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SBD Global/July 31, 2013/FinancePrint All
Christian Sylt is the co-author of "Formula Money," an annual report examining all aspects of F1's finances, with "detailed data on teams, drivers, sponsors and races," according to Knight & Torre of CNN. Here, he "answers key questions about F1's financial model."
Q: How well is F1 doing financially?
Christian Sylt: F1 is incredible really. I've never seen a company like F1 in terms of revenue-generating potential. Over the past five years we've had one/two recessions and its revenues and profits have gone up. The revenues last year were $1.6 billion, 2011 was definitely $1.5 billion.
Q: What's the secret of its economic success?
Sylt: The key driver of the growth is the fees that come from the circuits ($500 million). Most of these contracts include clauses that increase the rate by up to 10% annually. It's a clever strategy because if you look at the secrets to F1's success you can identify several key points. The move to Asia is one.
Q: Do different races pay different fees?
Sylt: Bigtime. For example, Monza (Italian Grand Prix) you are talking single digits whereas Singapore you are talking in the region of $60 million. Malaysia pays $66.9 million a year. The average fee for hosting is now $27 million and that's driven by these new Asian races.
Q: How much of F1 profits go to the teams?
Sylt: Essentially, 47.5% of the profits are split between all of the teams. That is what is known as the prize fund. In 2011, profits came to $1.1, 1.2 billion so 47.5% of that amounts to around $400-500 million and that is shared between the top ten. It's not shared evenly, it's based on performance. In addition to that, certain teams get additional money, with Ferrari being the key beneficiary with, as far as I know, 5% of profits all to itself.
Q: How is sponsorship evolving?
Sylt: What's increasingly happening is that sponsorship deals are being done with F1 owners. You have Rolex and Emirates in the last three/four months alone doing gigantic deals to sponsor F1. What you get as a F1 sponsor is numerous things. You get packages of trackside advertising around the circuit. Those are probably some of the best value sponsorships in the whole of sport. What sponsoring F1 offers over sponsoring a team is guaranteed exposure (CNN, 7/30).
Source: Formula Money
The "hard negotiating" has begun to determine whether Scottish Premier League Heart of Midlothian "can continue to exist in its current form," according to Barry Anderson of the SCOTSMAN. All three offers for the Edinburgh club "have been rejected," and one bidder, HMFC Ltd., "is out of the running." Foundation of Hearts Dir Angelo Massone "must now increase their offers or potentially see Hearts liquidated." That "is the warning from Valnetas UAB, administrators for Ukio Bankas, after they knocked back the tabled bids." Valnetas has instructed Hearts’ administrators BDO "to re-negotiate with the Foundation and Massone’s company," Five Stars Football Ltd., as the bargaining to see whether Hearts can emerge from administration "enters a crucial phase." The initial rebuffs "are not entirely unexpected given rejecting a first offer is common practice during negotiations." Valnetas officials "have privately indicated" that a sum of £5M ($7.6M) could be enough for a CVA -- "the only means by which Hearts can exit administration." That would "also need approval from those in charge of the insolvency process at the club’s parent company, Ukio Bankas Investment Group (UBIG)." Massone’s offer remains around the £4M ($6M) mark. The Foundation’s bid "was significantly increased from the initial" £2M ($3M), plus £3.75M ($5.7M) working capital, it put to BDO. However, its cash offer to gain control "remains less than Massone’s" (SCOTSMAN, 7/30).
BUSINESS AS USUAL: In Edinburgh, Stuart Bathgate reported BDO has "insisted that preserving the Tynecastle club as a going concern is in the best interests of both creditors and bidders." BDO administrator Bryan Jackson said, "We are continuing to work with the administrator of Ukio Bankas and the bidders to enable the club to exit administration as a going concern. However, it should not be forgotten that it is the duty of the administrator of Ukio Bankas to achieve the best financial result for the bank’s creditors, and he will act to ensure that this happens." While the mention of liquidation "inevitably caused considerable worry for many Hearts fans," the Foundation adopted a "business as usual" attitude. They pointed out that the possibility of liquidation "had existed since the club went into liquidation last month, and recognised that Valnetas were duty bound to do what they could to maximise the return for Ukio" (SCOTSMAN, 7/30).
The Spanish Football League (LFP) has confirmed that Guadalajara has been relegated from the second division to the third division -- second division B -- for "irregularities in the club's process of becoming an Anonymous Sports Society (SAD)," according to Sergi Font of MARCA. At the LFP General Assembly, it was also decided that "Real Murcia will replace Guadalajara in the second division." LFP President Javier Tebas also addressed second division sides Alcorcón and Deportivo La Coruña. Alcorcón is currently being audited "to see whether the club violated regulations in the process of increasing its capital." Tebas: "You can't be optimistic when an audit has been requested. A possible irregularity has been detected and depending on the result of the audit, we will decide what decisions to make." Regarding Deportivo, Tebas said, "As of today, if they do not settle the debts with players, Deportivo will be relegated to the third division" (MARCA, 7/30).
HOPE FOR DEPORTIVO: The EFE reported Deportivo creditors have reached an agreement for a proposed settlement they have been working on this week. On Wednesday, the creditors will meet with Deportivo President Augusto César Lendoiro to present the proposal. The creditors "indicated that the proposed settlement will resolve part of the debt with players." The creditors said that "they will keep working Wednesday to offer guarantees for the remaining quantities," referencing the debt that accumulated from July '12 through last January, when the club filed for bankruptcy (EFE, 7/30).