In the dynamic world of Formula 1, financial performance and stability are as crucial as on-track prowess. For years, RaceFans has meticulously chronicled the intricate financial landscape of F1 teams through our annual “Cost of F1” reviews, delving into financial records, engaging in candid discussions, and conducting thorough analytical breakdowns. These comprehensive assessments, such as our insightful analysis of the top teams’ expenditures in 2019, provided a clear snapshot of the sport’s economic health. However, the dawn of 2020 brought an unprecedented global crisis: the COVID-19 pandemic. This monumental event plunged the entire F1 ecosystem into a maelstrom of uncertainty, drastically altering the planned 22-round calendar to a mere 17 races and forcing promoters to navigate unforeseen challenges, often requiring direct financial support to host events. The financial models that once provided clarity were suddenly rendered obsolete, necessitating a new approach to understanding the sport’s economic resilience.
The initial shockwaves of the pandemic sent ripples across Formula 1, creating a deeply unstable environment. We extensively covered the fundamental reasons behind this turmoil, detailing the precarious positions many teams found themselves in. While the early phase saw a number of promoters requiring payment to stage their events, a pragmatic shift occurred as the season progressed, leading to a reduction in such instances. This period was not merely a crisis but a rigorous, steep learning curve for the entire F1 fraternity, from the sport’s governing body to every team and circuit. Valuable lessons emerged, particularly concerning operational flexibility, health protocols, and financial adaptability, many of which are now integral to F1’s future strategy. The immediate consequence, however, was the impracticality of conducting an accurate financial analysis for 2020 in real-time. The sheer volatility, marked by ongoing contract renegotiations with team and F1 sponsors, and a continually shifting race calendar, profoundly impacted F1’s primary revenue streams. A true, consolidated financial picture for 2020 could only materialize once all participants published their comprehensive financial statements, offering a retrospective clarity that was impossible during the chaotic year itself.
Despite the immense hurdles, Formula 1’s achievement in maintaining its global spectacle was nothing short of remarkable. The sport’s ability to execute a nearly full season stands in stark contrast to other major international events, as evidenced by the public outcry surrounding the Australian Tennis Open, which faced significant COVID-19 outbreaks despite stringent charter flight policies and a considerably more contained operational footprint. While five of the 20 F1 drivers eventually contracted the virus – a statistic that understandably raised concerns at team level – the effectiveness of the sport’s robust testing and isolation regimes proved crucial in preventing widespread transmission within the paddock. This demonstrated F1’s capacity to adapt and innovate under extreme pressure, safeguarding its personnel and the continuity of the championship. The early days of the pandemic, however, were fraught with doubt, with numerous skeptics and prominent figures expressing severe pessimism about the season’s viability.
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Indeed, a chorus of doom-mongers and nay-sayers questioned Liberty Media’s capacity to stage any races at all. Esteemed former F1 figures, including ex-F1 tsar Bernie Ecclestone and former FIA president Max Mosley, went as far as to advocate for the complete cancellation of the 2020 season. Speaking in April of that year, Mosley articulated their concerns, stating: “[By cancelling the season] the teams and the race organisers would have certainty so they can plan and take measures. At the moment they are in limbo and many are losing money.” He further cautioned against procrastination, adding: “By waiting, you risk making things worse without having the certainty of winning anything. There’s no guarantee that the races can start again in July and it actually seems increasingly unlikely.” This sentiment reflected the prevalent anxiety and the understandable desire for clarity in an uncertain world. Yet, against all these calls for caution and cancellation, Liberty Media pursued a diametrically opposite and ultimately triumphant strategy.
The decision to push forward, meticulously planning a delayed start and an intensely condensed schedule, proved to be the correct course of action for Formula 1. By restarting the season on July 5th in Austria and remarkably squeezing 17 races into a mere 23 weeks, F1 achieved something truly significant. This resolute approach not only salvaged the season but, arguably, saved at least one, and potentially two, teams from financial collapse. The implications of a cancelled season would have been catastrophic, leading to widespread job losses, team closures, and an irreparable blow to the sport’s commercial viability. The sheer willpower to race against the backdrop of a global pandemic provided a lifeline that many in the paddock desperately needed, demonstrating F1’s commitment to its stakeholders and its enduring appeal.
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Consider the stark possibilities: Would Williams, a team steeped in F1 history, have been able to secure its sale for $150 million (including significantly reduced debt) in August had the 2020 season been completely abandoned? Similarly, would Ineos, the multinational chemical company, have so readily acquired a one-third stake in the formidable Mercedes team if F1 had not raced? The same question applies to McLaren’s crucial equity sale to MSP Sports Capital, a leading sports investment group headed by entrepreneur Jeff Moorad. These vital transactions, injecting much-needed capital and stability into key teams, were undoubtedly contingent on the sport’s active presence and continued global visibility, validating Liberty Media’s decision to press on.
