Year ending accounts for Formula One in 2018, released today, reveal that the sport lost £51.5m ($68m), up from a £28m ($37m) loss in 2017 and a £35.6m ($47m) profit in 2016.
The loss, which has been blamed on accelerating costs and modest revenue expansion, is made to look even worse when one considers that Morgan Stanley, in its predictions for 2018, had talked about anticipated revenues around £148.3m ($195.9m) more than turned out to be the case.
While 2018 featured 21 races, one up from 2017, the revenue from those two events - France and Germany - fell short of making up for the lost revenue after Malaysia opted not to renew its contract, or as Liberty puts it, was, "not fully offset by the return of two European races in France and Germany".
As a result, the revenue from the 21 races last year was up just 1.4% on 2017 to £467.9 ($616.7m), pretty abysmal when you consider that race hosting fees increase annually by 5%.
In a report issued in January 2018, Morgan Stanley forecast race hosting fees £33.2m ($43.9m) more than what turned out to be the case however, in terms of revenue from broadcast fees the bank's forecasting performance was even more woeful.
"We believe '18/'19 will see the bulk of F1's major markets step up with new TV contracts," proclaimed the bank, adding that "broadcasting will drive approximately two thirds of the company's revenue growth between now and 2020."
Indeed, it claimed that broadcasting would contribute around 66% of F1's revenue growth between 2017 and 2020 with the biggest increase in 2018, the bank confidently predicting that the fees from broadcasters would increase by 31.1% to £594.7m ($785m).
In fact, broadcasting revenues only rose by 0.4% to £457.5m ($603.9m)... Morgan Stanley's prediction out by a staggering £137.2m ($181.1m).
"Broadcast revenue was essentially flat for the full year 2018," admitted Liberty, "as contractual rate increases and favorable foreign currency movements were offset by the early termination of one contract with a failing broadcast rights broker.
"It was essentially a middleman that controlled our rights and sold them on," the statement continues, "so when the broker went broke the agreements were eliminated as part of the process. There was a large region and a number of smaller ones so we went back and engaged directly with the parties that had been buying through the broker.
"Given the timing and some of the circumstances, the consequences and timing of it made it adverse to us... We believe we are on a path to addressing it in a constructive way for the '19 season."
As Forbes reports, increased costs added to the bleak figures, Liberty's profligacy seeing spending increase 20.4% to £389.3 ($514m) courtesy of various initiatives, including its F1 eSports championship, online streaming service and street demonstrations.
The statement goes on to explain that "cost of F1 revenue increased primarily due to logistics and travel expense... digital media development and spend on fan engagement, which more than offset reduced team payments. Selling, general and administrative expense increased primarily as a result of increased marketing and research costs and increased bad debt expense due to payments issues with two commercial partners."
"Freight costs were up significantly in 2018," admitted Chase Carey. "A lot of our freight is for third parties that we bill through so it is a revenue generating cost increase. It is not a profit centre but it is a revenue generating cost increase."
All of which means bad news for the teams, who benefit when the sport is doing well financially but take a hit when the finances hit the gravel trap.
Indeed, the prize money for the teams dropped for the second successive year, the heady days of 2016 - when they 'shared' £731.7m ($966m) - a distant memory as, having dropped to £696.1m ($919m) in 2017 they dropped a further £4.5m ($6m) in 2018.
"For 2019, the drivers of revenue are clear," insisted Carey, "cost growth will abate and we expect leverage to decline significantly. We remain firm in our commitment to growing this business in creating value for the long term for the teams, our partners, Formula One and our shareholders."
"We are very pleased with the progress that Formula One has made over the last two years," added Liberty CEO, Greg Maffei. "We are confident the tremendous potential still exists. "We are committed to the F1 business."
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