots.

Edited by mzvztag, 09 December 2014 - 19:29.

[Wingcommander]

The payment structure has been the same for around a decade.

Things changed with latest "concorde".

If perpetual back markers can make a profit every year, is it really good for F1 to have the "not quites" being subsidized by the sport? If you aren't a competitive team you will go broke and this opens up opportunities for others to have a go.

Is it really good for f1 that the biggest teams are subsidized by the sport?

[KWSN - DSM]

I was always terribly annoyed to see the amounts of money in professional sport.
Strict salary and budget caps and strong governmental regulative should be applied with no tax evasion tolerance or off-shore business allowed.
Commercialization should be curbed and, in the case of motorsport, all FIA-sanctioned events should be available on public TV.

Whatever remained after all this is applied will be healthy, sustainable and back to the roots.

 

Zero regulation, sink or swim, no funds from any public coffers, no public funds for stadiums, no public funds for race tracks. Spend less than you earn after taxes, and you are good.

 

2002 - Toyota beaten by Minardi, Sauber and Jordan.

2003 - Toyota beaten by Sauber, finished with 3 points more than Jordan.

2004 - Toyota beaten by Sauber, finished with 4 points more than Jordan.

2005 - Toyota finish 4th in WCC only beaten by Renault, McLaren and Ferrari.

2006 - Toyota finish 6th in WCC.

2007 - Toyota finish 6th in WCC, only 5 points more than Toro Rosso, beaten by Williams using Toyota engine.

2008 - Toyota finish 5th in WCC, beaten by Ferrari, McLaren, BMW Sauber, Reanult.

2009 - Toyota finish 5th in WCC.

 

I am not privy to the amount spend by Toyota, however in excess of Usd 1 billion, and possibly as much as 1.5, accumulating 278.50 points in 139 races, you can spend a lot of money getting no real results.

 

[Fastcake]

"Who's going to have a go?"

 

5 of the 10 teams that participated in the 2004 championship have since changed ownership through 8 different groups, plus we had the 3 teams enter in 2010, and 1 or 2 coming in 2016. So I think history shows there are a number of people (a dozen in 11 years) wanting to have a go.

So we had all this extra money in 2004, but did that mean teams didn't lose money?  Were Sauber, Jaguar, Jordan and Minardi flush?  3 of those 4 had to sell in this time of riches.

If I look at the 1994 there were 14 teams. 5 went broke and a 6th forced to sell all by 2000.  Only 4 of the remaining 8 are still owned by the same people/group.

 

There were many people willing to join in the past thanks to the tobacco money, manufacturers, and big paying sponsors that made it possible. When the manufacturers started to buy up teams, the independents had to start selling up as even though the money they were attracting was large by historical standards, it was now not enough to compete with the likes of Renault or Ferrari or McLaren who were attracting major sponsorship in addition to their own funds.

 

Nowadays though the fag companies are gone, sponsorship is drying up, and even the car manufacturers are less willing to splurge hundreds of millions on racing projects. Since this revenue dried up, who has actually joined in the past few years? We had three teams join, but only under the budget cap, not the current circumstances. We have one new entrant, who is waiting until 2016 to join - providing all goes to plan of course. And all the while we've had empty grid slots, which could have been made available to an interested applicant, and five teams who are either for sale or are desperate for investment.

 

So yes, who is going to have a go in modern day F1? At the moment, I don't see anywhere near enough people to make up for the teams we may well lose.

[Nathan]

I highly doubt we would lose Sauber/FI/Lotus, but I do imagine we will see these teams sold and renamed.  It's much easier to buy an established team versus start one fresh.  Even car makers couldn't make that happen, and the difficulty in doing so is in virtually any top level sports league.   Not a single new team owner that came in after 2004 (Shnadier, Mol, Mallya, Mateschitz, Brawn, Mercedes, Lopez, Campos, Fernandez, Fomenko), had tobacco money.  And none would have come in anticipating it because we knew by then it was on the way out.  They were almost all funded by the new owners business group.  That is where the revenues for Red Bull, Torro Rosso, Lotus, Caterham, Marussia and Force India come from. The billionaire entrepreneur is what replaced the tobacco companies.

If we look further back at 'real' new from the ground up teams, we had Toyota, Stewart, Super Aguri, Simtek, Forti, Pacific, Lola, Sauber and Jordan - none had significant tobacco money.  That's going back to 1991.  Perhaps I'm missing some?  It's been on a long time since it was viable to start a whole new team, you really have to go back to the 80's/early 90's.

