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Formula One Team Values: Liberty Seems Ready To Get F1 Back On Track

This article is more than 6 years old.

A mere glance at Formula One would suggest that not much has changed for the world's top racing series. Mercedes locked up its fourth straight constructors' championship with three races left on the schedule. A week later Lewis Hamilton clinched the driver's championship, his third in the last four years. The same five teams have led the standings for three years running, and Ferrari is once again threatening to leave the sport altogether. In other words, business as usual.

And yet there may not be a more exciting time for the sport in recent memory. Formula One spent years deteriorating as viewership plummeted, teams went bankrupt and the series ultimately lost one-third of its value. As we covered in detail a few years ago, F1 left billions on the table as potential buyers came and went. So when billionaire John Malone's Liberty Media finally stepped in to buy the series for $8 billion it kicked off a new era for the ailing series, and major changes are already beginning to appear on the horizon.

It's obviously too early to be handing out accolades, but thus far the idea of a transparent owner with intentions to invest, rather than wring the series out for all it's worth, has many in the sport brimming with optimism for the first time in years.

New series leadership has criticized the way F1's TV broadcasts have been moved from free-to-air to pay-to-watch broadcasts, a shift that has largely been responsible for F1's global TV audience slipping to a 12-year low last season. Correcting that strategy should help rejuvenate global interest in the sport, and there are signs that fans are willing to watch, even in the United States. Total American viewership was up 13% through the first two-thirds of this season, and next year ESPN takes over from NBC on a deal that reportedly won't include a rights fee but should guarantee the series even greater exposure while allowing F1 to retain its increasingly valuable streaming rights.

There are also potential plans to continue expanding the race schedule. Last year's increase to 21 races was largely responsible for an extra $80 million in series-level revenues. That's great news for the teams, since they collect a significant share of F1 income - last year the teams collectively took home $986 million, a 9% increase over the year before. And investors clearly believe in the league-level strategy, as the Formula One Group's tracking stock is up more than 20% to $37 since Liberty completed its purchase in January.

Perhaps most importantly, Liberty appears to be serious about leveling the financial playing field. Last month F1 unveiled new power unit regulations to be introduced in 2021 that will lead to simpler, cheaper engines. The cost-controlling measure is intended to help back-end teams compete and encourage new investments from prospective team owners. As expected, top spenders like Ferrari, Mercedes and Renault are less than thrilled, but enforced on-track parity is likely the only way to prevent the now-standard - and utterly boring - result of a runaway champion.

Taken together, those plans indicate that Liberty is prepared to make any changes necessary to get F1 back on track. Plus unlike previous owner CVC, which squeezed out dividends while taking on massive amounts of debt - the series was carrying $4.1 billion at the time of its sale - Liberty has made it clear that it's in this for the long haul: "We are laser focused on improving the sport for the long-term; we feel the stability of ownership and longer investment horizon will stand to greatly benefit the teams and dedicated fan base."

It's all great news, though how, exactly, it'll impact teams remains to be seen. For that reason team values remain mostly flat this year - the average F1 team is worth $451 million, up 1% from last year. Ferrari is still on top, now at $1.33 billion. The Italian outfit is as old as the sport itself, which helps explain its preferred treatment: Ferrari reportedly gets a $100 million bonus just for showing up. Last year the team's parent company also added another $100 million or so between increased F1 sponsorships and engine rentals to Toro Rosso, Sauber and Haas.

And yet the name most associated with on-track excellence these days is Mercedes. The German team has absolutely dominated the grid for four years now, and the bad news for the rest of the field is that Mercedes actually turned a tidy profit last season, taking home $19 million before taxes. That's the result of increased prize money and sponsorship payouts, and it's a remarkable achievement considering that the team spends more than $100 million just on staffing costs. Mercedes is now worth $695 million.

McLaren ($640 million) and Red Bull ($620 million) round out the class of elites. Both rank among the sport's top spenders, though to very different levels of on-track success of late. The former is a once-great team that has fallen on hard times after an engine deal with Honda backfired so badly the two agreed to part ways after this season. Prize money will take another hit after this season, and there's still no title sponsor, but a move to Renault power units may help jump-start the historic franchise.

Red Bull, meanwhile, remains a top-three team on the track, but at a major cost to the team's owners. In fact, by all appearances the team's non-ownership income may be drying up: Last year total team revenues were up $22 million, but that includes parent company Red Bull GmbH boosting its investment by a whopping $40 million. You can't deny the payoff, though, as Red Bull has finished outside the top two just once since 2008.

New to the list this year is Haas F1, the first American team to compete in the series since 1986. The team has surprised many with its ability to immediately compete, finishing eighth in its debut and remaining in the hunt for a top-six finish this season. We rank the team tenth in value at $108 million, largely because of its short track record in the sport. And the biggest gainer this year is Renault, up 21% to $212 million. After Renault took over the ailing Lotus team last year it promptly increased revenues by more than 50%, and this year the outfit is already back in the mix for a mid-tier finish.

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