One of the very financial cornerstones that served Formula 1 so well for over 40 years could ultimately prove one of the factors that impede the sport’s return to (relative) normality after the pandemic.
When F1 commercial rights holder Liberty bought into F1 they immediately latched onto the advantages of ‘destination cities’, with the first event by the company being Hanoi’s now-postponed street race. Equally, enormous effort has been expended (thus far unsuccessfully) on staging a grand prix in Miami’s suburbs.
But there is always a flipside: that tactic of chasing street venues does not look too clever now. Street circuits require long and costly lead times to construct, making it harder to reschedule postponed events.
Monaco and Baku gave notice despite the latter having ten weeks in hand. Canada seems to be stalling, with a no-go decision expected within a week. Melbourne cancelled its grand prix on the eve of the event and is unlikely to return this year due to the costs and disruption of (re)constructing the Albert Park circuit.
However, the biggest impediment to F1’s recovery is its overall business model, which revolves around races of all types, with all its other income streams riding on the back of race fee income.
Effectively, the commercial rights holder (Liberty Media) sells the rights to stage a race to a promoter, who recovers the costs through a combination of ticket income, food and drink concessions, second-tier hospitality and public subsidies designed to encourage F1 tourism. The CRH further monetises the race by selling electronic media rights (predominantly television, plus live streaming and radio income), ‘bridge and board’ advertising, top-level hospitality and merchandising rights, all of which is utterly race-dependent. The bottom line: No race; no income.
This creates and imperative is to cram as many races into a season as possible, with each additional event providing further television, trackside advertising and hospitality streams. However, F1’s business model means promoters only stage events provided tickets can be sold, and public subsidies are paid where tourism gains are tangible.
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Thus, as soon as governments started banning mass gatherings in response to the pandemic – as was the case with the Australian Grand Prix, which was granted permission to continue “behind locked gates” before the promoter decided otherwise – F1’s business model collapsed overnight, for no promoter would pay eye-watering hosting fees, yet have no income. That would trigger immediate bankruptcy.
Before Covid-19, Liberty targeted around $1.8 billion in gross income, respectively split roughly 37.5%/37.5%/25% in terms of hosting fees, media rights and other earnings. Therefore, hosting fees contribute $675 million per year to Liberty’s coffers, as do media rights, with advertising and hospitality making up the balance of approximately $450m. In short, $675m in race fees spins off an incremental $1.125bn in media and ‘other’ income.
The most basic arithmetic shows the $675m divided by 20 of the 22 events on the original 2020 F1 calendar (Monaco and Brazil are believed to be on freebies) provides an average of $37.5m per race in fees, with media rights and the rest contributing $675m and $450 respectively. By extension, each paying race generates an average of around $90m in income.
(This means the 10 teams currently share – inequitably – approximately 66% or $1bn under ‘normal’ conditions, with the rest covering Liberty’s outgoings of around $300m and profit. The crucial figure, though, is the team’s collective slice, for without that income half the grid could be endangered.)
With eight races cancelled or postponed, and races in June and beyond weighing their options, the question becomes how quickly F1 can resume racing once the official ‘green light’ is given by governments and the current ‘social distancing’ measures are relaxed, as is beginning in China. Race promoters require two months minimum, most likely 12 weeks, to prepare their venues. Significantly, most of this cost and effort is expended on spectator facilities.
According to various sources, the actual racing installations require a maximum of three weeks given most hard- and software is already in place, while F1’s “circuit ring” and broadcast kit can be installed in three days flat. However, understandably promoters are not prepared to incur expenditure on preparations until official clearance is granted – delaying a return to racing by up to 12 weeks after the green light.
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That period could cover anything up to eight events assuming a number of triple-headers, as can be expected once the crisis subsides. Time will be of the essence as Liberty needs to maximise revenues in order to meet its various covenants after a truly dire period not of its own making.
However, a potential solution is at hand, provided Liberty is prepared to mindset shift from race ‘seller’ to promoter: Effectively paying European circuit owners to stage locked-gates races, with paddock access to restricted to key team crews and personnel, bona fide media and TV personnel and race officials.
