These deals have been hugely beneficial to the sport’s bottom line over the last two decades. These are $50-60m races, making a 10-year deal worth upwards of half-a-billion dollars. And the knock-on effect has been similarly seismic. “In many respects the Gulf states have shaped Formula One’s ability to put in place those long-term race contracts elsewhere,” explains Mark Gallagher, the former Jordan and Red Bull director and now a respected F1 consultant. “It wasn’t that long ago that a long-term contract in Formula One was three to five years. But in the Liberty era contracts are a decade [Bahrain is contracted until 2036, Qatar 2032, Saudi Arabia, Abu Dhabi and Azerbaijan all 2030].”
Sport willing to give Gulf time
The value of those deals and partnerships does leave the sport slightly exposed. Already, the short-term cost from the Iran conflict has been significant. Liberty Media’s share price took an immediate hit, wiping out approximately $2.46bn in market capitalisation, although it has since bounced back. Meanwhile, an analyst report from Guggenheim Partners estimates F1 lost somewhere in the region of $200m, and about $80m in earnings before interest, taxes, depreciation and amortisation (EBITDA), from the two cancelled races, with Bahrain and Saudi Arabia collectively paying about $115m in hosting fees each year. “They can mitigate a bit of that because the media rights portion of the race economics is separate, but it’s going to be hard to fully recoup sponsorship as well,” Ian Moore, an equity research analyst for Bernstein, says.
Gallagher is actually not so sure that F1 has lost out. When Australia was forced to cancel its 2020 and 2021 grands prix due to Covid, it paid out $100m for both races before it returned to the calendar in 2022. And there may well be a similar arrangement here.
“One way or the other, there will be protection,” Gallagher says. “None of us know for certain what is in those commercial deals. But what we do know is they are long-term deals, they are with promoters who are fully supported by the governments of those nations. And therefore it’s in the interests of the state to make sure the Formula One contract is honoured. And if they weren’t able to honour it, because of the conflict, then they’re likely still to have to pay some kind of fee for it.”
It is for that reason – the fact that they are such good partners, and payers – that F1 is likely to give the Gulf states as long as they need. Whether it is this year, next year, or in a few years, as soon as the situation in the region de-escalates, the sport will be back. Indeed, a number of sources within the sport have suggested F1 might even look to slot one of Bahrain or Saudi back into the 2026 calendar should a lasting ceasefire be agreed by the summer. Most likely in October, when there is a two-week gap in the schedule.