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Alpha Tauri’s Franz Tost casts dire warning over smaller F1 teams’ survival

8 April 2020

As reported in the German language motorsport-total.com and Autoweek, Franz Tost, team principal of Red Bull junior team Alpha Tauri, has said that should Formula 1 not get underway until after July, some teams could be in real trouble in terms of surviving.

“If we start competing in July, we will come out with a black eye,” he said. “If we don’t start, it will be very critical. When we don’t contest a Grand Prix, it costs us $1.5 million to $2 million. If nothing happens throughout the year, it will be a very critical matter. If you have no income, it is obviously an economic disaster.”

His claim was reiterated by Haas F1 Team boss Guenther Steiner who said, “If we don’t have a World Championship, it will be difficult for many teams to survive.”

The finances under threat include not receiving constructor championship prize money upon which some of the smaller teams rely on. The knock-on effect will be the ability to field a team in 2021.

“We need to wait and see which races we have, what income we have and how it looks with the sponsors,” Tost said in the interview. “Do they stay, do they disappear? What does the whole economic situation look like?

“We have to face reality to find out where we are economically. Then we have to sit down and say, ‘This is the challenge we are facing and we have only this money and that money left.’ Only Liberty Media can give us a starting point. They are responsible for the money from sponsors, from television rights, from organisers, which they then distribute to us.

“If they cannot distribute anything, we don’t have much to spend either. Now, we wait and see.”

Meanwhile credit rating agency Moody’s has changed the financial outlook of Alpha Topco Limited, the holding company for the group of companies controlled by Liberty Media Corporation through its holding companies Delta Debtco Limited and Delta Topco that exploit the commercial rights to the FIA Formula 1 World Championship, from “positive” to “negative” due to “severe disruption to the 2020 race calendar” and “expectations for weakened earnings and cash flow generation.”

According to financial journalist Chris Sylt in Forbes, F1’s revenue is expected to dive from its total of $2 billion last year. Broadcasters are the biggest single source of this and provided a total of $762.8 million in 2019 with hosting fees bringing in $602.1 million.

Moody’s considers that Formula 1 is relatively well placed to recover after the coronavirus crisis, underpinned by its contracted revenue nature, strong franchise, large fan base and high cash conversion. However, the company might face some revenue challenge in 2021 due to the timing of TV contract renewals, as well as a weak macroeconomic backdrop. Increasing environmental concerns may also affect the image of the sport and the company’s ability to grow its sponsorship and other income. The strength and attractiveness of the Formula1 franchise, though, provides some protection in the context of wider broadcasting market challenges.

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