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is part global coming-of-age statement, part tourism driver, played out in front of a massive TV audience. Last year F1 attracted more than 500m TV viewers, making it the world’s most-watched annual sporting series (the Olympics and soccer’s World Cup are bigger, but on a quadrennial basis).

In recent years, emerging economic powerhouses like Abu Dhabi and Singapore have woken up to the promotional power of F1, while superpower candidates such as China, India and – for 2014 – Russia view a grand prix as an obligatory status symbol.

Central or regional governments are
prepared to bankroll or underwrite the
hosting fees for several of the new races,
fueling a grand prix arms race and driving
by up to 10 percent annually. This goes a
long way to explain why F1 is one of the
few industries (and it is an industry) with
consistently rising revenue over the past
five years. It took in $1.07bn in 2006, rising
to $1.16bn in ’07. Since ’08, when revenue
hit $1.39bn, it’s increased at a compound
annual growth rate of 3.1 percent.

F1 doesn’t own any tracks, so its costs
are kept under tight control. It only has
313 staff and its biggest single cost is the
payment of prize money to the teams (see
page 74). The bulk of it is 47. 5 percent of
F1’s profits remaining after all fixed costs
have been paid. It’s split into two equal
amounts, with one half divided equally
between the top 10 teams and the other
paid out based on final points. Heritage
payments to Ferrari and a Constructors’
Championship Bonus (CCB) divided between
Red Bull Racing, Ferrari and McLaren further
add to the earnings of F1’s big dogs.

Giving the top teams the richest rewards may seem like a bad idea because it means that the same teams are the most likely to win. However, it helps secure F1’s future.

In a sport where teams enter and exit on a frequent basis, or change identity almost at will, Ferrari, McLaren and, latterly, Red Bull are marquee names, beacons of stability, and successful, too.

In total, the 2011 prize money came to

$698.5m. Although it’s F1’s biggest cost, being a profit share links it directly to financial performance. The more money F1 makes, the more the teams get. In

2011, that left F1 with a $474m profit, and a great deal of media attention has been given to how private equity firm CVC Capital Partners benefited from this.

Last year alone, CVC netted $2.1bn through selling 28. 4 percent of F1 to three investment companies. That left it with

35. 5 percent, keeping it as the biggest single shareholder. In addition, it has received hundreds of millions of dollars in dividends from F1’s profits. However, CVC has been far from the only beneficiary.

Prize money rose by $450.5m in just the four years to 2011, and since CVC bought F1 in 2006, the teams have banked more than $3.7bn. Even if you include the income from the share sales, the sum that CVC has received from F1 is roughly similar to the amount received by the teams. It makes Bernie Ecclestone’s current $3.9m salary seem small in comparison, but such is the gargantuan scale of F1’s finances.

(LEFT) Ferrari and McLaren are two of F1’s marquee brands and that’s reflected in the prize and bonus money they receive.

(BELOW) Bernie Ecclestone with FIA president Jean Todt.

Here’s a breakdown of where F1’s revenue came from in 2011, the most recent year where full accounts are available. Race hosting fees top the list.

Source: Formula Money

REVENUE STREAMS

Race hosting fees $512m Television rights $489m Trackside ads and sponsorship $222m Corporate hospitality $80m Feeder series $55m Other sources $164m

TOTAL REVENUE $1.5bn COSTS $350m

Team prize money $698.5m

UNDERLYING PROFIT $474m

“Most of F1’s key contracts
contain clauses which
increase fees paid by up
to 10 percent annually”

up hosting fees by $15.7m per event since 2003. The average fee was $27m in 2011, pricing many countries out of the running.

It’s a particular problem in F1’s traditional European heartland, where F1 isn’t needed to boost tourism, or governments are loathe to subsidize such flagrant shows of conspicuous consumption. In the past five years, Eurozone races have been lost in France, Germany, Spain and Turkey.