The precarious situation extended beyond these high-profile sales. While initially denied by the team, a reliable paddock source confirmed that Haas was actively on the market for a “fire sale” until late June 2020, only to be abruptly withdrawn just as the racing calendar resumed. This anecdote underscores the immediate and positive impact of F1’s return to competition. When asked at the conclusion of the season to encapsulate Haas’s primary objective for 2020, Team Principal Guenther Steiner’s response was succinct and telling: “To survive. That’s what we’ve done right.” He further emphasized the gravity of their situation, remarking: “I think there was a big chance that we [would not be] here anymore, and I think everybody pulled together, and we are here to stay.” This candid admission highlights the collective effort and the profound sense of urgency that permeated the sport during this period. The ability of all ten Formula 1 teams to navigate the perilous waters of 2020 and emerge intact for the 2021 season is a testament to a complete shift in mindset across the board. This transformational change encompassed everyone, from the tail-enders on the grid to the championship contenders, from individual team sponsors to F1 management and the FIA itself. The commercial challenges of 2020 were never more starkly illustrated than during the opening round at the Red Bull Ring. In 2019, the stands would have been brimming with fervent fans, and traffic would have stretched for miles. Twelve months later, an eerie silence and emptiness reigned, a potent visual reminder of the pandemic’s pervasive impact.
The decision to hold races behind closed doors – a concept first suggested here – was a necessary evil. While it allowed F1 to honor crucial television broadcast and trackside advertising commitments, it simultaneously created a significant void: little to no on-site sponsor activation for fans or corporate hospitality guests was possible. Both direct fan engagement and hospitality are invaluable components for sponsors seeking more than mere logo placement or livery branding. The teams, whose financial health heavily relies on these activation opportunities, bore the major brunt of this consequence, facing a significant challenge in delivering value to their commercial partners. The absence of physical interaction with the sport’s passionate fanbase and the high-profile corporate environment of the paddock forced a rapid re-evaluation of sponsorship strategies, pushing teams to innovate in unprecedented ways. Logically, team sponsorship revenues were expected to plummet, likely by at least a quarter, due to the severely truncated calendar and the vastly reduced or entirely absent fan attendance. Ultimately, only a select few venues—Sochi, Nürburgring, and Portimao—were able to admit spectators, and even then, with strict limitations on crowd sizes and restricted movement within the circuit. This meant that traditional, direct sponsor activation, which relies on physical presence and interaction, became effectively impossible, forcing teams to explore alternative, remote engagement activities.
To retain sponsor loyalty and goodwill during these challenging times, teams adopted a variety of ingenious solutions. These ranged from offering incremental sticker space (where feasible) to allow for larger logos or, in the case of multi-brand sponsors, providing exposure for products not originally included in their initial agreements. Another common tactic was to offer significant discounts or enhanced space and activation rights on future contract renewals. This could be likened to a form of ‘sponsor overdraft’ – a short-term financial arrangement that, while easing immediate pressure, creates a future obligation, effectively kicking the financial can down the road. This ‘overdraft’ scenario represents a quiet but significant challenge, a looming concern for teams as they head into subsequent seasons. Interestingly, in some instances, the dynamic reversed: brands severely impacted by COVID-19, yet committed to their partnerships, had their fees ‘rolled-over’ into future years, often contingent on extending their existing deals. A comparative analysis of launch liveries versus end-of-season liveries across the grid reveals remarkably few changes, with Williams and Rokit being a glaring exception. This consistency suggests that team marketing departments worked tirelessly and effectively to manage expectations and deliver value amidst the unprecedented disruption, earning their collective keeps.
For sponsors for whom direct activation and experiential marketing are paramount, teams ingeniously pivoted to create ‘virtual’ grand prix weekends. Leveraging advanced video conferencing and digital platforms, they facilitated remote driver and management interviews, virtual garage tours, and even simulated paddock visits. While these digital activities, by their very nature, couldn’t replicate the visceral thrill of a trackside selfie or the immersive experience of being physically present at a race, they successfully fostered significant levels of goodwill. This cultivated goodwill will undoubtedly be a valuable asset for teams as they navigate the repayment and renegotiation of their sponsor ‘overdrafts’ in the coming years, showcasing their dedication and flexibility. Despite these creative efforts, the logical conclusion remains that team sponsor revenues saw an approximate 25% decrease, primarily attributed to the five fewer races on the calendar. However, this shortfall was somewhat mitigated by higher per-race television ratings, as millions of fans, confined to their homes during lockdowns, tuned in to watch the racing. The precise extent of these decreases varied significantly among teams, depending on their unique business models and diversified sponsor portfolios. Nevertheless, internal surveys conducted within F1 suggested average sponsor income reductions ranging from 20-30%, aligning closely with initial logical projections, underscoring the widespread financial impact of the pandemic on F1’s commercial backbone.