The economics are simple: circuit owners have facilities they are unable to use for as long as governments ban paying punters. The chances of profitable events are slim even after restrictions are lifted as governments and consumers tighten belts. It follows that Liberty has zero income for as long as no races are run. Thus, the imperative is to run as many races as possible to recover lost TV and other income.
Equally, F1 fans are desperate for action, while sponsors and teams are unable to strut their stuff, and therefore have zero return on their substantial investments. Any races which can be held would fill empty TV spaces with much-needed exposure, and probably attract new audiences as F1 would have much less competition for eyeballs than usual.
Such ‘ghost races’ would be aimed purely at television audiences, with only key personnel permitted on-site and VIPs, sponsors, spectators and fans banned. No public means no traffic control and no car parks, no catering or public conveniences, no merchandising areas, no additional grandstands, no big screens, no programme sellers and, crucially, no need for public security or crowd marshalling.
With none of the above required, a race-ready ‘white’ circuit – one with all track perimeter areas ready for advertising billboards – a circuit could be prepared to full, ready-to-race specification within a fortnight.
Trackside officials and authorised media only would be permitted outside of the paddock, with access to the inner sanctum restricted to personnel as below. Race promoter sources confirmed to RaceFans that around 300 marshals would be required to safely run events, complemented by 100 medical staff.
According to team sources 45 to 50 heads are required to operate two F1 cars safely. Restricting the paddock to essential staff only means no paddock guests and thus no hospitality facilities, with skeleton marketing and PR staff permitted, say four total. Teams need to be fed, either via central catering – as per Formula 2’s paddock – or in vacant circuit hospitality units.
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Add in three engineers per team on the engine side, two fitters and a tyre engineer from Pirelli plus 10 staff to cater for brake, fuel and other technical duties, and the figure is still around 800 team heads maximum including drivers. In itself this is still a ridiculous figure: a stripped-out crew of 80 required to operate two cars for a couple of hours each day.
Media, television crews and race officials take the total to 1,000. Tighter clustering of events, possible as no ticket sales means promoters are not affected by date and distance proximity of two races, means crews – all pre-tested for Covid-19 – can travel across Europe in minibuses (eight per team), largely negating the need for flights and rental cars, thus minimising contact with outsiders and reducing costs and exposure.
To recap, the total (cross-checked) total headcount complement required stage a ‘ghost grand prix’ on a maximum safety/minimum headcount basis is 400 trackside officials, 800 team personnel plus 200 ‘other’ heads. That adds up to 1,400 in total, a figure governments may be comfortable with when restrictions are relaxed, particularly given the social distancing that is possible at vast circuits with many unused areas.
A number of circuits offer different licensed layouts or may even be used in both directions with minimal adaption, enabling events to be run on consecutive weekends on differing layouts, reducing costs, increasing the number of events F1 can run and fostering the unpredictable racing the sport craves. In some ways, how F1 reacts to this challenge could set a trend for its post-coronavirus future.
As discussed above, this concept could only be applied to permanent circuits due to the lead times and costs and other implications of preparing and racing at street venues. International freight costs mean flyaway races are less viable – these are generally included in hosting fees, with Liberty providing 11 tonnes per team and 20 economy class air tickets, and teams paying the rest. Still, ‘propaganda races’ such as Bahrain and Abu Dhabi may play ball.
So which circuits could run to this model? For starters all permanent European venues – Zandvoort, Catalunya, Paul Ricard, Red Bull Ring, Silverstone, Hungary, Spa and Monza. Possibly Hockenheim could be persuaded to return given this no-cost model? So nine such events, with one or two ‘altered layouts’ as above providing back-up for a run of races between mid-June and mid-September: a 13-week window.
Thereafter, if the global situation improves rapidly enough, the calendar may be able to return to normal, perhaps with deviations to accommodate China, Bahrain and possibly Vietnam before ending in February 2021. Thus F1 could potentially stage an 19-race calendar, with activities spread over Saturday (shortened practice and qualifying) and Sunday (race) to reduce costs and workloads.
