These are extraordinary times, and Formula 1 is being impacted in many ways by the spread of the coronavirus COVID-19. The latest is the announcement that the sporting regulation changes planned for 2021 are being pushed back to 2022.
The biggest headache for the sport and its teams—aside from how the virus could affect personnel and their families—is the financial implications of not running races. Formula 1 revenues come from three basis sources: TV rights (about 38%), race fees (30%) and sponsorships (15%). Without races, all three sources of revenue suffer, the F1 group’s revenues drop and all the teams lose significant chunks of prize money.
On the other hand, both the series and teams are saving money and expenses by not going to races. But salaries, which are the biggest cost component for all concerned, still need to be paid.
There are fears among the smaller teams—think Williams—that the reduction in revenue from prize money, and from sponsors who are not going to be getting what they were promised, is going to lead to financial hardships.
The best way to save money is to stop spending it, and so pushing back the 2021 regulations is a sensible thing to do. The longer the COVID-19 crisis goes on, the more pressure there will be on teams to lay off staff, particularly those who have nothing to do. Race teams, marketing and production staff will be idled for months, and some teams will be unable to balance the books as a result.
However, it takes years to build a good F1 team, so letting people go is not a good idea, unless there is no other choice. Spending money on rule changes for next year makes no sense in the the current climate. The current cars are not going to be raced for at least half the season—probably longer than that. The geography of the coronavirus is important in this respect because although some countries, such as China, may now be emerging from the outbreak, it will still be many months before international travel restrictions are eased, and there are then logistical problems to be overcome.
The races that are being postponed at the moment will probably never happen because there is no space in the calendar. Others later in the year may have to cancel because of the virus. F1 regulations say a minimum of eight races need to be run for a season to be considered a true championship season in which the series crowns a champion. The series has already canceled or postponed seven of its 21 scheduled races.
While no one involved in F1 is going to say it out loud at the moment, it must be seen as a strong possibility there won’t be a World Championship this season. Thus, it is sensible for the new cars that have yet to be raced to be retained in 2021, rather than being set aside with expensive new cars being developed.
“Due to the currently volatile financial situation, it has been agreed that teams will use their 2020 chassis for 2021, with the potential freezing of further components to be discussed in due course,” the FIA said in its statement. “The introduction and implementation of the Financial Regulations will go ahead as planned in 2021, and discussions remain ongoing between the FIA, Formula 1 and all teams regarding further ways to make significant cost savings.”
The teams are not the only ones suffering financially. The Formula One Group share price is down from $46 a month ago to as low as $20 in recent days.
Some of the race promoters are also staring disaster in the face. The Circuit of the Americas is loaded with debt, and without races there is no means to meet the debt repayments.
For now, it is difficult to speculate about where this will all end. One thing is certain: Formula 1 is not a priority in the world today.
There are bigger problems.
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