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Crucially, sponsor income constitutes only one part of a team’s overall budget. As detailed during an exclusive interview with F1’s global director of race promotion, Chloe Targett-Adams, all race contracts underwent extensive renegotiation. A number of race promoters found themselves in a position where they demanded fees to stage events, highlighting the desperate need for races and the shift in bargaining power. Others had their contracts rolled over into future seasons, effectively creating more ‘overdrafts’ that will impact F1’s future revenues. This complex web of renegotiations underscores the profound disruption to the traditional financial model of Formula 1. The teams, as key stakeholders, receive the largest portion of F1’s central revenues, which are derived from three primary streams: race hosting fees (as previously discussed), global television broadcast income, and revenue from hospitality and trackside advertising. The TV contracts were largely honored in full, as the stipulated minimum number of races (typically up to 16, depending on the specific contract) was successfully staged, ensuring this vital revenue stream remained relatively stable. However, the third category, encompassing hospitality and advertising, presented a more mixed picture. Only trackside advertising delivered tangible, albeit paltry, income, as the absence of crowds severely curtailed hospitality opportunities. Consequently, F1’s global income for 2020 was estimated to be down by a significant 40%, a stark reflection of the pandemic’s economic toll on the sport’s central finances.
Prior to the end of 2020, a distinct tiered system governed team earnings, with certain teams receiving fixed and variable bonuses in addition to their prize monies. These prize monies were primarily awarded based on their final classification position from the preceding year’s championship. Therefore, to clarify, the 2019 final standings dictated the distribution of the 2020 income ‘pot,’ which, as expected, was significantly diminished compared to pre-pandemic projections. Despite this reduction, team bosses universally praised Liberty Media’s adept handling of the crisis, acknowledging the commercial rights holder’s unwavering commitment. Liberty not only honored every existing obligation but also proactively offered crucial financial advances to cash-strapped teams, providing a vital lifeline to help them navigate the immediate liquidity challenges. It is understood that four teams – McLaren, Williams, Sauber, and Haas F1 – availed themselves of these emergency loans, with repayment slated from future revenues. McLaren, in particular, is reported to have already settled its loan, demonstrating a swift return to financial health, facilitated by strategic investments. The financial support provided by Liberty Media underscores their profound commitment to the long-term viability and health of Formula 1 and its constituent teams.
The severity of the pandemic’s impact on F1’s central finances is further highlighted by the fact that Formula 1 – publicly listed on NASDAQ as FWONK – failed to turn a profit during the first three quarters of 2020, with Q4 results pending at the end of February. The sheer scale of the support packages extended by the commercial rights holder clearly illustrates its profound commitment to both F1 as a sport and its teams. However, commitment alone does not pay the bills. The critical question remains: how significantly were the teams’ prize incomes reduced? Due to the complex and differing bonus tiers that were in effect until the end of 2020, the level of income disparity can be broadly categorized into three main groups. The first group comprises recent championship winners: Mercedes, Ferrari, and Red Bull. The second group includes McLaren and Williams, who receive bonuses based on their historical heritage and success. The remaining teams fall into the third group, without such historical bonuses. Off-record discussions with various informed insiders suggest that Group A teams experienced an approximate 30% reduction in F1 revenues, those in Group B faced around a 40% decline, while Group C outfits endured the steepest drop, roughly 50%. These figures serve as general guidelines, as specific payments are intricately linked to individual team bonuses and performance. Nevertheless, as the accompanying table vividly illustrates, the challenging times of 2020 led to a concerning widening of the financial gap: the rich, comparatively speaking, grew richer, while the less affluent teams became poorer, exacerbating existing inequalities within the sport’s revenue distribution model.
