A Tale of Two Sets of Accounts: the Australian GP vs Brawn GP

September 16, 2010

I did a slot on BBC Radio Oxford this morning commenting on the Brawn GP accounts for 2009. My esteemed colleague Dr Ruth Bender glanced over them and her assessment was ‘wow!’: they look fantastic whichever way you look at them, sales up from £170 to £234 million, profit up from £1.3 to £98.7m and costs down from £166.5 to £102.9m, an accountants dream! Of course there is a subtext to all of this with the support from Honda and FOTA, but it is undoubtedly a story of the success that is possible in F1 if things go your way, and you get a reasonable amount of luck. Who would have predicted the Mercedes buyout when the management team decided to take the risk of running 2009 on their own and looking for a long term backer in the middle of a recession?

I then saw the Autosport post on the financial results of the 2010 Australian Grand Prix and they certainly make an interesting contrast: a $46million loss, double the cost of the race in 2006. Of course you can argue (and many due) that the true revenue stream is impossible to define: how can you measure the impact on tourism and corporate relationships that the event generates? There are consultancies who get generate mutlipliers for you suggesting the economic impact of such events, but the true answer is we don’t really know, so it often comes down to considering the different ways you can create global exposure for your country or region and then making a judgement. Certainly when you compare it with the Olympics and World Cup Soccer you can argue that F1 is excellent value for money. The danger is of course that only those with deep pockets and global ambitions will host grand prix as they see it as a long term investment. For those who are part of the history and heritage of F1 if they simply start incurring ongoing losses, it becomes more and more difficult to justify. Add to that the power of the environmental lobby and it looks less and less sustainable unless F1 can really get its act together with clean technologies.

There was a time when the circuits were the ones that made most of the money in F1, they got the revenues from the spectators and the trackside advertising, if it was a well known race they could even sell the media rights. They paid the teams ‘start money’ for turning up and also some prize money if they did well, but that was it. Then along came FOCA led by Mr Ecclestone who, by bringing the teams together and getting them to work as one, shifted the balance of power from the circuits to the teams, in many ways he could be described as the most successful (and richest) shop steward of all time. Now the commercial rights holder: Mr Ecclestone’s FOG, controls all track side advertising and media and requires a hefty fee from the circuit for the privilege of holding a Grand Prix. The main revenue stream for the circuit is therefore the spectators and given we even had empty spaces in the grandstand at Monza that becomes a hard battle to win. With a new Concorde Agreement brewing from 2013 and the three parties of FIA, FOG and FOTA lining up for some tough negotiations, it is interesting that the circuits themselves have no collective voice in deciding on the distribution of the spoils.

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One Response to “A Tale of Two Sets of Accounts: the Australian GP vs Brawn GP”

  1. Drewe Says:

    It’s a pity about the Aus GP – because within F1 circles it is a universally praised race.

    And it does bring in revenue for Australia, and Melbourne in particular.

    But a recent auditor report said the benefits can’t be quantified and certianly don’t justify the cost – so. Come 2015? We may no longer be at Albert park, because as we know, governments will make decisions based on popularity, and the majority of the noise is coming from the ‘what else could we have done with 40 mil’ crowd – despite other benefits!


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