Have you ever wondered how F1 teams make the big bucks? The world of Formula 1 is filled with extravagance, globe-trotting, and whimsy. In a realm where it’s the victor who supposedly takes it all, the question of how Formula 1 teams survive comes to light. Let’s explore how the F1 Teams Income is divided up.
Liberty Media Changed the Game
Liberty, the mighty American company, seized control of F1 in 2017 for a whopping 7,4 billion dollars. Since their arrival, the company has implemented changes that not only make the sport more entertaining but also more lucrative for the teams and sponsors.
Successful marketing strategies, broadcasts on Disney platforms, the Netflix series “Drive to Survive,” and many more factors have significantly boosted the value of F1 to 15.1 billion dollars.
But the most impactful move was implementing cost caps for the teams. This not only levels out the competitive ground for Formula 1 teams (although we know they’re not quite there yet), but it also draws in more investment groups (it’s well-known that many investors don’t like it where there’s no caps.)
In one way or another, Liberty transformed a sport that was losing fans into the modern-day media phenomenon. Combined with an F1 grid full of young drivers who align with social media, and entertainment trends, it’s a sure-fire formula for success.
But How Do F1 Teams Make Money?
Due to the immense wealth linked to this discipline, Formula 1 teams are very tight-lipped about the information they disclose.
In broad strokes, each of the teams in the premier single-seater division earns money based on their performance each season, gauged through points in the F1 standings. The more points they earn in the season, the more they receive, although the gap between the best and the worst teams is smaller compared to previous years.
The F1 Teams Income also depends on the sponsorships that each driver can bring to the team. This situation has been highly criticized worldwide because teams tend to select a driver who can bring in more sponsorship money rather than the most talented driver.
For the 2023 Formula 1 season, the teams shared a total of 1.4 billion dollars, and it is projected to be even more profitable in 2024. It’s believed that Red Bull took 15% in 2023, while Williams, the lowest earner, received 7%.
Long-Standing Teams Agreement: Ferrari’s Peculiar Income Case
The FIA (Federation Internationale de l’Automobile) has unconventional agreements with several teams, and the most peculiar case is Ferrari’s.
The Maranello team has been an institution in this discipline, and even though it’s far from the dominant force it once was, there have been seasons where they earned more money than the championship-winning teams.
How is this possible? The Italian team is the only one that can afford to charge for being who they are. Due to the team’s significance in the racing world, there’s an agreement called the “Long-standing teams” deal that goes to the team with the longest history in F1. In the event that Ferrari decides not to participate in F1 anymore, this bonus would be passed on to McLaren.
This clause has been controversial. While Formula 1 teams respect it due to Ferrari’s historical achievements, the financial group Liberty plans to do away with it. They feel it’s pretty unfair that a team with a somewhat sloppy performance gets much more money than other teams that have really made the cut or at least are higher in the performance food chain than most of Ferrari’s instances.
The FIA Also Takes Its Cut
Not all the Liberty money that comes from sponsorships, use in platforms, and other sources goes into filling up the F1 Teams Income.
The FIA, the organization that oversees F1, also claims its share of the money. When Liberty, the North American group, took the reins and started generating more income, the FIA decided it deserved a substantial chunk. One way they secured their share was through fines or penalties.
Furthermore, drivers and teams must pay a license fee to compete, and it’s tied to their performance. The more points they accumulate, the more they must pay to stay in the competition. This also adds up to the substantial chunk self-assigned by the FIA.
|Team||2022 Points Standings||2023 Fee (USD)|
There are, apparently, quite a lot of ways to cut the Liberty money pie, and it’s not all that symmetrical…
The F1 Teams Income Doesn’t Reflect Their True Value
How much are teams paid this 2023 F1 season? Hint: It’s not a reflection of their true value. Then, let’s see what the real value of each team is.
|Team||Team’s Worth (USD)|
|Ferrari||3.9 billion dollars|
|Mercedes||3.8 billion dollars|
|Red Bull||2.6 billion dollars|
|McLaren||2.2 billion dollars|
|Alpine||1.4 billion dollars|
|Aston Martin||1.3 billion dollars|
|AlphaTauri||1.1 billion dollars|
|Alfa Romeo||900 million dollars|
|Haas||780 million dollars|
|Williams||725 million dollars|
In 2023, Ferrari takes the cake as the most valuable team. This goes to show that, in addition to the brand’s prestige, bonuses like ‘Long-standing teams’ add more value to the favored team. Surprisingly, Red Bull, despite winning consecutive driver and F1 constructor championships for two years, isn’t the most valuable team. Even with a bonus for their ‘Heritage’ (recognition for their track record in F1), Williams remains at the bottom of the list.
As Formula 1 is on the rise, it’s expected that in the coming years, the number of fans, sponsors, and consequently, the money will increase, contributing to a higher F1 Teams Income. Now, the fair apportionment for that increase in money is, entirely, something else. We’ll have to check up on that later on.
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