| Team (2019 classification) | Forecast 2020 ($m) | Covid 2020 ($m) | Variance % |
|---|---|---|---|
| Mercedes* | 190 | 145 | 25% |
| Ferrari* | 200 | 150 | 25% |
| Red Bull* | 160 | 110 | 32% |
| McLaren* | 120 | 75 | 38% |
| Renault | 70 | 35 | 50% |
| AlphaTauri | 66 | 33 | 50% |
| Racing Point | 63 | 31 | 50% |
| Sauber | 58 | 29 | 50% |
| Haas | 54 | 27 | 50% |
| Williams* | 50 | 30 | 40% |
*Recipients of bonus payments
For a meaningful comparison, acknowledging that individual championship positions and corresponding payments fluctuate year-on-year, here are the detailed 2019 prize money distributions, offering a pre-pandemic benchmark. The actual total spending by each team for 2020 will only become fully transparent once their respective financial accounts, which include crucial details such as marketing expenses and parent company contributions, are officially filed with their fiscal authorities. However, the overall financial outlook appears considerably rosier than initially feared. This improved picture is largely attributable to significant reductions in operational spending, driven by several factors: fewer races (predominantly held in Europe, reducing travel costs), mandatory factory shutdowns, stringent restrictions on traveling staff, strategic staff cutbacks, and government-supported furlough programs that absorbed a portion of personnel costs. Indeed, one team boss optimistically suggested his outfit might even turn a “marginal profit” for 2020, a remarkable achievement given the circumstances. Another, traditionally reliant on substantial parent company contributions to balance the books, predicted lower-than-expected shortfalls. The financial landscape, it is universally agreed, would have been undeniably dire, verging on catastrophic, had F1 succumbed to the calls for scrapping its entire season, illustrating the profound success of its defiant return to racing.
However, Liberty Media and the teams were not the sole entities to endure substantial financial setbacks during 2020. Race promoters, too, faced immense economic hits, regardless of whether they ultimately hosted a race or not. These organizations carry significant fixed overheads, including staff salaries, marketing costs, and, in the vast majority of cases, substantial infrastructural maintenance responsibilities for their circuits and facilities. As revealed earlier this year, the cancelled 2020 Australian Grand Prix, despite not staging its race, required a substantial state handout of AUS $40 million (£22 million). While this figure compares favorably to the AUS $60 million underwrite required in 2019, the stark reality was the complete absence of any global marketing benefits to report from the event, a key return on investment for government support. Reports indicate that no – or at least a substantially reduced – hosting fee was paid after the race was controversially called off on the opening day, directly impacting F1’s central 2020 revenue ‘pot.’ Furthermore, the Australian Grand Prix Corporation (AGPC) had established a separate consulting company to provide services to the planned Vietnam Grand Prix. This new event was also cancelled and now appears unlikely to ever see the light of day, generating further losses at both ends of this complex deal. In totality, the full extent of global promoter losses remains unclear, but they are widely anticipated to be substantial, with more than one promoter reportedly facing ruin. This precarious situation inevitably casts a long shadow over future F1 calendars and the sport’s crucial race income, highlighting a significant vulnerability in the F1 ecosystem.
As previously elaborated, the various ‘overdrafts’ – encompassing sponsor commitments, rolled-over promoter contracts, and team loans – will continue to weigh on Formula 1 for the next year or two, creating ongoing financial complexities. Moreover, the harsh economic realities imposed by COVID-19 mean that a number of existing sponsors and partners may regrettably be unable to continue their involvement in F1. The parent companies of F1 teams, particularly those within the broader automotive industry, may also need to reduce their financial underwriting. The European motor industry, already grappling with substantial debt and burdened by the immense costs of transitioning to electrification, reported a significant 25% reduction in 2020 unit sales, underscoring the wider economic pressures influencing motorsport. Does this paint a bleak picture of doom and gloom for Formula 1? Not unless one is a perpetual nay-sayer. On the contrary, the sport decisively took responsible and proactive steps to salvage the best possible 2020 season under extraordinary circumstances. It learned invaluable lessons, adapted with remarkable agility to unprecedented challenges, and emerged stronger. The teams are now leaner, more efficient, and more resilient than ever before. Liberty Media has significantly expanded its portfolio of potential circuits, as evidenced by the successful return of historic venues like Imola and Portimao to the calendar for the upcoming season. Crucially, F1’s long-awaited, reduced budget cap is now firmly in place, ushering in an era of greater financial parity and sustainability.
The mere fact that all ten Formula 1 teams survived the tumultuous 2020 season stands as a powerful testament to a healthy, robust, vibrant, and commercially sustainable sport. F1 is exceptionally well-poised to face 2021 with renewed vigor and optimism. If it could not only survive but thrive through the unprecedented trials of 2020, emerging stronger and more adaptable, it can undoubtedly withstand anything the wider world chooses to throw at it. The continuous improvements in COVID-19 management regimes and the global rollout of vaccines can only work in the sport’s favor, paving the way for a more stable and prosperous future. With these positive developments, we eagerly anticipate that a comprehensive 2021 “Cost of F1” feature can be published later this year, reporting numbers that are healthier and more encouraging than ever before, signaling a true return to financial strength for the pinnacle of motorsport.
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