TV revenues and GP2 – show me the money…
June 10, 2009 16 Comments
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:
- 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.
- 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:
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.