...forgive what I'm sure might be a dumb question. But I'll bet there are others here who have wondered the same thing but are afraid to ask. What is the "money chain" in F1? Obviously, sponsors pay a LOT to have ads on the track and on the cars and uniforms. Obviously, spectators pay a LOT to attend the race. But what exactly is the BUSINESS MODEL? Where does the money to pay the drivers come from? How does the track make its money? How does Bernie/Max make their money? How do the private investors in F1 make their money? Do the actual manufacturers make money? And who PAYS to be a part of it all? ALL businesses can be broken down into a cash flow tree... How does the F1 cash flow work exactly? <sheepish grin emoticon> Jedi
all F1 teams bought a dozen money trees but seriously, I wonder the same thing. It can't be profitable. Ferrari maybe sinks income from road cars into their racing teams. But Williams??!?!
Well, recall that not all drivers are paid, its been suggested that some drivers on the B-teams are actually paying the teams for their drives. I don't know if this is accurate or not, but seems to make a lot of sense. If this really is true, is this an openly discussed topic? I've never heard anyone in the F1 world mention it as it would feel the sport is cheapened to a degree. Anybody like to run down the list of drivers and guess who is paid vs. paying? Sounds like ANY driver on HST is a paying customer.
It is (or has been) very, very profitable to some - Eddie Jordan is maybe the most obvious example.... IIRC, Sir Frank was once listed on the "UK wealthiest" list (Ron Dennis still is) - The much maligned "modern" F1 has made many people very wealthy. My "understanding" of the (very simplified) money tree (Feel free to add/correct as needed.....) - A circuit/promoter/government agency wants to host a race -> Bernie (FOM) says "OK, it'll cost you $XXXMM / per year." - Bernie sells the TV rights to "the F1 World Championship" to broadcasters around the world - This is his *big* income stream. Oh, and with the exception of Japan and the UK (?) it's his TV "arm" that generates the feed (more $ for Bernie). - He also owns (or has "interests" in) all advertising rights around the tracks - The "Santander" billboards everywhere; Pay Bernie. The on-track vendors; Pay Bernie...[This is one of the things that pissed Indy off.] - The only revenue the track receives is from ticket sales. Bernie then distributes this income in accordance with the Concorde Agreement - Recently renegotiated with the teams receiving a higher (but still unknown?) percentage of total revenue. Exact amounts aren't known, but race positions at 25%/50%/75% distance are factored in as well as points scored and overall championship (WCC, not WDC) positions at the half way and end of season - I believe (but may be wrong!) that a moderately successful team - Force India, Williams right now can more or less cover their expenses from this source...... If the team can get sponsorship, they have the potential to generate serious $ - IIRC, Marlboro pay $100MM/season for all of the rights on the Ferrari cars - They then "sub-let" some of that space to Santander etc. [I wonder how much of that 100 large they get back?] The teams (and their sponsors) may or may not pay the jockeys - Over the years, I'd guess there's been more guys pay for their drives than the opposite...... Cheers, Ian
Jedi: When you figure it out, then explain to me how Hollywood works. I can't figure out how a movie costing $100M to make and paying a star like Tom Cruise $20M alone when the box office receipts (which a good chunk goes to the movie distributors) sells only $70 in receipts can make money. Yet, in most cases, this is exactly the situation. Selling DVD's? Yah, maybe. Overseas sales? OK. But it still make no sense to me. At least in F1, you can see the advertising money and the money tossed in from the manufacturers as part of their ad/PR budget. And, on a lot of young or little known drivers, they bring in their own sponsorship or they don't drive. So, you see a lot of well connected persons with banks or big business driving because of who they know rather than their true talent. Image Unavailable, Please Login
Seems about spot on. There is a difference between "Team" and "Team Owner" as EJ and FW were both made wealthy from F1, but their teams...very much not so. I'm not so sure about the $100MM figure for Ferrari and Marlboro. LdM has stated on quite a few occasions that Ferrari's F1 effort pays for itself and then some...and I don't doubt this. $100MM for the entire car wouldn't come close to footing the bill. There's the Happy Money that Ferrari get from FIA or Bernie for just showing up, but that's what, how much? 50 million? 75? The figure was made public but I forgot.
Good summary. Worth emphasising that a circuit's only revenue stream is ticket sales. Bernie gets everything else. That means that all those new circuits in new countries are subsidised by the government, because they come nowhere near covering costs. And that is why the British GP is a dicey proposition, and the USGP is even more so. France has no Grand Prix. France. You know: the country that held the very first Grand Prix; the country that bloody NAMED the races Grands Prix. Yeah, that country. It sank without a trace. Sure the circuit was ****e, but the numbers don't work anywhere in France because Bernie can get more from that traditional bastion of motor racing Abu Dhabi. I'm not arguing for sentiment over financial realities, but the value of the product is diminished by races in countries that pay Bernie for a race, eat the loss as a PR expense, and can't fill the stands except by giving away tickets.
