The Coronavirus has taken the world by storm, with over 1.8 million reported cases and over 110,000 as of the 14th of April,2020. Other than just the ongoing healthcare crisis, the epidemic’s destructive effect on the economy is also clear to see, with lockdowns having caused industries to grind to a halt. Sporting leagues have also been given the red light and it is unclear when sporting activity will resume. This has hurt several sporting leagues around the world, but arguably the worst affected is the Formula 1 World Championship.
Due to the fact that races take weeks of preparation to set up and are more difficult to postpone than other sporting events, there have been several cancelled events. This is a big problem since a large part of the money Formula 1 makes from races is from various nations actually paying the organisation to stage a race in their country. With the races being cancelled, this source of revenue disappears and along with a loss of ticket sales this is a heavy burden for the sport to take.
The other impending crisis is that of television rights. If there are less than 15 races which take place, the amount of money Formula 1 receives from its broadcasters begins steadily reducing. Ordinarily, this would not be a problem since there were supposed to be 22 races in this season. However, in extraordinary times this could be seriously tested. 2 races have already been officially cancelled while 7 others have been postponed. There is a high chance that there will be more postponements and cancellations and if it slips under this 15 race threshold, there would be another shortfall in revenue. In a worst case scenario the entire season may have to be scrapped.
So the question arises, can Formula 1 survive this? For now, the answer is most likely yes. Formula 1 has a rather flexible cost base and with postponements of new regulations and other steps costs are definitely being reduced. As of 31st December 2019, the organisation also had a large liquidity headroom of about 900 million dollars. This, along with the fact that F1’s owners Liberty Media Corporation currently have substantial resources available, mean that F1 will likely be able to face the torrid situation of 2020 and survive. While this is not guaranteed, it is extremely likely and almost certain, unless the whole season is cancelled.
The larger scale problem is that due to the diminished revenue, the teams in F1 will receive less money to develop their cars and sustain their ability to function. Smaller teams are facing uncertain times and there is a significant risk of losing 4 out of the 10 teams if the situation is not handled properly. This could be a fatal blow for Formula 1. Therefore steps such as the lowering of a cost limit for teams and freezing of the main components of the car over the course of this season have been taken to ensure that all the teams manage to survive.
While nothing is guaranteed and teams are definitely at risk, F1 has taken steps to ensure it weathers the storm and it seems likely that just as it has in the past, despite the hurdles, the show will go on.