Formula One reveals its revenue reversed by £13m in Liberty Media's first year in the driving seat

It was the biggest fall of the past decade and it puts Liberty on a collision course with the sport’s ten teams

Formula 1's revenue has fallen (Getty)

Formula One has revealed that its revenue reversed by £13m in 2017, the first year its new owner, Liberty Media, was in the driving seat.

It was the biggest fall of the past decade and it puts Liberty on a collision course with the sport’s ten teams as their prize money is linked to F1’s financial performance.

In a letter to shareholders Liberty said that “Formula 1 revenue for the year ended December 31, 2017 is expected to be down approximately 1% as compared to the prior year period. Full financial statements for this period will be filed on or before March 1, 2018, and prior to such time Liberty will not provide any additional details.”

In 2016 F1’s revenue accelerated by 5.8% to £1.3bn ($1.8bn) which puts the 1% fall the following year at £13m. The only other time it has dropped in the past decade was in 2015 when it fell by just £3.3m ($4.6m) to £1.2bn ($1.7bn).

The drop last year was driven by the loss of the German Grand Prix and several sponsors including insurance firm Allianz and banking giant UBS. Despite promising to rev up the business Liberty failed to sign any new races or major sponsorship deals. However, it has boosted F1’s costs by re-branding the sport, moving to a plush new office in London and boosting the razzmatazz through initiatives such as hiring boxing announcer Michael Buffer at a cost which is believed to come to several million Dollars. It has burned up the red ink.

The letter to shareholders doesn’t reveal the impact of the decline in revenue but F1’s results for the nine months to the end of September showed that its operating loss doubled to £50m ($70m). It fuelled a drop in the prize money paid to F1’s teams which fell by 5.9% to £460m ($650m).

F1’s most famous names, Ferrari and Mercedes, will bear the brunt of this as they get more prize money than their rivals. They are two of the five teams which receive special bonuses with Ferrari alone getting an estimated £70m ($100m) before a single race begins. It brings the Italian squad’s annual total to £140m ($195m) which is higher than any other team even though it hasn’t won the championship since 2007.

Liberty is planning to scrap these bonuses and introduce a cap on budgets which would prevent the top teams from spending more to gain an edge in races. It has driven Ferrari’s chairman Sergio Marchionne to threaten to pull the team out of F1. As the Independent revealed last year, this would save it an estimated £100m annually as it spends far more than it makes from F1 despite its bonus payments.

Sergio Marchionne threatened to pull Ferrari out of F1 (Getty)

If they were scrapped it would cost Ferrari even more which is why Marchionne said that “if we change the sandbox to the point where it becomes an unrecognisable sandbox, I don’t want to play any more.” He has a window to carry out his threat as the teams’ contracts to race expire at the end of 2020.

“There is the possibility to create an alternative championship from 2020/2021,” he added. “If they think we are bluffing then they are playing with fire.” Mercedes team boss Toto Wolff concurs and told Germany’s Welt am Sonntag newspaper that “if I were Liberty Media's new Formula 1 promoter, I would not continue provoking Marchionne with unacceptable suggestions or demands or nonsensical changes.”

Asked what he means, Wolff said, “bringing rules or show elements into the game and turning F1 into a cheap shopping channel. Formula 1 must remain in its basic structures what it was and what it is. We have to improve them and face the new media environment. But we need evolution, not naive revolution.”