I believe the situation with the drivers is slightly different. When a new driver comes in F1 the KIND OF pay their way in, but not by shelling out cash. It is about bringing sponsors.So the driver brings with him sponsorship to the team and in return, the sponsor gets their name on the car. It was long time ago, but I read an article about what the minimum sum was. Like for example it is $20 000 000. So Petrov gets LADA to sponsor him 15 000 000 and someone else the rest etc. I know that Senna paid a good portion out of his own pocket when he first got in the F1.
Not all drivers need this though, some get picked based on their talent, such as Hamilton and I believe Kimi. It's very rare though, even Schumacher paid 150K for his drive at Jordan.
I believe Alonso also was picked for his talent, but Massa on the other hand did use some family money. Could be wrong though.
No you aren't and its not unintended. F1 is operated under a master agreement (is it still called the Concorde?) between the various parties. Many terms of which are confidential. Over the years details of expired versions have been "leaked" by various entities (each with their own agenda) giving a sense of what the finances were but these reports by nature are unverifiable. Suffice it to say there is a ton of money changing hands in F1 and some have become incredibly rich while others have lost fortunes.
One further piece of information. After several financial dealings, change of shareholders and receiverships, CVC capital partners (a private equity firm) owns a majority stake in Formula One Management who has the rights to commercialize and sell broadcast rights of the F1 Championship. Bernie is an important shareholder and principal manager. On a positive note since Bernie's divorce it's very likely that Slavica took a good chunk of his stock
Merchandising can also add quite a few bucks to the coffers when you're global, like F1. Granted, it doesn't stir the drink. But it provides a nice twist!
+1. At least we know what we are getting with Bernie....the unknown is what scares me after he is gone.
+1 You never hear the guys "on the inside" whine about the evil little pygmy - Seems to me they love him (or least the $ he puts in their pockets eases the pain). How else has he been around for so long? Even Paul Stoddart didn't really slam him too hard - And if the stories are true, he *hated* him.... cheers, Ian
F-1 is all about advertizing and TV. Teams get income exclusively from: 1. Sponsors - advert space 2. Branding & merchandise - 3. TV revenue based on performance 4. Some have pay drivers - again with limited sponsorship The business model is based on world wide TV time, exposure etc. If you are BMW, Mercedes, Ferrari (FIAT) and any other mfg, then you spend some R&D $$$ to build and write off on investment. Its pretty simple. Sales ( advertising) less cost ( car, engines, travel, drivers etc...) = profit. For the big guys like Schumacher etc al. personal endorsments have nothing to do with driver salary. Most likley a sponsor like Marlboro will pay the lions share of the drivers salary. As for F-1 - this is where it gets really greedy. a long while back ( early 90's ) I did a deal with Bernie and Allsport mgmt. to provide all the food for the Paddock club in North America... basically all I could earn was what I invoiced F-1 for. We hassled back and forth for a year on getting concessions income... basically it was take it or leave it in the end. (I was reping a large world wide hotel company called Marriott) Allsport controlls all the signage inside the F-1 venue, controls the concession vendors, and takes 50% of the revenue ( but has no expense ) as well as designates all the beverage vendors, food vendors etc.... ( they get kickbacks from all those as well) Hotel's are usually comped for all F-1 / Allsport staff, as well as transportation for the event by the title sponsor. This was back in the early 90's - so I know its not any worse now... All immages are now owned by F-1 and they tightly control the press access as well as photo access. back in the 80's & 90's you just had to submit an editors reference and samples of your work for accreditation ... and you had access all over the track... today, you are limited to specific corners , pit & paddock and specific times.... unless - you pay! Its really incredible, anti trust lawyers would have a field day with F-1, but as a promoter you agree up front to the terms and cost... somewhere between $10 -$25MM per race. That is my understanding of F-1 business model. multiple income streams, control cost, spend less than you earn. Not bad for a used car salesman from London.
+1 You always hear plenty of people 'on the outside' (the fans) complaining but I'm not sure everyone is 100% aware of what Bernie actually does. To me, for the most time, Bernie is taken the piss quite literally with what he says etc in interviews, and more often than not, gets takes WAY out of proportion...Whenever Martin Brundle does his gridwalks, and interviews Bernie, Bernie is always playing tricks on him, taking the piss out of each other... But things such as 'we don't need the Monaco GP' is a bit silly since it's one of the most watched GP's of all of them...But then I believe he wasn't quite serious when he said that (haven't read the report yet, just headline).
