The noise, the colour, the brands, the money- ‘iconic’ is the word that comes to mind when images of the insanely popular motorsport conjure up. What’s interesting is that even at a time when the pandemic cast its blues on businesses, F1 could garner $530 million of revenue, even after its tally of races went down due to the social-distancing norms. But the high-octane sport kept racing ahead.
Understanding The League
The Formula One group is owned by Jersey-based Delta Topco, a company owned in turn by CVC Capital Partners, which has a 63.4% stake in it.
Furthermore, Mr. Bernie Ecclestone, who helms the brand, has a personal stake of 5.3%. Meanwhile, his family trust owns 8.5%, and management and advisors make up the remaining minority stakes.
The company employs more than 50,000 people in more than 30 countries and uses cutting-edge technology in the automotive industry.
According to research by Deloitte, revenues per game in the NFL are an estimated $24 million, $8 million in the FA Premier League, and $2 million in the MLB. According to the same research, the 18 Grand Prix in 2007 produced average revenues of $7 million, making it much higher than any other sports. The two biggest sources of funds revenues are fees from broadcasting races and hosting. Also, what makes it different from other sports companies is that its performance is not related to the events on the track.
Driving The Numbers
“For six and a half days a week, F1 is a business, and on Sunday afternoon, it becomes a sport,” Formula 1 team boss Sir Frank Williams once remarked. And rightly so! Naturally, a big part of the revenue comes from the sport itself. The other piece of the puzzle are the big sponsorships of the game.
“Every year, each team receives financial backing from 10-20 sponsors that shell out huge chunks to have their brand names displayed around or to be roped as titled sponsors in the most-watched sporting television series. Trackside advertising at each race is one of the biggest revenue generators here. That alone is known to clock over $259 million,” shared an industry insider on condition of anonymity. This is generated from the likes of Rolex, DHL, among others.
Meanwhile, $1.3 billion are known to come from hosting and broadcasting races each. Furthermore, according to SEC filings, F1’s revenue from television rights in the US alone was $4 million, and television contracts add a staggering $587 million to the company’s balance sheets.
The Technology Transfer
From Ferrari to Mercedes, and the most sought-after auto-maker, marketing platform aside, Formula 1 is an important platform in terms of technology development.
Another thing to remember is that the most common component is the engine, and hence various automakers provide engines for the teams and others. For instance, in 2021, Mercedes produced engines for Aston Martin, McLaren while Ferrari did it for Haas and Alfa Romeo.
Rich firms even without proprietary engines, can become suppliers too. Another source of creating an additional income stream is the external technology transfer. “If you look at its history, various teams developed technology for third parties that we’re not even involved in the F1 championship. From McLaren to Williams, several have donned supplier and external technology transferer hats. That gives them an edge in their booming income,” shared another industry insider who didn’t wish to be named. It’s also well-known that the innovation produced in this sport has been applied to aerospace, IT, telecommunications, and materials engineering.
Apart from riding high on sponsorships, broadcasting, and the game itself, automakers at F1 have showcased various innovations such as aerodynamics, finger-controlled gear shift systems, ultra-light carbon fiber composites in bicycling, advanced telemetry systems, virtual design, and simulators such as Advanced Engineering to flywheel energy storage mechanisms.
The F1 season has become longer and longer in recent years, and the 2022 calendar is only set to be the biggest year, thanks to the 23 races that are scheduled to go ahead. F1 enthusiasts are also speculating the possibility of extending the race in the years to come. Overall, there are 25 circuits that hold contracts with F1. For the unversed, China and Qatar each have an agreement for the future despite not holding a Grand Prix in 2022. There has also been much talk over potential new venues such as Las Vegas.
There are some venues on the calendar that hold long-term deals with F1. They are primarily circuits that pay a significant amount to host a Grand Prix.
Qatar is one example that has an agreement for ten years from 2023. Qatar pays $55 million per year for its contract, the highest amount on the list of contract costs so far.
Others to spend on this list are Saudi Arabia, Azerbaijan, China, Abu Dhabi, Bahrain, and Russia. They all pay a sizable amount of money to participate in the sporting extravaganza. In addition, holding a slightly different agreement in Miami, where a new track is being laid for 2022, which will remain on the schedule for ten years, F1 itself is working with the race organizers on the said venue. That means that the sport will take on some of the costs. In all, the race sanctioning fee, the fee for hosting a formula one race, is the other big-money generator. According to the latest numbers, the hosting fees in 2022 came to a total of around $700 million in a year.
Overall, the road ahead only has F1 fans enthused, and all eyes are on its 2022 edition now with optimism in the air. F1, after all, is racing full speed with no end to the road ahead!