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
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
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.
Making matters harder for self-financing
grands prix, most of F1’s key contracts
contain clauses which increase fees paid