The cancellation of the Emilia Romagna Grand Prix meant that the sport has recorded a minus sign in the revenue and earnings columns in the second quarter of 2023 according to the financial statements published by Liberty Media.
After the sport completed the first 12 races of the 2023 F1 season, Formula One’s Commercial Rights Holder Liberty Media have revealed their financial report on the second quarter of the 2023 season.
This period saw F1 achieve encouraging commercial results on various fronts. The second quarter of the 2023 season saw Formula One announce a 24-race calendar for 2024 with increased geographic efficiency in support of F1’s sustainability objectives.
Moreover, this three-month period saw F1 extend the contracts of the Austrian and the Hungarian Grands Prix. The Red Bull Ring will stage F1 races until at least 2030 while the Hungaroring will host the pinnacle of motorsport until at least 2032.
The sport has also announced the contract extension of Heineken with the Dutch brewing company set to continue to serve as Formula One’s Global Partner in the coming years.
Formula One races continue to be run as sellout events with tickets being sold over the stretch of a few days. Commenting on Formula One’s popularity, Greg Maffei, Liberty Media President and CEO said: “At Formula 1, the quality of the fan experience at Grand Prix weekends continues to improve and is helping drive sellout crowds at many races.”The result of the cancellation of the Emilia Romagna Grand Prix
The original calendar for the 2023 F1 season comprised of 23 races, but the cancellation of the Emilia Romagna Grand Prix has meant that the championship is being contested over 22 events. The cancellation of the Imola race that was called off due to local flooding had a negative impact on Formula 1’s financial numbers for the second quarter of 2023.
There were six races held in the second quarter of 2023, compared to seven races held in the second quarter of 2022.
Primary F1 revenue represents the majority of F1’s revenue and is derived from race promotion revenue, media rights fees and sponsorship fees. Due to the cancellation of the Imola F1 round, F1’s revenue for the second quarter of 2023 dropped from $744m in 2022 to $724m.
A statement from Liberty Media read: “Primary F1 revenue decreased in the second quarter with growth across race promotion and sponsorship offset by a decline in media rights revenue. Despite one less race held in the current period, race promotion revenue grew due to contractual increases in fees and sponsorship revenue increased due to recognition of revenue from new sponsors and growth in revenue from existing sponsors.
“Media rights revenue decreased due to the impact of lower proportionate recognition of season-based income (6/22 races took place took place in the second quarter of 2023 compared to 7/22 in the second quarter of 2022), partially offset by continued growth in F1 TV subscription revenue and increased fees under new and renewed contractual agreements.
"Other F1 revenue decreased in the second quarter primarily due to lower freight income driven by the easing of freight cost inflation on billing rates and lower hospitality revenue due to one less race held in the current period, partially offset by increased licensing income and higher revenue related to Formula 2 / Formula 3 car chassis sales.
The cancellation of the Imola race had a negative impact on the teams as well as they have received lower payments compared to the prior year due to the pro rata recognition of payments across the race season with one less race held. However, it is expected that teams will receive an increased payment for the full year.
The statement continued: "Other cost of F1 revenue is largely variable in nature and is mostly derived from servicing both Primary and Other F1 revenue opportunities. These costs increased as significantly lower freight costs were offset by increased hospitality costs associated with servicing higher Paddock Club attendance and cost inflation and higher commissions and partner servicing costs associated with growth in Primary F1 revenue streams.
"Other cost of F1 revenue in the current period also includes hospitality, travel and other costs related to the Imola event that had largely been incurred prior to the event’s late cancellation. Selling, general and administrative expense decreased in the second quarter due to lower personnel and legal costs and foreign exchange favorability, partially offset by higher marketing, property and IT costs.
The current season is set to include one new event with the Las Vegas Grand Prix making its return to the calendar. Formula One previously raced in Las Vegas in the early 1980s on a temporary track next to the Caesars Palace hotel, but the famous venue will host its third F1 race on an all-new circuit which will include the famous Strip.
The construction of the circuit, buildings and the promotion of the event have already generated huge costs. Liberty purchased a site on which to build a permanent pit and paddock infrastructure, and roads associated with the track needed to be resurfaced to enable F1 cars to run in the heart of the city.
“There were $7 million of costs associated with the planning of the Las Vegas Grand Prix included in selling, general and administrative expense in the second quarter of 2023.”