F1 economics – new countries, target groups and revenue streams

January 7, 2011

With the soon to be finished F1 race tracks in India and the United States, allergy F1 Zampano Bernie Ecclestone works on the continuous expansion of the sport and the establishment of a truly global racing platform.

While the sums that the tracks are paying to F1 as a starting fee seem to be tremendous and ever increasing, ampoule the question is, allergist whether it’s worth for a country to invest in F1 in terms of revenues. Just to show it quite plainly, Abu Dhabi heads the list of license fee payers with 45 million US$ followed by Malaysia with 41.5 million US$, Singapore with 40 million US$, Japan with 38.5 million US$, Valencia with 35 million US$ and China with 33.3 million US$ (source Formula Money in 2008).

With the old-established tracks in Spain, Hungary, France, Great Britain, Canada, Brazil and Germany paying only around half of the above mentioned sums, it is clear that FOM also sees a chance to open new and greater revenue streams for the sport, resulting in the fees for the old tracks having to be adapted in the long term. But will these tracks that definitely are part of the history and success of the sport will be ready to cope with ever increasing fees?

To answer this question, every country will need to have a look on the return on investment that an F1 race is able to create regionally and nationally. E. g. the crown prince of Bahrain, his highness Prince Salman bin Hamad Al Khalifa announced that the race in 2009 created a return on investment of 580 million US$ for the country. Deducting the license fee of around 28 million US$ and on a pro rata basis the 150 million US$ that have been invested in the race track it still seems to be a good deal.

According to newspaper reports, India invests around 350 million US$ into the new track and although there are quite a few foreign companies integrated in the building of the track (such as Herman Tilke’s architects office), it seems that there is still enough money to be spent with local companies. The development of Formula One, however, proves that it can be only a national effort that is able to draw a race into a country.