ENGLEWOOD, Colo.: Liberty Media Corporation has reported fourth quarter and year end 2018 results for its portfolio of assets that includes Formula 1, which it purchased outright in January 2017.
Overall revenue rose by $44 million from $1,783 million in 2017 to $1,827 million, although only a negligible amount of just $4 million was derived from what it describes as its “primary F1 revenue” – race promotion fees, broadcasting fees, and advertising and sponsorship fees.
The bulk of the increase – $39 million – came from what is described as “other Formula 1 revenue”, determined in a statement as being “primarily due to higher logistics revenue, higher digital media and TV production-related revenue, increased revenue from various fan engagement activities and higher spare part sales for the F2 and GP3 support series”.
However, there was an 84% increase in losses on its operating income, from $37 million in 2017 to $68 million last year. Across the same period team payments fell 1% by $6 million, from $919 million to $913 million.
Assessing the overall picture, F1 chairman and CEO Chase Carey said: “We have made significant investments in the business over the last two years which are showing results through increased fan engagement across race attendance and all media platforms. This provides tremendous momentum as we enter 2019.”
Liberty has declared its primary F1 revenue as “essentially flat”, with a modest increase in race promotion revenue offset by a decrease in advertising and sponsorship revenue.
“We have made significant investments in the business over the last two years which are showing results through increased fan engagement across race attendance and all media platforms. This provides tremendous momentum as we enter 2019,” said Chase Carey, Formula 1 chairman and CEO. “During the off-season to date, we extended the race contract in Azerbaijan, renewed a broadcast agreement with Sky Deutschland, and signed up additional sponsors, among other things. Our F1 TV platform has added exclusive content to the platform, with live pre-season testing followed by a daily review show, and a new F1 produced documentary on Michael Schumacher. Further regarding content, we are excited for the launch of the F1 Netflix series ‘Formula 1: Drive to Survive’ on March 8th.”
European races
It claims that “race promotion revenue in 2018 was impacted by the calendar variance, with the non-occurrence of the Malaysian Grand Prix in 2018 not fully offset by the return of two European races in France and Germany”.
Positively, Liberty noted that 2018 audience figures increased across TV and digital platforms for the second year in a row, with TV viewers across all F1 programming up 10 per cent to 490 million.
The aggregate attendance at races grew 8 per cent to 4.1 million in 2018, with the average attendance per race weekend increasing by 2.7 per cent to approximately 195,000.
F1 further claims itself to be the “fastest growing major sports brand on social media for the second straight year, with social media followers up 54 per cent to 18.5 million”.
Formula One Group highlights
2018 season audience figures increased across TV and digital platforms for second year in a row
TV viewers across all F1 programming up 10% to 490 million
Fastest growing major sports brand on social media for second straight year, with social media followers up 54% to 18.5 million
Aggregate attendance at races grew 8% to 4.1 million in 2018
Average attendance per race weekend increased 2.7% to approximately 195,000
2019 F1 season begins March 17th in Melbourne; 21 Grand Prix events in 2019 season
Primary F1 revenue represents the majority of F1’s revenue and is derived from (i) race promotion fees, (ii) broadcasting fees and (iii) advertising and sponsorship fees. For the year ended December 31, 2018, these revenue streams comprised 33.8%, 33.1% and 14.6%, respectively, of total F1 revenue. F1 held 5 races in the fourth quarter of 2018 compared to 6 races in the fourth quarter of 2017, and 21 races in the 2018 season compared to 20 in the 2017 season.
Primary F1 revenue decreased in the fourth quarter primarily due to one less event being held in the fourth quarter of 2018 compared to 2017. Broadcast revenue decreased due to the calendar change, as approximately 5/21 of the full year fees were recognized in the fourth quarter of 2018 compared to 6/20 in the prior year. Advertising and sponsorship revenue in the fourth quarter benefited modestly from the adoption of the new revenue recognition accounting standard (ASC 606) on recognizing fees from F1’s Global Partner and Official Supplier contracts. These fee elements were previously recognized pro-rata with the race calendar, but certain elements are now being recognized evenly over the calendar year and others over a smaller number of specific events. While this led to quarter by quarter variation against prior year recognition, the change was neutral on a full calendar year basis.
For the full year 2018, Primary F1 revenue was essentially flat. Race promotion revenue increased modestly primarily due to contractual increases in race promotion fees, as well as a contract amendment for one event that provided for an increase in promotion revenue which was fully offset by a reduction in advertising revenue related to that event. This contract amendment was neutral for total Primary F1 revenue. In addition, race promotion revenue in 2018 was impacted by the calendar variance, with the non-occurrence of the Malaysian Grand Prix in 2018 not fully offset by the return of two European races in France and Germany.
Broadcast revenue was essentially flat for the full year 2018 as contractual rate increases and favorable foreign currency movements were offset by the early termination of one contract with a failing broadcast rights broker.
Advertising and sponsorship revenue decreased for the full year 2018.
Other F1 revenue increased in the fourth quarter and full year 2018, primarily due to higher logistics revenue, higher digital media and TV production related revenue, increased revenue from various fan engagement activities and higher spare part sales for the F2 and GP3 support series. From 2019 onward, under a long term agreement with the FIA, F1 will operate a new official F3 support series in place of GP3.
Operating loss increased in the fourth quarter and full year 2018. Adjusted OIBDA decreased in the fourth quarter primarily due to calendar variances and decreased for the full year 2018 primarily due to increased costs as the business continued to invest. Cost of F1 revenue increased primarily due to logistics and travel expense, higher costs associated with providing the chassis and component parts to F2 and GP3 teams, digital media development and spend on fan engagement, which more than offset reduced team payments. Selling, general and administrative expense increased primarily as a result of increased marketing and research costs and increased bad debt expense due to payments issues with two commercial partners.
