A $2.5 billion yield for Formula One

Formula One sees an increase in its revenue as a result of a larger fan-base.

The sport has grown in popularity over the years, with more viewers tuning in to watch the races and more sponsors investing in the sport. This has allowed Formula One to invest more in its cars and tracks, creating a product that is more appealing to sponsors and viewers, which has led to an increase in revenue and earnings.

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Jam packed F1 Circuit 

After a long two-year period under stringent Covid-19 measures, much to the anticipation of the racing sport’s fans, some of the Covid-19 regulations were lifted. This resulted in Formula One bringing back its fans to the circuits, a move that would significantly impact the turnover of the company. After being deprived of the thrills and spills which make F1 the most famous sport that it is today, the Formula One fanatics stormed in the circuits in numbers, (5.7 million fans) a record-breaking statistic in the history of the company as this was a 36% increase from 2019.

From 2019 to 2022, here is a breakdown of Total Attendances:

F1`s popularity is at an all-time high, recording high TV ratings and expanded broadcasting slates. Formula One saw a notable $437 million gain ($2.5736 billion from 2022 and $2.136 billion from 2021). This was attributed to the growing number of F1 admirers around the globe. The company is looking forward to converting their viewers into active long term fans. Even after all the teams` expenses had been catered for by the firm, a further surplus of $239 million was obtained, which was $167 million greater than that of the previous year. The best ten teams in the competition were awarded a grand total of $1.576 Billion, which was statistically a 502 million gain from the previous season.

Based on the graph below, we can see the detailed differences in revenue from 2021 to 2022:

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Formula One’s revenue on each season consist of race promotion fees (28.6%), media rights (36.4%) as well as sponsorship (16.9%). This was a rise of 14% from $1.850 billion to $2.107 billion.  In an Interview, Liberty Media, F1`s parent company, alluded that the significant revenue increases are based on the huge fees generated from the series of races held, with a total of three races held outside the continent. Liberty Media also asserted that the media right's revenue growth is attributed to the increase in television subscribers of the sport, increased fees and renewal of contractual agreements. This has seen the racing promotion’s revenue increase by 20% from $2.1 billion to $2.5 billion. Liberty CEO Greg Maffei asserted that they are prioritizing innovation, thereby improving driver’s experience on the field, leading to more competitive races. He argues that in turn, this will allow fans to be more interested in the sport.

Here is a comparison of F1's revenue:

In 2021, when Covid-19 was at its peak, F1 only managed 11 events whereas in 2022 when the pandemic had subsided, the company managed to hold 19 races. The freight revenue generated from races held outside the continent, which would also include the freight costs on the underlying inflation also contributed towards the revenue growth and increased the Paddock Club costs which constituted of hospitality charges, and conditioning eight additional Paddock Club events compared to those of 2021. The $172 million cost increase in turn would lead to the increase in revenue.  This included a sum of money that has been attributed towards the inaugural Las Vegas Grand prix event, which F1 is promoting. Maffei is certain that a lot of profit will be made in the Las Vegas Grand Prix, and the GP will potentially steal the show.

You can see the increase in Grand Prix races between 2021 and 2022 below:

Administrative expenses also increased, and this increase was as a result of higher personnel and IT costs, legal fees as well as advisory fees. In order to plan, and launch the new Las Vegas grand prix, this costed the firm a total of $19 million.  Formula One President, Stefano Domenicali, applauded the impact of social media as a tool that has lured many fans to Formula One racing sport. As a result of social media networks, amid the pandemic, the sport gained a massive fan-base which would lead to the Formula One racing sport the fastest growing sport in the world. 

President Domenicali stated that Formula One is working on growing further, improving the services offered to the fans, these including F1 TV channel, provision of relevant and high-quality content as well as broadcast of the channels. Amid the remarkable growth within the firm, this has seen American giant Ford announcing its comeback to the grid, with President Stefano confident that they will contribute massively towards the growth of the firm.

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