What defines an empty grid spot? If there were 40 cars, are we still missing 41 and 42?


 

Edited by Nathan, 09 December 2014 - 21:13.

[Ross Stonefeld]

So we had all this extra money in 2004, but did that mean teams didn't lose money?  Were Sauber, Jaguar, Jordan and Minardi flush?  3 of those 4 had to sell in this time of riches.
 

 

Minardi were constantly at the back and went through regular ownership changes.

 

Jaguar were 100% Ford and Ford b2b funded, when Ford got bored of it(and I think ran into some financial problems) the team evaporated. Ford probably could have said to their suppliers "keep sponsoring the team" and they'd have lurched around no slower than they were going, but with a smaller budget. Same deal with BMW/Toyota/Honda. When the proprietor got bored, the team couldn't sustain itself.

 

Jordan died on the loss of tobacco and an engine partner.

 

Sauber were doing okay. What put them in their current predicament was that they lost Red Bull(by becoming BMW Sauber, and the creation of Toro Rosso), and then both BMW(and associated sponsors) and Petronas to Mercedes. Sauber were very much the model of the efficient privateer team. A bit like Force India today, but with better accounting.

[Nathan]

I have followed F1 since 1994 and what is going on today was going on then.  Half the grid was in constant financial trouble.  Most of the teams from then no longer exist.  Welcome to motor racing I guess?  Tobacco loss was going to kill F1, so was the coming and then going of the manufactures, yet here we are today...

 

Just because people are not lined up to form new teams doesn't mean people don't want to own an F1 team.  Most are smart enough to see its better to buy an existing team (like Red Bull, Honda, Renault, BMW and Mercedes did).

Edited by Nathan, 09 December 2014 - 21:24.

[Fastcake]

I highly doubt we would lose Sauber/FI/Lotus, but I do imagine we will see these teams sold and renamed.  It's much easier to buy an established team versus start one fresh.  Even car makers couldn't make that happen, and the difficulty in doing so is in virtually any top level sports league.   Not a single new team owner that came in after 2004 (Shnadier, Mol, Mallya, Mateschitz, Brawn, Mercedes, Lopez, Campos, Fernandez, Fomenko), had tobacco money.  And none would have come in anticipating it because we knew by then it was on the way out.  They were almost all funded by the new owners business group.  That is where the revenues for Red Bull, Torro Rosso, Lotus, Caterham, Marussia and Force India come from. The billionaire entrepreneur is what replaced the tobacco companies.

What defines an empty grid spot? If there were 40 cars, are we still missing 41 and 42?
 

 

Will we see them sold on? Caterham and Marussia were both been forced into administration as no one was willing to take over, and Marussia at least was a well run team that could have moved forward with enough investment. I wouldn't be so confident Sauber or FI can find a buyer. Lotus couldn't even when they were winning races.

 

The billionaire entrepreneur has already failed. The expense of F1 is too great to subsidise using companies you own. Fernandes proved that. As has Mallya, even though he somehow manages to keep the team going despite the meltdown of his assets. And I have no idea what the idea behind Marussia was, but then Russian money is rarely clean. Any millionaire is going to take one look at the money pit that is F1 and stay well away.

 

Unless you find another Mateschitz with a company that has an extreme sport advertising budget in the billions. But those seem rather thin on the ground.

[nosecone]

I'm sure that the profit CVC Capitals made last year is fairly above 130m. So yes, F1 is sustainable. Everybody could make a small profit.

[BillBald]

^ I think that is a crock...

Are todays finances much different than 10 or 20 years ago?  The payment structure has been the same for around a decade.

 

I know the sums are larger, but the portion of the grid losing money surely can't be different.

 

I think F1 is very sustainable, though the move to pay-per-view may change that.

 

If perpetual back markers can make a profit every year, is it really good for F1 to have the "not quites" being subsidized by the sport?  If you aren't a competitive team you will go broke and this opens up opportunities for others to have a go.

 

I'm pretty sure that the payment structure has changed a great deal in recent years. Previously you had Ferrari who were paid more than other teams, now you have special arrangements for all the top teams.

 

Basically Bernie wanted to break up FOTA, so he bribed Ferrari and Red Bull by giving them the lion's share. McLaren and Mercedes followed suit, they couldn't risk being left out in the cold. Nothing left for the smaller teams.

