TV revenues and GP2 – show me the money…

I see many keep reading my initial posts on GP2 budgets, how the different teams make money and how their different strategies and positioning over the years has taken them to where they are now.  After a series of comments back and forth with Fletcher in previous posts, I think we need to dig a bit deeper and understand not only the “whys” but also the “why nots” – especially in relation to TV revenues.

What there is:

GP2 revenues come from 2 sources – though in most cases its only the first one:

  1. Drivers –  Those who wish to sit in a GP2 car have to put up anywhere between €1 million and €1.3 million per season, plus any damages to the car.  In 2009, many drivers have signed for less than that (see post), but it is an exception that will right itself once the economic situation improves.
  2. Team sponsors – If I’m not mistaken, only ART, Racing Engineering, Arden and Barwa Addax have one of these, so we can say they are pretty scarce in GP2 – not only in 2009 but generally in the category’s 5-year history.

What there should be:

As of today, GP2 team are basically limited to these 2 revenue sources.  Yes, some teams make some additional money serving A1 or Superleague teams, but that is not GP2.  If we compare this to an F1 income statement, we are missing one key line:  TV revenues.

Should CVC share some TV revenues with GP2 teams?   Yes, and here is why and roughly how much:

GP2 TV revenue model

So with this simple calculation, we have added about €1.3 million to the top line of GP2 teams.   This is not money they should/should not get, but money they have earned, just like F1 teams earn their TV money by putting on a good show and having people watch.   Next to F1, 150 million people may seem like little, but it is a lot of people watching a single event every month during one or two days per weekend.

So why are there no TV revenues in GP2?  A couple of answers from my point of view:

  • There is no “GP2 FOTA”: GP2 teams are not organized in any way.  They are there to race, period, and until today have not worried about this issue.  If they made even the slightest effort, they could probably get half of the estimated TV revenues per team, and we all know €650k would go a long, long way to help GP2 teams.
  • Legacy:  Most GP2 teams are evolutions from F3000 or F3.  They are used to running in series where they have no significant TV coverage and where they make money the old fashion way… “earning” it through hard work and rich drivers.
  • Ignorance:  The most basic of answers, is because no one has asked or has asked the right people.
  • Resistance: I don’t think it’s that CVC does not care for GP2, but that they need to squeeze the most out of it.  And given the previous 3 points, CVC has little incentive to alter the status quo.

In conclusion, GP2 has earned TV money and GP2 could really use these revenues – not to make higher profits, but as a possible way to reduce the cost of a seat for drivers.  In this way, the budget for a GP2 seat could fall below €1 million, making the category more appealing and increasing its competiveness in the top-tier racing market.  Teams need to organize themselves, understand the value they are adding to their organizers and owners and map out a revenue-sharing scheme that improves the competitiveness and longevity of their category.

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16 Responses to TV revenues and GP2 – show me the money…

  1. AMS says:

    Nice post , very important to understand the situation of any teams.

  2. Rob says:

    So why are there no TV revenues to split between the teams in GP2? You missed the obvious answer: there are no TV revenues in GP2…

    • gp2 insider says:

      Rob,
      You mean to tell me that GP2 transmits races to 150 million people for free? Even if it’s a pack with F1, some monetary value can surely be assigned to the GP2 races. Even F3 at a national level has TV revenues.

      • Rob says:

        Follow the networks and the answer becomes clearer: Setanta self-evidently don’t have any funds, Eurosport traditionally pick up those sports that are unable to request remuneration (or do not want it, in lieu of increased coverage), Sky Italia, La Sexta, etc are largely in the same boat.

        Let’s leave aside that there are more GP2 teams than F1 teams and therefore the splits are out, and look instead at the numbers you are suggesting should be shared among the GP2 teams. Now look at the list of broadcasters. Can you honestly, hand on heart, say that you think these figures are correct? And if not, why do you think that CVC would take funds out of their F1 revenues to split with the GP2 teams?

        I am all in favour of the GP2 teams having more revenues, as it could only improve their ability to race and the chances of a young, talented driver with little money getting a shot, but this is not the way that it’s going to happen.

        • gp2 insider says:

          I can’t argue much with you regarding the first point, only that I know some TV stations in Europe, Asia and Latin America do pay for GP2 TV rights. The price is not very high and in many cases is bundled with F1.

