Formula 1’s financial performance continued to improve year-on-year in the third quarter of 2022 as the impact of COVID-19 fades. However, the change wasn’t as dramatic as in previous quarters.
Revenues in the second half of 2021 were less affected by the pandemic after attendance at last year’s races returned to normal levels and the lucrative Paddock Club regained momentum.
Total Formula 1 revenue increased seven percent in the third quarter from July to September 2021 to $715 million in 2022 from $668 million, although operating income increased only from $80 million to $82 million due to increased costs. The ten Formula 1 teams shared payments totaling $370 million, up from $338 million in 2021.
The July-September 2021 and 2022 periods provide a fairly accurate comparison as both included seven races. Six events were the same in both seasons, with the biggest difference being that the inaugural year hosted the more lucrative Russian Grand Prix, while France 2022 fell within the same period.
How Formula 1 was able to compensate for the loss of Russia
Due to this change, revenue from race promotions declined slightly, but this was offset by an increase in broadcasting and sponsorship revenue.
Explaining the figures, Formula 1 notes: “Formula 1 results in 2022 will not be impacted by capacity constraints and for the first nine months of the 2022 season, Formula 1 has seen strong growth in attendance in the stands and Paddock Club listed.”
“Primary Formula 1 revenue increased in the third quarter on gains in media rights and sponsorships, partially offset by a decline in race promotion revenue.”
“Race promotion revenue fell due to lower fees generated by the different composition of events, with an additional race held outside of Europe in the same period last year.”
“Media rights revenue increased due to growth in subscriptions to F1TV and higher fees under new and renewed contractual arrangements, and sponsorship revenue increased due to the capture of revenue from new sponsors.”
“Other Formula 1 revenue increased in the third quarter, primarily due to higher hospitality revenue from the Paddock Club, which operated at an additional race in the third quarter of 2022 compared to the same period last year and recorded a record year-to-date attendance.”
Liberty Media with higher costs for frame series
Explaining the overall increase in costs compared to 2021, Formula 1 says: “Costs increased in the third quarter due to the cost of higher hospitality attendance at Paddock Club and an additional event at Paddock Club compared to the same period last year.”
“In addition, other costs of Formula 1 revenue increased due to higher commissions and partner servicing costs related to the primary Formula 1 revenue streams and higher costs related to Formula 2 and Formula 3. , general and administrative expenses increased in the third quarter due to higher personnel and IT costs, as well as higher legal and other consulting fees.”
F1 CEO Domenicali: Early title decision won’t impact business
Formula 1 CEO Stefano Domenicali pointed out several times during the season that the lack of a title fight had no impact on Formula 1 business and that the last two races in Brazil and Abu Dhabi will not be affected.
In stark contrast to last year’s thriller, which featured a championship decision on the very last lap of the season in Abu Dhabi, Max Verstappen clinched the world championship with four laps to go at Suzuka 2022, while his Red Bull team took the constructors’ championship at the following race in the USA won.
According to Domenicali, interest in the remaining races of 2022 remains high, stressing that there will be no negative impact on the Formula 1 business and also confident that the title fight will be more competitive next year and possibly back up will reach the last race.
Domenicali: New rules will pay off
“We don’t see any risk at all,” he said in a phone call with Wall Street analysts when asked whether the lack of a title fight was bad for Formula 1’s finances. “And most importantly we have the last race with sold out tickets and the numbers are really good. Attention is obviously shifted to other fights to keep the sporting perspective. So that’s part of racing.”
“And I would like to add that we are absolutely positive about the impact that the change in regulations has had this year. And we cannot comment on the fact that a team, in this case Red Bull, or Max Verstappen, have a did an incredible job. Maybe some other teams didn’t take the right chances.”
“But what we saw on the track was wheel-to-wheel battles. That’s what we wanted. And I’m absolutely confident that the fight on the track will get to the end of the calendar next year. And as you will see, the last few races will attract a lot of attention on the sporting side.”
“There is a fight for places, also from the teams’ point of view, it has to do with their financial position and the financial reward in case of placing. So I think there will be a lot of interest in Brazil and Abu Dhabi as well, without problems.”
Domenicali: Recession will not affect 2023 season
Domenicali also dismissed suggestions that the economic woes in Europe could impact ticket sales and therefore Formula 1 revenue in 2023. “First of all, as a World Cup, we can spread the risk of such a situation across the world,” he says.
“On the other hand, the fact that we have long-term contracts will reduce risk. I can tell you that we’ve already had an incredible number of pre-bookers for next year’s ticket sales, so that’s a good sign that we’re seeing, especially in See Europe, where I live and where the recession is very clear.”
“But I think that the way we are structured, the way we have done the business will allow us to move forward in that direction. So I would say that the current situation gives us confidence Of course we’re watching the development, but that’s how it looks today,” says the Formula 1 CEO.