[Brazzers]

One man's loss is another man's gain. 

[phoenix101]

The sport is not sustainable because the technical regulations do not allow any powertrain variation. Affordability to the top teams is around €200M. For the smaller private teams without legacy and championship payments, affordability is probably budgets around €50M. Their needs are incompatible, and charitable powertrain lease agreements are not going to solve anything in the long term. Every few years they have to be renegotiated, and there are no guarantees an agreement will be reached.

 

The sport would benefit from powertrain variation.

[HoldenRT]

So how much did Ferrari lose?  And this is on top of the extra money they get from Bernie/CVC for merely showing up?  Why do people even cheer for them if they are so inept?

 

F1 is lopsided in elite teams favour and the biggest most historic teams can still fail and lose money at the same time?  You'd think that if you were going to cheer for them, it'd be cheering them for being good at what they do.. that is WHY they are who they are.  And afterall, that is what a sport is.. you do good things and the crowd cheers, you do bad things and the crowd boos, but in this case, it seems you are supposed to cheer for them, just for being them.

 

Ideally you want to find out who can do the best job each season in the purest way, but still give incentives and a chance for the teams that didn't do such a good job to bounce back.  It keeps the wheels turning and the sport fresh and sustainable.  This is why you have draft systems and salary caps etc and I'm not saying that they would work in F1, but the general idea behind them is the same.  It's like a garden, you don't want 3 tall plants being green and healthy and the rest withering away and decomposing.  You want constant birth and rebirth.. cycles.. where all plants in the garden are fresh.  Better to have too many plants, than not enough.  Most sports manage this just fine.. but F1 seems to have a big problem with it.

 

Maybe it's because F1 follows a similar system to the way the whole world's economy works and is very dependant on the world's economy.  Instead of being a sport first.. business second.  F1 is business first, sport second.  And then comes the politics.. the people at the top in F1 usually always find a way to get themselves into the news and steal some spotlight, away from the drivers and actual competitors (who are the real heroes of F1, as well as the designers in the factory).  Most sports across the world, I don't even know who runs the sport or who gets what money.  But this stuff seems to be something to stimulate people in F1 who aren't actually competing.. to prevent them falling asleep?  Like the whole sport is their own little playground, instead of the track itself being the playground.

 

Ferrari was cherry picked just as an easy example.  They got enough problems without posts like this, but it's more of a criticism of the system as a whole rather than any one team.  It's in every F1 teams best interest to do what they do because the system encourages it.  Similar to tax dodging of large corporations.  One of the best questions I saw asked in the last Friday team bosses press conference of the season, was how healthy can it be to have a sport where the rules are determined by the competitors?  It's tainted by self interest for all involved.  But then, if you moved away from that.. you'd need a governing body/officials to control them in a fair and equitable way but unfortunately in big money sports like F1.. even those governing bodies are vested in self interest as well.

 

Who is looking out for the good as a whole?

 

No one.  No one cares.  Unless you can portray an image that you do or make some money off of it.  Just keep taking from the well, and one day someone else can figure it out.  Act too nice and actually care and you'd just get swallowed up anyway.

 

Yet they need each other.. and are co dependant on each other for each others survival.

 

It's like one big unhealthy co dependant marriage.  Overall, I wish they'd take care of their business properly.. so that we wouldn't have to hear about it.  It's not our job to even think about it.  Or at least.. (speaking for myself) it's not my job.  I just want to watch people compete against each other and enjoy the best drivers in the world compete at a high level.  That's why you watch F1 instead of karting.  That's why you watch the Olympics instead of a fifth grade 100m sprint.  But for me it has nothing to do with image, power, or penis extensions (my sportscar is better than yours).  Unfortunately that's the image that F1 cashes in on, that's the image that tries to hook you in, which is nice when you drive up to a nightclub with a nice logo on your car, but does nothing for the sport itself.  I'm not against those things, a nice car is never a bad thing.. but only the effect they have on F1.  Because in a system (any system).. everything is interconnected.  And that image is a façade and has nothing to do with F1 cars or F1 teams, they are separate disciplines.  In F1, a lot of the teams are interchangeable where the factory and staff stay the same, and only the logo changes.  And this image on the front of a sportscar has nothing to do with if Lewis is better at dancing the rear of the car than someone else, or if Alonso can handle understeer better or if Ricciardo is a good overtaker.  Williams has no fancy logo sitting on the front of a car parked infront of a posh hotel but they've managed success in F1 over a long period of time.  Force India has done pretty well in the last few years also.  And Redbull.. Redbull would be a nice story to mention.. if only people weren't so jealous or bitter towards them.  Well the good news is, in the F1 world.. you could paint the car and factory red and slap a new logo on the car, and suddenly it's a Ferrari!  People don't like to be reminded of that.

