2019 Season - Important For Sport & Business of F1
The much-awaited and anticipated Formula 1 2019 Season starts out in Australia this weekend. Liberty Media, who bought the business of Formula 1 since 2017, start their third full-season as the ‘new owners’ of the sport — well, it’s time to drop in and explain why this season is such an important season for Formula 1.
Aerodynamic changes in 2019 are conceivably the most well-researched rule changes in the history of the sport. Formula One Management (FOM) and the FIA, the governing body, have worked hand-in-hand to ensure that the changes put in place will deliver the desired effect — closer wheel-to-wheel action. While the teams’ managers expressed their dissatisfaction with the rule changes, some of the drivers complimented the changes amid pre-season testing. It might be too early to say, but let’s hope the aerodynamic changes would deliver such huge on-track excitement this weekend.
2021 – So Far, Yet So Near
Despite the fact that 2021 is still a couple of years away, the teams, FIA and FOM are still leaving it to the last minute to agree on sporting, commercial and technical regulations that will govern the game at that time. In fact, efforts have been underway for over a year to work with the teams to make them agree on these regulations, and works are still in progress.
Apart from the aerodynamic regulations, the existing hybrid-turbo power unit regulations are expected to change too. However, the current power unit manufacturers did well to force Formula 1 to stretch out the current regulations to 2021 and later.
For 2021, Formula 1 plans to introduce a hilarious rule that would force the existing power unit manufacturers to help new power unit manufacturers entering the sport. In the world of motosport racing so fiercely like Formula 1, one wonders why a competitive team would help a rival become competitive enough – if that is so, why couldn’t Formula 1 get Mercedes or Ferrari to agree to supply power units to Red Bull a few seasons ago?
Additionally, there have been excessive talks about restructuring the unfair financial payouts of the sport and introducing a budget cap – both aimed at stabilising the competition of the sport among teams. But could it be too late to make that change for 2021? Will Formula 1 be able to persuade Ferrari to accept a lesser pay-out? What about the bonuses and special payments to Mercedes, Red Bull, Mclaren and Williams? Drama will be unfolded over the next few months with the hope that Formula 1 is able to make decisions for the sport overall and not just for a few competing teams.
Race Hosting Contracts
Formula 1’s biggest revenues come from race hosting fees paid by the various organisers around the world. The sport has already expressed its desire to expand the calendar year to 25 races, but for the moment, it might still keep to its 21 races. Since Liberty Media’s takeover, the Grand Prix of Vietnam was the only new signing announced — despite the fact that the owner boasting of interests from many other parties over the world.
It is no secret that Mexican Grand Prix might be in danger after the new ruling party in the country decided to coordinate the funds for Formula 1, which will be used for building a new railway line. Similarly, though the United States Grand Prix still present in 2019, it might lose its state of funding after filling an incorrect reimbursement application for the last season race.
TV Viewership and Sponsorship
After successfully broadcasting free-to-air to amass its global fan following in the last several decades, Formula 1’s decision now is to shift to pay-television. On the revenue front, the sport and teams have earned a significant amount of money via this, but there has been a dramatic drop in the game’s following on television. As well, the sport is working hard to reduce the average age of a Formula 1 fan. The new documentary of the game broadcasted on Netflix is a step in such direction.
While pay-television offers higher income and better content, but the drop in viewership takes away interest from the sponsors, who sponsor for the teams and for the sport overall. And this is dangerous because teams collectively spend around $1 billion annually (10 teams x $100 million at least!), thus, external sponsorship is a key resource of revenue to them. And the drop in sponsorship would be a disaster!
Business of Formula 1
Under Liberty Media’s reign, the teams’ earnings have suffered a drop for the second year consecutively. Despite the fact that an increase in the sport’s earnings overall for both years. Will 2019 see a reverse in this trend of lowered earnings?
Brexit is approaching, which could impact on the sport since most teams operate based out of the United Kingdom. And finally, there was a report in January 2019 stated that Liberty Media was looking to sell Formula 1 – fully or partially. While the veracity of the report wasn’t confirmed or denied by Formula 1, we remember an adage – there is no smoke without fire !