Under the long-in-the-making 2013 version
of the Concorde Agreement – the contract
that binds together the FIA, the teams and
the commercial rights holder, Formula 1
Group – the teams are set to receive a total
of 63 percent of the sport’s annual profits
as prize money (compared with 50 percent
in the previous Concorde Agreement that
lapsed at the end of 2012). Under the
previous Concorde Agreement, that
comprised around 29 percent of total team
revenue and came to the not inconsiderable
sum of $698.5m in 2011, according to
F1’s most recent financial statements.
What you receive from the profit share
isn’t just based on your most recent
on-track performances. Taking multi-
season achievements into account, three
teams – Red Bull Racing, Ferrari and
McLaren – receive varying Constructors’
Championship Bonus (CCB) payouts
which add up to whatever is the greater
of 7. 5 percent of total profits or $100m.
Based on its historic status and the
importance of the Prancing Horse to F1,
Ferrari receives an additional payout. Under
the old agreement that was 2.5 percent,
rising to 5 percent in the latest version.
In real terms, winning the constructors’
title in 2012 gave Red Bull Racing an
estimated $87m from the prize money pot.
The remaining 5 percent of F1 team
income comes from miscellaneous sources,
such as the previously mentioned pay
drivers, who typically bring $10m each to
drive. The other drivers are paid to drive,
and this averages at $5.2m per driver, rising
to an estimated $40m for Ferrari’s Alonso.
Drivers aside, after manufacturing and
R&D, staff salaries are the second biggest
cost for F1 teams, averaging $42.5m per
outfit, thanks to 600-plus staff numbers at
the bigger teams. It’s a huge figure, but it’s
just one more example of how F1 teams
manage to spend almost every dollar they
receive in the relentless pursuit of victory.
Mercedes’ Formula 1 activities are split
into two: Mercedes Grand Prix (race
operation) and High Performance
Engines (supplying McLaren and Force
India, as well as its own race team) are
separate entities. However, HPE
cannot be isolated; nor can MGP’s
engineering satellite operating
from Daimler’s Stuttgart base.
Combined, Mercedes has by far
the largest spend in F1, with
commensurate headcounts. These
are offset (marginally) by the engine
supply contracts with Force India
and McLaren, the latter expiring
after 2014 when it switches to the
returning Honda. Williams will also
join Mercedes’ customer ranks
next season, when the new F1
engine formula come into play.
These activities explain top-heavy
structures, with recent intensive
staff recruitment drives pointing to
a ramping up of activities and
corresponding budget increases.
Mercedes GP is financed by a
combination of Daimler funding,
sponsorship (the largest being the
Malaysian national petro-chemical
company Petronas), customer activities
and FOM payments. Shareholding was
diluted recently through an allocation
to motorsport director Toto Wolff
( 30 percent) and non-executive
chairman Niki Lauda ( 10 percent).
Although a member of F1’s
Strategic Committee, the Mercedes GP
operation is not a full member of the
CCB, qualifying for annual incremental
payouts of £8m until 2015, which
from then on increases to £10m.
MERCEDES GRAND PRIX
CASE STUDY
INCOME BREAKDOWN
33.33%
($80M)
DAIMLER
40%
($96M)
SPONSORS
26.67%
($64M)
FOM EARNINGS
FROM 2012
2013 estimated spend and income:
Spend: $256m (inc. engines)
Income: $240m
SIDE OF TUB (MEDIUM LOGO)
$10M
TOP OF NOSE (SMALL LOGO)
$3M
WING MIRRORS (SMALL LOGO)
$5M
(LEFT) On average,
around 42 percent of
a Formula 1 outfit’s
budget comes
from team-sourced
sponsorship. (BELOW
LEFT) Ferrari has
been part of the F1
World Championship
since its inception in
1950. Its special
payments from the
sport’s annual profits
reflect that history
and the marque’s
massive fan appeal.
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