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SBD Global/December 24, 2013/Finance

Formula One Facing Cost Crisis As Smaller Teams Are Struggling To Survive

F1 CEO has defended the perception that smaller teams are struggling to stay afloat.

F1 had turnover of $1.35B in '12 and generated an operating profit of $426M "once payments to its 11 teams had been deducted," according to Baldwin & Weir of REUTERS. 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." When asked whether the sport faced a cost crisis, AirAsia airline entrepreneur and Caterham Owner Tony Fernandes said, "I don't THINK there is one. There IS one. You hear about people not having been paid, suppliers taking a long time to be paid. These are certainly not happy days." The teams shared around $750M of the income last year, "but are questioning a structure that takes so much money out of a sport with a high cost base for teams flying around the world to 19 annual races." The division between the rich and the also-rans is evident on the track, where Red Bull's Sebastian Vettel ended the season winning the last nine races and his fourth title in a row, with "such predictability testing the patience of many fans." Marussia CEO Graeme Lowdon said, "There is a large disparity in the distribution of money and the controls on cost don't appear to be as effective as they could be. It's not good for the sport and it's not good for the fans. Without them there is no commercial model." F1 CEO Bernie Ecclestone said, "Ever since I have been in Formula One, there have been the haves and have nots. Whatever sport there is, people will spend what they think they have to spend in order to win" (REUTERS, 12/23).

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