F1 economics – where does the money go and come from?

January 24, 2011

For people outside of the sports business industry – or let’s say sheer sports fans – it is sometimes strange to point out the value of sports. Especially in Formula One, prostate a sport that obviously needs huge budgets for cars, developments, teams, logistics, tracks and many more, it is always interesting to see who is paying what to whom.

According to “Formula Money”, the biggest share of F1’s revenues comes from team owner spending (1,605.5 million $). Unfortunately, there are no figures on how these spending developed, but it is obviously not hard to guess that this figure has increased. Not only because of team owners coming out of industries outside of racing, let’s say aviation, beverages or chemicals, but also because of the constructors being determined to become F1 world champion no matter what it will cost.

Second position on the top ten list of revenues is on-car team sponsorship. In 2008, team sponsors spent 836.9 million $ (source Formula Money). After a financially hard year in 2009, 2010 should have brought another increase in sponsorship for F1 with UBS and the banking sector returning to the sport.

Race sanctioning fees accumulate to 403.5 million $. With all the new tracks and markets integrated into Formula One, also this figure should have nothing but increased throughout the last years. TV rights sum up to 380 million $, ticket sales bring a revenue of 290 million $.

For trackside advertising, sponsors were willing to pay another 171.7 million $, while the activation of sponsorship including guest invitation, merchandising etc. brought a turnover of 209.3 million $.

Summing up all sponsorship related revenues, F1 generates 1,533.35 million $ including team, driver and on-site sponsorship, sponsorship activation, sponsorship of TV broadcasts and paddock club revenues. Being almost a third of all accumulated revenues, it becomes clear that sponsorship is definitely an important factor in the financing of the sport.

Another factor that should not be forgotten is the revenue that comes from suppliers. Tyre suppliers spent 72.8 million $ in 2008. The supplier off-car team sponsorship made up 58.85 million $ and the customer engine supply resulted in a turnover of 90 million $. Big figures for companies that are sometimes only known in the OEM and automotive industry. (Source of all figures: Formula Money)

There’s money to be spent and money to be made in F1. For worldwide brands and companies it is a perfect platform for global marketing.