Of course, this will still be a hectic schedule and will result in a lot of disappointed ticket-holders seeking refunds. But given the reduced manning levels required by the concept, staff could be rotated throughout the season. However F1 responds to the challenge it faces, it and the teams have a choice: Survive by adapting to sweeping changes in the world order or fail to do so and accept the consequences. It is both that simple and complex.
Now for the bottom line: Circuit rentals run out at $1m-$1.5m depending upon venue, infrastructure, location and manning required to run the event, with direct costs panning out at approximately double that, meaning Liberty would be in for a bill of $2-3m per event, so $25m over eight events.
Yes, Liberty writes off its hosting fee income. But, on the flipside, F1 scores television and some other income such as trackside advertising over the run of ‘ghost races’. This could pan out at around $500m in income which would otherwise be lost, or a 2,000% return on investment. Crucially, the cash-strapped teams need every bit of support going, and if push came to shove this concept could prove to be their saving grace.
Equally, circuit owners need every bit of support going, and this concept would provide welcome as they count their already substantial losses, particularly if they lose out totally on their grand prix this year. Sponsors, too, could be tipped into staying, while the sport could attract new eyeballs by staging events during otherwise fallow weekends.
One hopes, of course, that life soon returns to normal and not only for the sake of the sport we love. This crisis has changed the world order, and those businesses who best adapt will survive by thinking laterally, and may even emerge all the stronger for it. However, if the effects of Covid-19 do linger, a solution for F1 is at hand at the switch of its corporate mindset.
Who knows, the concept may even be snapped up by Moto GP.
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42 comments on “Will F1 have to ban fans from races to get its 2020 season started?”
Aleš Norský (@gpfacts)
1st April 2020, 12:08
This may not win me any popularity votes, but I must admit that I miss Formula 1 far less than I would have thought possible. I was all charged-up for Melbourne and all that, but since then…I don’t really mind having this break. Perhaps a series of 20+ race seasons really was too much, especially during an era, when we have pretty good idea of how it is all going to turn out, long before it does. Mercedes AMG have won 89 of the 121 Grands Prix since 2014…more than two-thirds of them by Lewis Hamilton alone. I am not even sure if I should look forward to this season, whenever it might begin, because inevitably it is going to morph into a blur of week-to-week activity. I fully understand the economic and commercial reasons for it. But if there ever was a case for 16-18 race seasons in my mind…this is it. As for 2020, if they can put together about 10 races that would be fine with me…and no extending the season into January or even further, please! F1 already is clashing with other big weekends at Indy and Le Mans…no need to bring Dakar into the mix as well…
1st April 2020, 12:28
@gpfacts The clash with the 24hrs of Le Mans isn’t F1’s problem, though, since the weekend of September 18-20 was Singapore’s before the annual 24h-event got postponed from its original slot. As for the Indy 500 and Monaco traditionally sharing the same weekend, no point in making a fuss about it since there’s never a direct clash with the timing due to the time difference.
Aleš Norský (@gpfacts)
1st April 2020, 12:51
Yet…I would prefer to be able to enjoy the racing, digest and reflect on it, instead of madly rushing from one event to the next :-)
1st April 2020, 13:49
That’s entirely fair enough – for myself, I have been enjoying an amazing few years of the most intense and exciting midfield battle I can remember and I am absolutely dying for the net instalment… actually, bad choice of words… I can wait for as long as it takes without complaint, my entertainment is not worth deaths!
John Toad (@)
1st April 2020, 21:12
For the first time ever this year I paid for F1 through BT sport. At £45 per month for BT Sport and SKY F1 I thought it a reasonable price to pay.
You can imagine my dismay as all sport started evaporating. I managed to cancel my subscription and have reverted to a minimum BT package with no sport at all. If and when sports events start up again I’m unlikely to re-purchase my sport subscription as I’ve now found other ways to fill in for the missing sports broadcasts.
I’ve been following F1 since 1958 and I’m now returning to journalists to keep me abreast of F1 news.
2nd April 2020, 21:32
Am I glad I don’t have a subscription for any of the sports channels.
As I think that it is too much money just to watch F1.
1st April 2020, 12:32
At least, Bahrain and Abu Dhabi could sustain racing in front of empty grandstands since they don’t have to rely on the ticket sales, but I’m not as sure about the others how it’d be for them.
