Formula One revenues crashed by 96 per cent in Q2 2020 compared to the equivalent period of last year according to the latest set of second-quarter results published by Commercial Rights’ Holder Liberty Media.
Formula One revenues declined from $620m in Q2 2019 to just $24m in Q2 2020 due to the global coronavirus-induced lockdown period. The primary F1 revenue is comprised of three different sources – race promotion fee, broadcasting fee and advertising and sponsorship fee. Due to the coronavirus pandemic, no races were held in the months of April, May and June while sevens grands prix took place in the same period in 2019.
Due to the lockdown, revenue recognition was limited with no race promotion fees, nor broadcasting fees being recognized in the Q2 period. The revenue consisted only of the elements of sponsorship contracts associated with non-race related rights. Similarly, other F1 revenue decreased due to zero revenue being generated from the Paddock Club and other event-based and television production activities.
Compared to $335m in Q2 2019, there was no team payment expense recorded, since such payments are recognized on a pro-rata basis as races take place on the calendar.
Formula One implemented certain cost cutting measures in the second quarter including lower bonus accruals and salary reduction. Approximately 50 per cent of Formula One’s employees were put on furlough with the sport utilizing the UK government-supported furloughs. Moreover, senior personnel also took a pay cut.
"Selling, general and administrative expense decreased due to lower personnel costs and lower discretionary marketing expenditures, partially offset by the effects of foreign exchange related losses," said Liberty Media. Those expenses dropped from $34m in Q2 2019 to $24m in the same period in 2020.
Commenting on the results, Formula 1 Chairman and CEO Chase Carey said: “We were excited to return to the track in July and have now completed five races of what we expect will be a 15 to 18 race season, During the break we continued to move the business forward with a reduced cost cap for the 2021 season, and announced new broadcast and sponsorship deals.
„We reengaged with added purpose and determination, announcing our #WeRaceAsOne platform, underpinning our sustainability, diversity & inclusion and community strategies. #WeRaceAsOne was launched as an initiative to further our sustainability efforts, to stand united against racism, in fight against COVID-19 and to further address inequality and diversity in Formula 1. We are thankful to the FIA, teams, promoters, our employees and other key partners that made this return to racing possible,” Carey concluded.