Formula 1 is considered one of the toughest sports out there. Crashes at every race and dramas at every turn. Beyond athleticism, drivers should have a great mentality while driving the car with 200km/h velocity. When one of their mates crashes, they should keep going because every point from the race counts. Those fast cars are not cheap. Salaries are beyond-imagine numbers. Famous seven-time world champion Mercedes AMG driver Lewis Hamilton earns 40 million dollars per season. F1 teams must earn a lot to stay competitive, let alone be on the podium. So, what is the business model of the much-earning teams?
As of the longest race season, 2022, FIA and the rights owner of F1, Liberty Media, agreed to bring a budget cap of 145 million dollars. The decision was made right after the pandemic. Meaning that it will help small teams like Williams Racing and Haas stay competitive.
F1 racing teams get their money from many various budgets. The first one is directly from F1. When Liberty Media got the job from Bernie Eccelstone for 4,6 billion dollars, there was no marketing team. Social media attraction was not enough. The situation changed significantly in just four years. F1 social media accounts have tripled the followers on a diverse range of medians. Netflix’s top-ten show in many countries Drives to Survive helped this enormous growth. All F1 teams get their equal share of these earnings. Also, there is a prize for different standings. Last year, the first team got 14 million dollars, the second 13, the third 12, and so on until the tenth team: Williams. There are also some controversial prizes. Every year Ferrari gets 68 million dollars just by being the longest-standing team. The prize is called the Ferrari Money by fans; just like that Williams, founded by racers, gets 10 million because it has memories of legends in this sport. Mercedes and Red Bull get 35 million dollars each. The prize was given after their big race in the last Abu Dhabi Grand Prix, which brought many unique viewers to the sport after watching Hamilton and Verstappen race to win it all or lose it to be second.
Netflix Series: Drive to Survive
Great money comes in with the car stickers. Even though it is hard to see the sponsor’s names when the car is going with such great speed, when they stop, or the drivers jump on the podium, the sponsor’s names are showcased there. Depending on the size of stickers on cars, the sponsorship fee changes between 500K and 30M dollars. Name partner or title partner is another source of money. After Petronas Energy became a name partner with Mercedes, the racing team’s name changed to Mercedes Petronas, and this brought Mercedes enough money to win for seven years in a row. It ended dramatically when Max Verstappen of Red Bull won against Lewis Hamilton in the last race of 2021.
Sponsor Names on Cars
Drivers sometimes look like they are fresh from the fashion show. We see them coming to races with watches, backpacks, tees, etc. This way, they become an influencer in some way without it taking so much time, and also make money for themselves and the team. Yet, in the end, they are athletes who train long hours, and this is a very small part of their income.
Small race teams, when they need to be on a budget to survive, get their mechanicals from another big team. They have enough technology to supply requirements, like telecoms and engines. In this way, teams do not need to open big factories just for two active racing cars. Of course, there are a lot of cars waiting in the garage in case someone crashes, but mechanics will not be able to do it overnight. Still, supply caused many troubles for the FIA officials, and, in the end, they race against each other.
Controversy never ends for Formula 1. A term called pay driver is always a hot topic. When small team Haas was in trouble with sponsors during the pandemic, they brought two rookie drivers. One is the son of the famous Michael Schumacher, Mick Schumacher. He is not especially a pay driver but Haas specifically chose him because the name Schumacher itself brings revenue. Another rookie entered in 2021 and left the race when Russia invaded Ukraine, thus Russians were not allowed to race as athletes. Nikita Mazepin entered the team, and with that, his dad, owner of Uralkali, the main sponsor of Haas, entered the table. When all cards are on the table, the team is open to unwanted results. Nikita’s dad attended all races in the pit, and always made comments which became hard for the other driver Schumacher. After Nikita lost more than expected by a rookie, they changed cars with an order of the Uralkali.
In the end, F1 has always been controversial, and it will always be. There is just so much money on the table that power and money struggles are now visible. Still, drivers got that grid to bring everything they have to the game, not thinking about the externals, or how good their car is because they do not do it on a budget.
Howsen, George. "Do F1 Teams Make Money?" F1 Chronicle, https://f1chronicle.com/do-f1-teams-make-money/
Harshit, Verma. "F1 Revenue Model" Startup Talky, https://startuptalky.com/formula-one-revenue-model/
Joshi, Abhigyan. “The Rise of Formula 1” Business Bar, https://businessbar.net/all/the-rise-and-business-of-formula-one/
Del Bello, Ricardo. “Formula 1 Business Models: How F1 teams make money and stay competitive” LinkedIn, https://www.linkedin.com/pulse/formula-1-business-models-how-f1-teams-make-money-stay-del-bello