BTW, big TV-screens remain in place all-year-round on some circuits, for example, the two above-mentioned ones, as well as, Sochi Autodrom, Hungaroring, and COTA, or at least some of them stay put outside the GP-weekend. Also the ones above the pit-building in Suzuka, as well as, probably the ones on the side of the pit building in China, etc.
1st April 2020, 17:54
For that matter even Monaco can hold race without presence of fans.
Alianora La Canta (@alianora-la-canta)
2nd April 2020, 20:37
@Chaitanya But it would need to have started setting up about a week ago, and they wouldn’t do that when there was no guarantee of even being able to hold the race that way.
3rd April 2020, 13:51
What I meant was Monaco doesnt pay any hosting fees so they can afford to hold a race behind closed doors whenever the season starts. Also if season begins under normal circumstances that not paying hosting is the exact reason why FIA/FOM have zero financial motivation to hold a race in Monaco and cancel it.
Euro Brun (@eurobrun)
1st April 2020, 20:54
But if, as Dieter is saying, Liberty were to pay to hire the circuits, then lack of fans (lack of income) wouldn’t matter.
1st April 2020, 12:38
Great article by Dieter as always. Seems like common sense.
The only question I have is what is going on with teams sponsors. I assume all the agreements are made before the season starts. With 2020 they would have been for 22 races. Are any sponsors now backing out or renegotiating. When they don’t have their logos going around the world 22 times a year, surely they won’t pay what they agreed with the individual teams
1st April 2020, 13:32
I’d like to think that while I’m sure there’s a financial penalty for running less races from sponsors, this would be offset with not having the cost of having to actual run races and are as such not the biggest issues to teams right now. As long as the sponsors don’t run into financial issues of their own, that’s probably just a thing that happens and is dealt with by the time we know how many races will actually be run and how.
Backing out seems unnecessary, as I’m sure everyone knows that this is out of control of anyone. At least in my business pretty much everyone accepts how extraordinary the situation is and deals with the issues that rise from it in a logical and forgiving manner.
Alianora La Canta (@alianora-la-canta)
2nd April 2020, 20:39
@eurobrun I would assume the sponsors would be getting at least partial refunds. Teams will lose income through this, but it may be 2021 before they really feel it.
1st April 2020, 13:06
1400 people is still a lot of people to let in. So I doubt more than a few countries will allow an F1 race to happen this year. Ironically, other than the small dictatorships, Italy and Spain may be the most likely candidates because they may have achieved herd immunity in a few months – at a terrible cost.
F1 will probably be one of the last sports to resume because it requires such large crews. I expect tennis to be the first, because it requires so few people and they don’t have to get close to each other. You really only need 3: the umpire can function as lines judge too and the players can collect their own balls.
Alianora La Canta (@alianora-la-canta)
2nd April 2020, 20:44
@krommenaas Britain’s “mass event” cap is 2000, so that is a country that could hold the race under such circumstances. Several nations on the European continent have a limit of 1000 (including France) and in parts of the USA, the definition is as low as 250.
2nd April 2020, 21:02
Would the UK currently allow an event with <2000 people involved? And France one with up to a 1000 people? In the middle of the lockdowns? I find that hard to believe.
1st April 2020, 13:19
The circuits should be thinking the boot is on the other foot this time. Instead of FOM screwing them for as much as possible, there’s no reason why Spa, for example, who will have been losing money all year too, shouldn’t double or treble their usual circuit leasing rates or keep the advertising space for themselves.
1st April 2020, 13:25
What happens when there is a life threatening crash during the race? Does the injured F1 driver get priority to the Corona patients? The medical personnel in hospitals is already thinly stretched.
Other than that. I can’t see a F1 race happening on a global scale because of the restrictions in air travel. At best, they could drive their trucks to a handful of circuits in Europe. But still, with no Corona vaccin at hand, they would have to end the F1 season at the end of October, at the start of the flu season.
1st April 2020, 13:46
Given the spread modelling of the virus has shown no difference in it’s infectivity based on temperature, I doubt any science based decision will take into account seasons of other viral infections that happen to share a similar point of infection. As for your first question, I should imagine that any country that allows a race to go ahead would only do so once their hospitals are running within their capacity.
