Business of Speed
The Money Behind the Motorsports Industry
By: Tim Frost
Date: April 2, 2018
This month, we will take a look at the financial and operational performance of the largest public companies in the motorsports sector.
International Speedway Corporation – (ISCA):
For 2017, International Speedway Corporation posted revenues of $671.4 million, an increase of 1.5% from the previous year. This was a third consecutive year of growth and highest since 2010 for the Daytona Beach, FL based company. Led by broadcast contracts, motorsports and event related income was the largest source of revenue while admissions were slightly higher.
ISCA’s operating income was $96.2 million, or 14.3% of revenue. This decrease from 2016, was due to an increase in Nascar event (sanctioning fees) and losses on retirement assets.
Overall, management was pleased with the solid financial results and looked favorably on the development on the One Daytona entertainment destination and construction of guest amenities at ISM (Phoenix) Raceway and Richmond Raceway.
Speedway Motorsports – (TRK):
Speedway Motorsports showed a revenue decrease of $36.1 million to $453.6 million in 2017. Poor weather including Hurricane Nate impacted over half of Nascar Cup weekends causing significant drops in admissions and event related revenue. Speedway Motorsports Nascar broadcasting revenue was $209.1 million or 46.1% of total revenue and remains the contractual income that drives the business model of track operators.
Significant investments are being made in trackside premium hospitality services that generate higher margins and digital technology that will engage the next generation of race fans.
Dover Motorsports – (DVD):
Dover Motorsports is the smallest of publicly traded track operators, hosting two Nascar Cup weekends and several music festivals. For 2017, Dover Motorsports had $47.7 million in revenue and operating income of $6.8 million. This was like prior years.
Dover receives approximately $30.0 million in television money from its two Nascar Cup races. This broadcast contract increases about 4.0% annually over a typical five-year contract. The company’s annual purse and sanction fees are almost $17.0 million with annual increases of $750,000.
Formula One – (FWONK):
Liberty Media acquired the entity known as Formula One in January 2017. The transaction price represents an enterprise value of $8.0 billion and an equity value of $4.4 billion. The complicated deal structure involved issuing stock and assuming new debt and refinancing existing.
Last year represented the first year of operation under the leadership of Chase Carey, Ross Brawn and Sean Bratches. For 2017, primary Formula One revenue was $1.48 billion a decrease of $19.0 million from the prior year. There was one less race held when compared to the prior year and a significant decrease in one promoter agreement.
Formula One generates revenue in four different categories: (i) race promotion fees — (34.1%), (ii) broadcasting fees — (33.7%), (iii) advertising and sponsorship fees — (15.3%) and (iv) other revenue (16.9%).
Operating expenses of Formula One were $1.346 billion or 90.8% of revenue in 2017.
The included Team Payments of $919.0 million. This was a decrease of $47.0 million compared to 2016. The reduced amounts were related to an accounting definition and cost recognition policy being applied to fixed and variable Prize Fund elements.
Other expense increases were incurred with fan engagement activities, filming in Ultra High definition and higher freight, digital media and hospitality costs. Selling, general and administrative expenses were driven by higher personnel, property, marketing and research costs and advisory fees.
Liberty Media executives are investing heavily in OTT video technology, street festivals in non-race markets, and refining the economic model between key Formula One stakeholders.
These companies are making significant investments in the motorsports sector to compete effectively in the rapidly changing digital entertainment space.