Formula 1 is like many other sports in respect to television coverage. Advertisers will pay for slots in the TV coverage and may even sponsor a specific channel's coverage of an event. This lucrative method brings vast amounts of funding to the organising body of Formula 1, the FIA as well as its funding company, Formula One.
This is important as Formula One is in the driving seat of presenting the Formula 1 package to the public, hence it needs immense funding to carry out these roles.
The Formula 1 teams support themselves in a number of ways; the bigger teams will be able to court sponsors from some of the biggest names in business, whereas smaller teams must make do with lower profiles patrons. Teams also produce their own merchandise ranges to cater for the needs of the average fans; once again the more popular teams obviously make more money.
Venues in the Formula 1 calendar are somewhat limited with their advertising freedom. As Formula 1 is ran by a small number of big business share holders the venue bosses are pushed out of the commercial decisions. Most venues do not have the rights to place their own signage and must pay to host the race.
The majority of money made by venues is in the ticket and merchandise sales once fans are inside the track. These are the primary sources of F1 revenues and how formula one makes money. The money that is generated by formula one is important as it helps to fund the operation of the sport.
With all the logistics, car development, driver salaries and part replacements, this revenue becomes very critical to the success of the F1 sport. There is a lot more to how formula one makes money that just the prize money at the end of a season. Also, teams are paid based on the position they finished last year. Having won the season, Mercedes will equally receive more. Ferrari was the only team to qualify. It is said that if you want to make a small fortune in auto racing, you should start with a huge fortune.
This is an old saying which is more relevant today than ever. The finances behind high-stakes, competitive F1 motorsports are ruthless, even more so than in any other mainstream sport.
The variables behind how teams, drivers, and sanctioning bodies like F1 make their money are not only wildly complex, but they can also change frequently, depending on evolving business needs, market conditions, and any number of other factors.
Plus, the principals are deeply secretive, with most members of the racing fraternity unwilling to discuss contracts, salaries, or sponsorship deals. In order to pay the bills, racing teams and their respective drivers need multiple sources of revenue, and these will vary depending on popularity, rank, and driver marketability.
These streams of revenue begin with sponsors, and include drivers, purse monies, services rendered, such engine building and supporting customer teams and lastly, merchandise revenue. Formula one is oldest and most prestigious championship in the world.
The following is a breakdown of how Formula 1 as a sanctioning body makes its money, how F1 teams make their money, and lastly, how F1 drivers earn a living. These four teams still rely on sponsorship money to fund their teams, but the owners of the teams, are also the owners of the companies which are their title sponsors. Honda is the only exception. Honda is percent funded by the Honda car manufacturer, and therefore doesn't make a penny.
Next is the Technology partners who will supply a team with various components, such as Bridgestone tyre supplier , Mobil 1 oil supplier and Sap software provider. Corporate partners supply a team with goods which are used within the team and at team events, such as product launches, charitable events and parties.
I'm sure we have all seen Lewis clicking his TAG watch into place before he climbs the podium. This is a condition in his contract, that he must be seen with a TAG watch at any public event.
Finally, we have minor sponsors, who get small logo positioning on the car, usually around the sides of the spoiler or nosecone. McLaren have 16 minor sponsors, ranging from Nescafe to FedEx. But even so, paying drivers, maintaining the trucks and the cost of fuel can bring annual travel expenses to over 45 million dollars. Each team is constantly looking for a performance edge, pushing engineering to the limit and looking for ingenious innovations to go faster.
One example is the amazing mass damper system used by Renault in the mids, which we analysed here. The component costs of the car itself are a tiny fraction of this, but an F1 car is not cheap, and still costs over 11 million dollars to build. The cooling system alone can cost more than , dollars, which is almost the price of an entire Nascar racecar.
On top of this, the team must carry multiple spare parts if things go wrong in a crash, and a single front wing is , dollars. However, the 1. As we explained in this video, these bhp monsters are by far the most complex engines in F1 history.
In , Toro Rosso spent million dollars running the team, and despite a cash injection of 83 million from owners Red Bull, its overall earnings were only fractionally higher at million. But Formula 1 is about so much more than turning a profit. Running a car at the pinnacle of motorsport brings a level of exposure that is extremely valuable, especially for teams that struggle to make money. For example, Alfa Romeo road cars have been reintroduced to the U. The rebranding of Sauber F1 as Alfa Romeo in was a move to put Alfa Romeo on the map in the eyes of enthusiasts, with an F1 team on the world stage.
The same is true of the new Alpine team, which should help boost sales of Alpine sports cars. With drivers wearing and promoting Alpha Tauri clothes, and the name being broadcast to more than million viewers per year, the brand has a far stronger footing in the fashion industry.
But the most exciting benefits come from the F1 teams that also build road cars. For example, the Ferrari introduced an electronically controlled limited-slip differential for the first time in a road car, and borrowed the idea from F1. The system actively changes the distribution of torque between the rear wheels for optimum traction and drivability, and Formula 1 was its testing ground.
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