1st April 2020, 14:28
There’s still lots of planes flying so that’s not the problem. Corona won’t go away during the summer so seasons don’t matter either. Convincing a country to let in a 1000 globetrotting foreigners is the big hurdle. Before there’s a vaccine and the crisis is well and truly over, few will do so.
Carlos Medrano (@carlosmedrano)
1st April 2020, 22:59
Good point I don’t see how they could run races before this is all over
Alianora La Canta (@alianora-la-canta)
2nd April 2020, 20:47
@Oliver I would assume that moderate-sized events would need to be permitted before any attempt to restart could work, and that won’t happen until medical facilities can manage incoming patient loads. At that point, one or two more shouldn’t be a problem.
The reason to consider fan-free races is simply to enable F1 to get going 2-3 weeks after that clearance, instead of 8-12 weeks.
1st April 2020, 13:47
While it sounds logical there are still travel restrictions and mandated isolation for incomming people in many countries. As long as these are not lifted, the F1 world cannot go anywhere. I cannot imagine F1 getting some exceptions for this. With the current situation and slow progress I really doubt we will enjoy any racing this year.
1st April 2020, 14:43
Ah, the way the article ended was amazing! Some serious burn there for MotoGP :)
Super informative and great bit of journalism right there. Fodder to think for Liberty!
1st April 2020, 16:31
With a second wave on the horizon while, at least in Europe and the Americas we’re still riding the first, and no vaccine readily available for at least one year, 2020 is preparing to be a hole in the F1 history. Unless the world decides to change the strategy against the pandemic, moving from social distancing/lockdown to herd immunity (which sounds ridiculous as we don’t know enough about SARS-Cov-2) F1 doesn’t seem to be going anywhere.
Green Flag (@greenflag)
1st April 2020, 18:29
Thoughts of any races in 2020 are totally unrealistic. And the way COVID-19 is spreading, together with preventative measures against future waves, it’s not improbable that the 2021 season may be delayed for many months.
Euro Brun (@eurobrun)
1st April 2020, 21:01
I know there’s no best answer for this, bit I presume you’re effectively suggesting F2 and F3 (and Porche Supercup for that matter) are sacrificed for the greater good of F1?
It’s a tricky conundrum, as their budgets are also much lower, but I’m concerned that a few of the junior teams might also go to the wall, even if they get their own ‘ghost races’- as a lot of their attention comes from being on the F1 bill.
Jimmi Cynic (@jimmi-cynic)
1st April 2020, 21:42
With F1 banning innovation, seems logical that fans would be next.
1st April 2020, 22:48
Interesting article with some creative thinking.
However, until other mainstream sports, like the major football leagues, that rely on fewer people being transported, begin to operate in ghost mode, I’d suggest something that involves global travel of larger groups may not get much in the way of concessions from various countries authorities.
Unfortunately also, the owners of F1 live in a country that believed that it’s a flu that will just go away in a couple of weeks so they seem to be well behind in their contingency planning and to a large degree think that everything will just restart soon and with a little tweaking will allow business as usual. Until they acknowledge that there’s very little chance of that, they’re unlikely to consider what Dieter has suggested.
1st April 2020, 23:15
The article highlights my reasoning for Silverstone to hold the entire 2020 season, but the numbers for teams, marshals and medics would have to be reduced to make even that possible. 200 medics, 10 for every on the grid, how is that possible let alone needed ? 80 engineers for 2 cars ? With the factories (or temporary base ) just down the road, surely the car prepared to race at the local base would only need a few chief technicians to start up and do final adjustments, telemetry and pit-wall management could all be done from factory, not ideal but better than teams had not so long ago. As for tyre/wing changes, they would have to be banned, hard tyres and possibly slightly reduced distance races would be needed, but if crap tyres ever added any drama then this scenario would maximize it, as would 1st corner pile-ups, Williams might even get on the podium.
Not ideal, but for the TV viewer an hour plus of on track racing drama has to be better than simulated races and for F1 also more profitable.
