John N
The popular saying “money makes the world go around” applies to every sport and Formula one isn’t an exception. While other sports runth4 model of pay to win, formula one runs the paid to play or compete in the first place. This means that the balance sheets of most F1 teams contain a lot of zeros. Every year, F1 teams budget humongous amounts for research and development, salaries, production and operations.
The big question is where does this money come from?
Formula 1 teams earn money through the following means:
- Formula One Management Funds
- Sponsorship and Partnership
- Investment from parent manufacturers
- Merchandise
Formula One Management Funds
Also known as FOM funds. The Formula One administration raises over £2 billion through track fees, driver super – licenses and commercial TV rights, which andmdmdre sold to broadcasters around the world for huge amounts of money. For proper understanding, here’s a breakdown of the sharing formula
- In the First division 36 million dollars is paid to every team that has been classified for over two seasons. This is known as the division one payment, and every single team receives this.
- Then in the second division is the prize money based on where the team finished the season before. For example, Mercedes received 61 million dollars for winning the title while Williams received 13 million dollars for coming last.
- The third division is the LST or Long-Standing Team, also known as the Ferrari Budget because it’s only given to them, and it’s a whopping 68 million dollars.
- On top of that is the CCD or Constructors Championship Bonus which is a 35 million dollar payment to the winner of the championship.
- There are a couple of other payments such as 10 million to Williams as a heritage payment, 35 million Ferrari, 35 million to Red Bull for signing the Concord Agreement first, and 35 million to Mercedes for living up to their promise of winning two titles.
Sponsorship and Partnership
This isn’t the most common spurs of income for F1 teams. In exchange for advertising their logos and brands in the body of the car big companies pay F1 teams sponsorship fees. The more successful a team is, the more the sponsors. Teams could have as many as 20 sponsors who pay varying fees to place their logos on strategic positions of the car.
Some companies referred to as technological partners sponsor a team with its goods which are used within the team and at team events. Examples of such partners include TAG Huer, Johnnie Walker, Santander etc.
Investment
Team owners, through the team’s parent company of which they own, sponsor the team with the aim of making them do better. For example, Daimler, (parent company of Mercedes) sponsors the team with $80 million every season. This is similar for every other team.
Merchandise
Formula one teams like every other sport team sell merchandise through online stores and promotional tests at the races. The bigger teams sell the most merchandise due to their popularity compared to the smaller teams.
In conclusion, formula one teams have multiple sources of revenue which explains why they can embark on research and development projects that cost billions of dollars. The big question that comes to mind is this – How will the smaller teams be able to compete with the bigger teams financially?
One would hope that the new regulations on budget cap can somehow level the playing field and make everyone compete equally.
