Liberty Media, the company that owns Formula 1, concedes that some adjustment could be required to a business model based on live events in the post-coronavirus world if people change their behaviour.
As well as F1 suffering financially from the current lack of races, sister company Live Nation, which promotes concerts worldwide, is also taking a hit.
Recently, Liberty shuffled assets between its subsidiaries, giving F1 a safety net of $1.4bn of cash with which to tackle the crisis.
In a Q&A with shareholders at a virtual annual meeting, Liberty CEO Greg Maffei acknowledged that it was impossible to predict what might happen.
“That’s the great unknown,” he said when asked about the future of live events. “I think we’re taking a cautious attitude to the belief that things will adjust and change, that we can build businesses that can operate in a post-COVID world.
“Whether that’s through therapeutics or a vaccine, or just changed procedures, there will be ways to have live events.
“Will they be as scale or profitable as historically? I think that remains to be seen, so we’re taking a step-by-step cautious attitude.
“One of the reasons we strengthened the FWON [F1] balance sheet was because of that potential, that things may not be as positive going forward, and particularly in the case of FWON, where we may need to provide support for some of the teams.
“We’re hoping for the best in terms of therapeutics and vaccines, but we’re not counting on that as our investment thesis. We’re trying to create attractive vehicles that have upside in any situation.”
Liberty founder and chairman John Malone pointed out that F1’s income doesn’t rely solely on people physically attending events, should there be a change in behaviour in the years to come.
“The original thesis of live events perhaps being the best place to be on content for television or for digital distribution I think remains intact,” he said.
“Unfortunately we’ve had this pandemic. I personally believe there will be a therapy and/or a vaccine sooner rather than later that will get as back closer to normal.
“There’s undoubtedly going to be a hangover in terms of valuations, and obviously like anything else if this depression in valuation is excessive it presents opportunity for those of us who believe in the longer term thesis that this is a good place to be, live events, particularly when you have a substantial part of the revenue has little to do with gate attendance and a lot to do with television, and ultimate digital distribution.
“So the question is how do you manage your hand from here? And I would say the number one thing obviously is that everyone has been scrambling to improve their balance sheets so that they don’t have liquidity problems over the period that this is expected to really depress the business.
“But I think the thesis of live events is still a good one, and I believe that there will be a health solution here, not a structural solution, that will return these events.
“Human beings are gregarious by nature. I can tell you the bars here in Florida are now open, and they’re pretty packed.”