If you think Formula 1 teams make huge profits, think again.
Just about every last cent is spent in the pursuit of victory.
Sebastian Vettel’s nine wins
from the first 15 grands prix
of 2013 gave Red Bull some
serious TV exposure. But the
correlation between winning
and screen time isn’t always
clear cut – win too easily and
the director’s going to linger
on the brawls behind you...
No. 2 / THE TEAMS
his year, the 11 teams in the Formula 1
World Championship will take over $2bn
in revenue. It’s a remarkable amount to
generate from 22 drivers racing around a
track for a couple of hours 19 times a
season. However, although the teams
receive those vast sums of money, they
will finish the year with next to no profit.
Welcome to the weird world of F1 finance.
Generally, F1 teams are run to break
even. This involves the team principals
spending whatever is available to them, and
they do it in the single-minded pursuit of
victory. The established theory is that it’s
better to race for wins and championships
and make no profit, rather than make
money and finish low down the standings.
Simply, winning races increases the value of
the team – which gives the owners a future
payout if and when they come to sell it. It
also increases the team’s ability to bring in
more money from sponsorship, since
brands are prepared to pay more to be
associated with a winning team.
But while team owners may get a financial
return from selling a team in the long run,
what’s in it for them in the short term?
If the team is owned by a private
individual, such as Sir Frank Williams, who
has a 50. 8 percent stake in his eponymous
team, they can take an annual salary. This
comes out as a cost to the team just like
salaries paid to staff. Eight F1 teams are
based in the UK and therefore have to file
publicly available financial statements. The
most recent year for which a complete set
is available is 2011, and this reveals that
the team with the highest-paid director
was Red Bull Racing. Its team principal is
Christian Horner, and he’s believed to
have received the sum of $2m (£1.3m)
shown on the financial statements.
If the owner is an auto maker like
Mercedes, or a commercial concern such
as Red Bull, the benefit they get while the
team runs to break-even comes from TV
and media exposure of their brand as logos
on the cars and drivers. According to
F1’s trade guide Formula Money, Red Bull
was the most exposed brand in F1 for
the past three years. Its Advertising Value
Equivalent (AVE) – the price to buy a
similar amount of on-screen exposure –
was an estimated $414.9m in 2011. That
fell to $322.8m last year, due to Sebastian
Vettel winning fewer races, but was still
14.2 percent of the total for all teams.
PAYING TO BE SEEN
In 2011, the accounts show that F1’s
UK-based teams had average revenues of
$150.8m (£ 97.6m), with Red Bull highest at
a staggering $273.2m (£176.8m) and
Caterham lowest at just $33.2m (£ 21.5m).
The teams’ revenue generally comes
from three sources, with each providing a
similar amount. They are all fueled by