Formula One forced to cut spending as costs pinch

Mon Dec 23, 2013 2:43am EST
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By Alan Baldwin and Keith Weir

LONDON (Reuters) - Glamorous, high-tech and hugely profitable: With the lure of races from Monaco to Singapore, Formula One just keeps on giving so far as the money men controlling the motor sport are concerned.

The business, in which private equity firm CVC is the largest shareholder, had turnover of $1.35 billion in 2012 and generated an operating profit of $426 million once payments to its 11 teams had been deducted.

That might suggest unconstrained happiness up and down the paddock but appearances are deceptive. Behind the luxury brands, the celebrity guests and the lavish hospitality suites, many of the smaller teams are battling to survive.

"I don't THINK there is one. There IS one," AirAsia airline entrepreneur and Caterham team owner Tony Fernandes told Reuters last week when asked whether the sport faced a cost crisis.

"You hear about people not having been paid, suppliers taking a long time to be paid. These are certainly not happy days," added the Malaysian, whose team finished last in 2013 and has yet to score a point in four years of trying.


Four teams - champions Red Bull, runners-up Mercedes, Fiat-owned Ferrari, and McLaren - have budgets of $200 million or more and benefit most from the division of revenues overseen by Formula One chief executive Bernie Ecclestone, long the dominant figure in the sport.

Ecclestone, who is facing a series of legal battles linked to the deal that brought CVC on board eight years ago, has built a unique business model that controls broadcasting rights, race hosting fees, sponsorship and licensing.   Continued...

Mercedes Formula One driver Nico Rosberg of Germany (R, front) leads the pack as they head for the first turn at the start of the Brazilian F1 Grand Prix at the Interlagos circuit in Sao Paulo November 24, 2013. REUTERS/Nacho Doce