          I do believe, and I have talked with GP2 team owners about this, that CVC can afford to pay teams anywhere around €500k – €750k per team (total of €6.5 million in the lowest level), if for nothing else as an investment in the longevity of the sport. If they can’t (or say they can´t) maybe there are 2 alternatives:

          1. Offer TV money only to the top 7 teams (just over half of the teams), as an added incentive to work harder. The amount there would be around €3.5 million
          2. Offer prize money (from TV) for each race to the race winner.
          – for example: €250k for feature race win and €100k for sprint race win
          – €250k x 10 = €2.5 million
          – €100k x 10 = €1.0 milion
          -Total €3.5 million

          Now, I’m sure they can afford that. Teams need to get organized and set the house in order if this is to be a top-tier series.

  3. Fletcher says:

    Great post and I don’t see why F1 Bernie FOTA whomever can’t split the revenues for the race weekend with GP2 and the reason I believe is because the teams don’t protest this. Isn’t that how FOTA got started by going up against the establishment and demanding their share of the pie. F1 teams get revenue from TV, prize money, travel expenses etc so why not GP2.

    • gp2 insider says:

      Great point, Fletcher…. also, many GP2 bosses are aligned with FOTA so it would make even more sense: Agag (Briatore-Renault), Horner (Red Bull), Driot (Toyota), Vasseur/Todt (Ferrari, Toro Rosso).

  4. Fletcher says:

    Why doesn’t the track sponsor say AIG for Turkey last weekend cough up for prize money to GP2 as part of the deal to do business with F1 for that particular race. I believe there is a 100,000 prize for the championship tesm but it really needs to trickle down to other teams as well otherwise the top team gets getting bigger. Why not 50,000 to the champion, 35,000, 20,000 and so for down the line to the 6th team.

    • gp2 insider says:

      Agree with you Fletcher…. I like your proposal even better.

      Stephen… my point exactly. Some money can be paid out, and clearly in GP2 a couple hundred thousand Euros would go a long way.

  5. Stephen Rees says:

    The BBC paid extra for the F1 support series’,not only GP2, but FBMW and the Porsche Supercup as well, but eventually decided not to show any of them due to extra production costs. FOM offered them the GP2 world feed commentary, but they weren’t interested… Setanta paid for their rights, but not much. Still, the GP2 teams should get some money, even if it isn’t that much.

  6. Fletcher says:

    Here is some info from Autosport which may clarify some issues. First off teams pay 30,000 euros to participate and the main income to GP2 apart from sponsors is its spare parts business. Michel and I quote says “We reinvest almost all our revenue stream into car development and new venues.” The new car for 2008 was quite costly and the Asia series has also cost a lot. Outgoings include payment to FIA to run and police the race weekends, Allsport to run on the F1 bill, and to Formula One Management for its TV coverage. Prize money totals over 1.5 million euros.” Seems to me everyone is getting fat rich except the teams. Is there really prize money but they keep it secret as to how they allocate it like F1? I don’t know.

    • gp2 insider says:

      Hmmm. Don’t get me started on GP2 Asia! If GP2 teams are suffering because of this “brilliant” idea from Bruno and company, I’m sure they are quite willing to get rid of the sick baby. Not sure what he means by “prize money totals over 1.5 million euros”. I know GP2 P&L statements to perfection, and I can guarantee there is ZERO income from the organization.

  7. Ron says:

    This calculation isn’t even close to correct.
    Gp2 does not get 1/5th of the tv-exposure of f1.

    F1 is broadcasted live by top-networks in every country in europe, whereas gp2 is on small networks or in highlights-format. Also the f1-race is longer, f1 get’s qualifying coverage, pre-race coverage, analysis after the gp and highlight coverage as well.

    Add to this that F1 is used by networks to increase their profile and there are way more sponsors in F1 with many of them trying to ‘activate’ their sponsorship by tv-commercials. This all makes f1 way more valuable to networks then gp2.

    My guestimate would be that Gp2 tv-rights are more like 1% of F1’s right fees.

    • gp2 insider says:

      Ron,

      My figures come directly from the GP2 Media Pack. I agree with you they are probably optimistic, but I was just trying to make a point.

  8. Fletcher says:

    It would be better if that 250k euros for the winner would be divided all the way down to 12th and not just give it all to the winner. That way the top team doesn’t get fatter then the rest. More chances of teams surviving. How about money from ticket sales from each event? Is CVC in debt? I heard somewhere the CVC bought GP2 for 150 million pounds back in 2007. Way too much in my opinion considering Liverpool was bought for 70 million pounds more around the same time.

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