CVC out-performed Liberty in its first two years of F1 ownership


From the moment Liberty Media bought F1 in early 2017, the company was keen to distance itself from the old management while at the same time re-branding the sport.

While one can understand Liberty's attitude to Bernie Ecclestone's "dictatorial" management style - though surely Chase Carey and his team are now beginning to understand why this was necessary - it didn't make sense when new commercial boss, Sean Bratches described his own role as "managing a start-up".

Ignoring the fact that the Formula One World Championship had been around since 1950, a company with an annual revenue of 1.4bn ($1.8bn), which Liberty had just paid 3.6bn ($4.6bn) for, could in no way be described as a "start-up".

As part of the re-branding, F1 acquired a new logo and a theme tune, while moving into a plush new London HQ, increasing the headcount massively and starting initiatives such as street demos and an eSports series. All of which bit into the profits, as the teams were to learn to their cost.

In 2018, despite there being one more race than in 2017, the first year under Liberty's ownership, race hosting fees increased by just 1.4% to 485.9m ($616.7m).

Though 2018 saw races in Germany and France, it lost Malaysia, for years one of the highest fee payers on the schedule at around 36.8m ($46.7m).

That aside, when one considers that the hosting fees rise 5% every year, the increase of just 1.4% in 2018 is derisory.

Over the same period under CVC the race hosting fees increased but under Liberty they decreased. F1 lost races during that time under CVC but the escalators in the contracts led to the race hosting fees increasing. Liberty lost a big spending race (Malaysia) so it cancelled out the benefit of the escalators in the contracts.

Similarly, according to Forbes, broadcasting revenues rose by only 0.4% to 475.8m ($603.9m) in 2018, Liberty claiming that this was down to "the early termination of one contract with a failing broadcast rights broker".

"It was essentially a middleman that controlled our rights and sold them on so when the broker went broke the agreements were eliminated as part of the process," said Chase Carey.

Meanwhile, back in the day, new contracts with ITV in the UK and Telecinco in Spain saw the sport's broadcast revenues increase by 64.9m ($82.4m) between 2005 and 2007, while in its first two years CVC boosted the sport's 'miscellaneous revenue', which comes from the likes of corporate hospitality.

Indeed, the only area in which F1's revenue stream has improved in the first two years under Liberty, compared to CVC's first two years, is sponsorship.

While it has grown 3.4m ($4.4m) in the last two years, between 2005 and 2007 (under CVC) it fell by 7.8m ($10m).

This is somewhat ironic, as Carey has continually said that it has been harder than expected to secure sponsorship.

Asked by CNBC, the day after Liberty's bid for the sport got the all-clear, which of F1's revenue streams had the greatest growth potential, Carey said: "Probably the one that grows the fastest, you know, is probably sponsorships. Realistically today, we have a one-man sponsorship operation. There are many categories we're not even selling into. Putting an organization in place that enables us to execute on that probably is the most immediate impact."

However, last November, he told the Financial Times: "The perception was just there are sponsors waiting... They were lined up out there and as soon as we had somebody to go call on them, they were just going to sign up. The world's not that simple."

More recently he said: "The challenge in the sponsorship world is probably tougher than it was a few years ago. For anybody who is not Google or Facebook, the broader advertising world is more challenging... I think it is fair to say that the sponsorship world has probably been more challenging than we would have expected it to be a couple of years ago."

Yet this remains the one area in which the sport under Liberty, has performed better than in those first two years under CVC.

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Published: 02/07/2019
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