Stephen Crowsen (@drycrust)
2nd April 2020, 1:30
@hohum Excuse my ignorance on how to organise a Grand Prix, but I think there’s a lot of merit in your ideas. I like the idea of a car should be trucked in “ready to race”, so only the fuel needs to be added. Instead of a mandatory tyre change why not just make it a mandatory drive through the pit lane once in the race?
I don’t know enough to know why they need 200 plus medics, so I’d rather err on the side of caution and believe they do need to be there, but I don’t see why they couldn’t double as track marshals.
Looking at a picture of Silverstone, it looks to me as though it has lots of potential for being configured to different configurations, and even if only a few are practical, so what?
2nd April 2020, 3:05
@drycrust, Yes, it’s obviously not simple, but in my view it is the only option that future times and dates could be planned on. As for medics I suspect that number must include marshals with first aid certificates primarily for their own safety as well as any spectator injuries, your suggestion of track changes is very good, a shorter (original ?) course would require fewer marshals.
1st April 2020, 23:17
Erratum; 10 for every CAR on the grid,
Stephen Crowsen (@drycrust)
2nd April 2020, 0:53
In systems where there’s a fear of failure, and especially if failure is a frequent event, the system is built in such a way as to be able to continue if something does go wrong. One way to do this is to use redundancy, which is building in duplication (or even more). For example, your car has two head lights (and each bulb has two filaments), the engine has 4 (or more) cylinders, and of course your “designated driver” is there to get you home when you go out for drinks.
Another way of reducing one’s susceptibility to being affected by failure is to believe it will happen in certain places and build in ways of recognising it has happened and have ways to deal with it. For example, when our computers talk to their ISP or our mobile phones talk to the cell phone tower they do so via data packets, and each packet has a checksum, so if even one bit in a packet were to become corrupted then the checksum wouldn’t match the data in the packet so the recipient knows to discard it.
Maybe I’m a bit bold in this statement, and of course this is with the benefit of hindsight, but it looked to me as though the Australian GP didn’t have any plan if several people were found to be infected, so there was the potential that if something like that did happen then the whole event would stall and crash, which is exactly what did happen.
I’m not sure if this idea of breaking a team up into groups of 8 people was simply a matter of economics or trying to contain an infection, but to me this is a good way to start. So if one person in that van got infected then the other 7 can be quarantined as well.
2nd April 2020, 3:11
@drycrust, makes sense and if races were all at Silverstone only Alfa, Alpha and Ferrari would need to travel any real distance.
2nd April 2020, 3:13
PS; Mercedes might loan Ferrari the mini-buses.
Stephen Crowsen (@drycrust)
2nd April 2020, 10:04
@hohum I agree, it does seem the logical place to hold the races. One thought that just occurred to me is with the teams being so close to the circuit they wouldn’t need to send a car’s telemetry to a satellite and then back, it could be microwaved directly from the circuit to their Team HQ, thus not having to lease satellite time and, of course, reducing the “real time” time lag by about half a second.
In regards to Ferrari, and the A teams, when one looks at the Silverstone circuit there seem to be a lot of warehouse type buildings in the area, and even at the race track too. And of course, it may be their friendly Haas or RBR team nearby could lend them a hand if it was needed.
3rd April 2020, 0:04
John Toad (@)
2nd April 2020, 4:58
Unless and until inter-country travel bans are lifted F1 won’t restart.
It’s very wishful thinking that is going to happen this year.
China is coming out of the first wave of infection and is now seeing a second wave starting as citizens return from abroad.
In the grand scheme of things F1 is insignificant and won’t get any special concessions.
We wont be seeing anything other than e-sports F1 until 2021 at the earliest.
2nd April 2020, 21:25
Since the first Covid-19 case, it has been 5 months and that country is still not letting people in.
USA has had it’s first case less than a month ago. So you can scrap that race.
UK wont be running any races in the next few months…. so you won’t have a season. These people are living in Cloud Cuckoo Land.
3rd April 2020, 13:24
That is brilliant thinking – and all the great Euro tracks get used – which are the only ones that are really needed anyway. Get’s my vote of approval. Dieter to replace Chase when he finishes up.
Comments are closed.