Formula 1, a business that works well!

Formula 1 has existed in its current form since 1950, for over 60 years, and since its inception, it has been able to attract crowds to become today a sport followed by nearly half a billion viewers each year and by several hundred thousand spectators present at the various races listed on the world championship calendar.

But beyond the on-track battles between teams and drivers and the sporting aspect, Formula 1 is also a very profitable business and has been very successful in developing and exporting itself outside of Europe since the early 2000s.

Indeed, according to a study published by CNN based on data collected in the book Formula Money written by Christian Sylt and Caroline Reid, which records the various lesser-known financial aspects of F1, in the span of eight years – between 2003 and 2011 – the revenues of Formula 1 more than doubled, rising from approximately 550 million euros to almost 1.15 billion euros despite the global economic crisis of 2008.

Formula 1 revenues

According to Christian Sylt, one of the authors of Formula Money, the revenues of Formula 1 are organized as follows:

– 33% come from television rights;
– 33% come from fees paid by Grand Prix organizers;
– 33% come from sponsorship on the circuits, including Rolex, UBS, Emirates, LG, and merchandising.

In recent years, while Formula 1’s revenues have significantly increased, it is notably due to the rise in entry fees charged to Grand Prix organizers, as a result of the internationalization of races and the inclusion of new countries on the calendar, such as Malaysia, Singapore, China, and Abu Dhabi.

The cost of hosting F1

Regarding the fees paid by the organizers, not everyone is on an equal footing. According to figures from Formula Money, while some pay (very) high fees to host the Formula One Circus, as is the case for Malaysia (€50 million per year), Abu Dhabi (€49.5 million per year), and Singapore (€49 million per year), the three destinations that pay the most to host F1, other countries are much better off.

This is notably the case for Monaco, which pays absolutely nothing to host Formula 1 – a unique case, Italy, which has hosted Formula 1 at Monza for over 60 years, for 5 million euros annually, and Canada, which pays an entry fee of 13.5 million euros.

According to Christian Sylt, interviewed by CNN, if Formula 1 manages to earn more and more money from entry fees, it is because there is a clause in the signed contracts that increases the amount to be paid by 10% each year to host Formula 1. The development towards Asia is also a key element that allows countries to capitalize on the aura of F1 to gain recognition and attract tourists from around the world.

The highest-paid drivers in F1

Formula 1 is a sport that pays well… provided you are in a top team, have talent, and some experience, as young drivers generally do not earn huge amounts, unlike those who play leading roles each year. In the top 5 highest-paid drivers in Formula 1, we find Fernando Alonso in the lead, followed by Lewis Hamilton, Sebastian Vettel, Jenson Button, and Felipe Massa.

Sponsorship in F1

Formula 1 is a great promotional showcase for many multinationals but also for national companies. These partnerships signed between companies around the world and Formula 1 teams are also important for the latter because they provide the capital needed to pay drivers, employees, modernize infrastructure, allow the development of the single-seater throughout the season and much more.

The cost of sponsorship in F1

According to the means of a company and the location where it wants its logo to appear, whether on the drivers’ suits or on the race car, the cost is not the same. Here’s a brief overview of the most common places where partner logos are found and the average price paid by companies.

We can notice that the DRS is a favored location, probably because replays of overtaking often show the deployment of this system. The mirrors, often visible during onboard cameras, are also a key point of a single-seater.

The biggest spending sponsors in F1

Some companies are very active in Formula 1, allowing them to promote themselves worldwide as they follow the different destinations throughout the year. However, not all sponsors invest the same amounts of money. Here are those that invest the most each year.

We can notice that sponsors are more inclined to spend a lot in partnership with top teams, even if this season Williams can hardly be positioned in this category. We can also observe that Scuderia Ferrari alone manages to host two of the biggest sponsors in the Formula 1 World Championship with Marlboro and Santander.

Business Sector of Sponsors in F1

Formula 1 is a motorsport, so automotive sponsors are very present – Renault, Ferrari, Mercedes, Marussia, Lotus, Caterham, etc. – but they are not the best represented. Indeed, the most represented sector in Formula 1 is telecommunications. Next comes automotive, fashion, beverages (with Red Bull at the forefront), finance, oil (with Petronas, Shell, and Total notably), travel, and then tobacco – covering a wide range.