The prize money paid to Formula One's teams crashed by £31m ($41m) to £493m ($650m) in the nine months to the end of September as the German Grand Prix went on hiatus and the sport's costs accelerated under new owners Liberty Media according to a report for Forbes by Christian Sylt.

The teams' prize money comes to around 68% of F1's profits so the more races there are, the more money there is coming in and the higher its profits and prize money. Likewise, the higher F1's costs are, the lower its profits and prize money. It is paid to teams on the last business day in every month of the season from March to November with the final payment coming at the end of the following February.

Filings released by Liberty on Thursday reveal that over the three months to the end of September F1's revenue came to £380m ($501m) which was £14m ($19m) lower than in the same period last year. The German Grand Prix hiatus was planned long before Liberty bought F1 in January from a consortium led by the investment firm CVC. However, Liberty could have compensated for the decline in revenue from the loss of the race if it had signed significant new sponsorship deals.

Not only has it failed to do this but it has also boosted F1's spending. It famously hosted a lavish demonstration on the streets of London in the run up to the British Grand Prix and has moved the sport's headquarters to a plush new office in one of the most expensive areas of the city and reportedly plans to open an office in New York and has openly stated that it wants to double F1's staff.

Filings released by Liberty on Thursday reveal that the F1 Group's 'selling, general and administrative expense' increased by 19% to £67m ($88m) over the first nine months of this year "primarily driven by higher personnel costs as a result of additional headcount due to the acquisition by Liberty of Formula 1".

Understandably, it's a sore point for the teams as they want to discuss whether this extra expenditure should be funded by new investment obtained by Liberty, or come out of F1's costs which reduces their prize money. It appears they have finally realised that Liberty is increasing F1's costs to build up the company which it owns 100% of and that in turn the their income decreases even though there would be no business without them.

It is a discussion which the teams should really have had before Liberty bought F1 but it isn't too late for them to give the red light to its extravagant spending plans. It is a particularly pressing matter and not just because of the boost in F1's costs. As Pitpass recently reported, it is understood that Liberty plans to put the brakes on bonus prize money payments to the top teams so they are on track for a significant fall in their income. They might not be the only ones.

The public can buy shares on America's Nasdaq exchange which reflect the financial results of the F1 Group so the greater its losses are, the more likely it is that the stock price will fall meaning shareholders' lose out.

The fall in revenue from the loss of the German Grand Prix, along with the increase in costs, led to a reduction in what is known as underlying profit. In simple terms this is arrived at by deducting a company's running costs from the money it receives (its revenue). The teams' prize money is calculated as a percentage of the underlying profit which is why it reversed. However, the share price tracks F1's overall financial performance which involves looking beyond the underlying profit.

One of the biggest costs which is deducted from the underlying profit is interest payment on debt. Liberty got around £910m ($1.2bn) of loans to fund its acquisition and F1 already had more than £2.3bn ($3bn) of bank loans which are largely the ones that were used by CVC to buy the sport but hadn't been paid off. Liberty increased them recently as its latest filings state that "on August 3, 2017, Formula 1 increased the amount outstanding under a... loan... from $3.1 billion to $3.3 billion."

Before Liberty bought F1 it had none of this debt so its interest payments have surged. In the first nine months of 2016 they came to £9m ($12m) compared to £133m ($175m) for the same period this year. The takeover also boosted what is known as depreciation and amortisation (it essentially involves Liberty paying off the asset it acquired over time) to £224m ($295m) in the nine months to the end of September. As this is a cost it helped to drive up the red ink and led to the F1 Group making a net loss of £28m ($37m) over the three months to the end of September.

This comes after the F1 Group lost £93m ($123m) in the first half of this year which leaves it with a total net loss of £121m ($160m) in the nine months to the end of September. In contrast, over the same period last year it made a £219m ($289m) net profit. There may be more squeezing of F1's profit margin to come.

In March the Daily Telegraph quoted Liberty's chief executive Greg Maffei saying that "in the short-term we are unlikely to see margin expansion because even though there are some near-term wins around things like advertising, over the longer term, there's going to be expense to achieve that." Time will tell whether or when it will pay off.

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