 

Is F1 sustainable?  Probably, in some twisted way.  But ask the ones who benefit most from it, and they will say yes.  Ask the ones who have been bitten by it, and they will say no.  They will try to work together, but only up until the point where everyone hits the "clash" of my self interest vs your self interest, and then it just goes around in circles.

 

Any time where the competitors decide the rules, or you have a large gap (that only gets larger with time) where all the power or money is filtered upwards and a gap grows between the top and bottom is usually not a good system for the whole.  Other sports seem to manage this better though.  They still have this gap, and there are still legacies, and gaps and shallow superficial images that are portrayed, but they still manage to be healthy as a whole.  The gap is there but it isn't a gaping hole, and they manage to play under the same rules and find out who the best is.  This won't be happening in F1 anytime soon.. but maybe one day.

 

I'm glad it's not my job to fix it.

[Petroltorque]

^ I think that is a crock...

Are todays finances much different than 10 or 20 years ago?  The payment structure has been the same for around a decade.
 
I know the sums are larger, but the portion of the grid losing money surely can't be different.
 
I think F1 is very sustainable, though the move to pay-per-view may change that.
 
If perpetual back markers can make a profit every year, is it really good for F1 to have the "not quites" being subsidized by the sport?  If you aren't a competitive team you will go broke and this opens up opportunities for others to have a go.

Patently the first statement is false. The Concorde agreement lapsed in 2012 and since then Ecclestone entered into a series of bilateral agreements weighted in favour of the big teams. That's why the independents are failing.
In short the present business plan is unsustainable.

[DanardiF1]

"Who's going to have a go?"

 

5 of the 10 teams that participated in the 2004 championship have since changed ownership through 8 different groups, plus we had the 3 teams enter in 2010, and 1 or 2 coming in 2016. So I think history shows there are a number of people (a dozen in 11 years) wanting to have a go.

So we had all this extra money in 2004, but did that mean teams didn't lose money?  Were Sauber, Jaguar, Jordan and Minardi flush?  3 of those 4 had to sell in this time of riches.

If I look at the 1994 there were 14 teams. 5 went broke and a 6th forced to sell all by 2000.  Only 4 of the remaining 8 are still owned by the same people/group.

 

How many of those 14 teams were around 20 years before? Ferrari, McLaren, Lotus and Tyrrell... F1 has a massive turnover of teams with a basic core of essentially two teams; Ferrari and McLaren.

 

Of course the sport could be run better in regards to giving smaller teams a bigger slice of what they help the sport as a whole earn, but this bemoaning of teams disappearing is similar to how people in football bemoan a 'once great' team playing in a lower division. Sport is cyclical and there are very few perennially successful outfits.

[ronsingapore]

Just out of curiosity, FIA has a 100-year contract with F1, correct? Which gives F1 the access to its own commercial rights? But does F1 absolutely need FIA to survive? i mean, NASCAR and Indycar do not fall under the FIA, do they? Let's say (hypothetically speaking, as this is so unlikely), that suddenly, the FIA as an organisation gets dissolved; what would exactly happen to the different races?

[mzvztag]

Just out of curiosity, FIA has a 100-year contract with F1, correct? Which gives F1 the access to its own commercial rights? But does F1 absolutely need FIA to survive? i mean, NASCAR and Indycar do not fall under the FIA, do they? Let's say (hypothetically speaking, as this is so unlikely), that suddenly, the FIA as an organisation gets dissolved; what would exactly happen to the different races?

I think there is also a question does FIA need F1?

FIA can set up a new top series with the same name as I doubt that a non-FIA sanctioned series can keep the F1 name.

[ronsingapore]

I think there is also a question does FIA need F1?

FIA can set up a new top series with the same name as I doubt that a non-FIA sanctioned series can keep the F1 name.

 

That is also true! FIA can indeed set up a totally-brand new series with exactly the same name too! It boils down if we believed a racing series, one that is "world championship", which would be the best way to run it, in a international global environment, of different cultures, and where different teams make for various competing viewpoints: an autocrat or rule by committee?