Profits and F1: How does anyone but Ferrari make money?

Theres no doubt they make more money from having their names on the cars.

I heard a little while ago, that Nascar has the highest return per $ of advertising then any other form, tv ads, radio ads, magazines, etc. I'm sure its the same way for F1 in Europe. Whether or not it is true is definitely a question to be asked, but there is no doubt they get a crapload of money back from it.

 

This is the mystery of marketing and how also my employees and I make a living. Ah, marketing...

 

Why would Ferrari be any different than the others in terms of making money?

Ferrari weren't always winners, and this past year they weren't either - yet they still do OK. I bet it's the same for toyota, McLaren, Williams, Renault and others.

 

There are 3 billion TV viewers in F1 every year -so your brand goes out to all of them - hence the attraction to the manufacturers. Also F1 has an elite aura to it - not sure about Renault or Toyota here

But is the spending really that high?

Maybe we need to reference the F1 spend with the number of cars sold and overall profitability.

For Toyota and Honda, the $200MM+ annual F1 expense is a drop in the ocean as compared to their overall revenues. I think per car it will be less than $30 bucks

Renault spends around $200 MM and sells around 2.5 MM cars so the avg spend is $80 per car. Seemingly not too bad but since Renault primarily sells small cars with slim profits, a cost cutter like Carlos Ghosn wont be too happy. Its lucky that Renault won last year or else he would have done something about it.

Mercedes sells roughly a million cars - so in terms of cost per car is is higher than Renault. But it makes profits from its car making line.

BMW is very profitable - so the F1 spend shouldnt be a big deal. This year though the money spent is going to escalate because unlike Mercedes, they are going the whole hog.

Come to think of it Ferrari might be the weakest manufacturer there in terms of affording to throw 300MM every year into F1 as it has the smallest car base to spread it over. But the names of Ferrari and F1 have been intertwined for decades and it would take a severe catastrophy for Ferrari to pull out.

 

win on sunday, sell on monday.

 

I heard somewhere most of Ferrari's excess money comes from clothes and other licensed products. They infact have a profitable F1 team last I read. I think one or two other teams turned a profit as well.


Mark

 

All that's been said is true, but don't forget this one:

Every team gets millions of dollars from TV revenue: That's a big part of what the bickering with the breakaway series is about (the other part is about changing rules etc): Bernie collects millions of $$$ for selling the TV broadcast rights. He divides that golden pot up based on a secret formula. In essence it is based on performance, so the better a team does, the more TV revenue it gets.

This is also the reason why e.g. a team like Minardi or Jordan who doesn't sell any cars IRL still could have made a profit (not sure they did or not). You don't need to win the championship to get TV money. As long as your revenues don't eat up what you're putting into it, you got yourself a good deal.

Some teams of the breakaway series think the way this money is distributed is not fair enough and/or Bernie keeps too much for himself.

 

also alot of F1 expenditure can be looked at as R&D.

the experience and feedback that the companies get from their F1 teams is utilized in the manufacture and design of their road cars.

 

I would think Toyota, Honda, MB and BMW get more bang for their buck in F1 as there is such a larger market for their cars than there is for Ferraris...

 

Yes and no: IMHO a big piece of the Ferrari myth is based on its racing history.

I like the Lotus Exige, but I'd rather drive a Ferrari because they're still in the game.

 

Marketing, for all, and at least in the case of Honda, technological innovation and training. Mercedes farmed out their engine work to Ilmor, and iirc Toyota's F1 is run by a German former rally outfit.

Yes, and not much. There are some funds available for championship points and a TV revenue payoff related to number of years in the championship, but those payouts are minimal compared to the gross.

Ferrari's F1 team is only very recently profitable as a stand alone entity, IIRC Montezomolo's goal was 'break even in 2004'.

The Garagistes*, OTOH, have made and removed several fortunes from the sport over the years, siphoning-off sponsor money like bandits.

*Williams, Head, Dennis, Jordan, et al.

 

i was not implying that this completely justifies the expenditure.
however, i do think that R&D is secondary benifit which is gained by running a formula 1 team.

also the examples you provide are the most obvious. im sure there are many other things that have been tested for F1, that have been used in road cars.
For example i remember reading somewhere that BAR along with Honda developed the hybrid technology that we see in Civic Hybrids these days.


i agree that what we see in a modern f1 car will most likely not explicitly be seen in a current road car. but it lays the foundation for the development of future of road cars.

cheers

 

The teams can and often do make money. Most of the teams have always turned a profit. Simply put, their income exceeds their expenditure. They receive money from their sponsors and they spend as little as possible (which is a lot!).
Frank Williams, Eddie Jordan and other team owners are not poor!

It used to be true that to make a small fortune in F1 you just started with a large one! Nowadays it is a profitable business.

I am sure the F1 programme has cost Renault a lot of money, but it was probably cheaper than traditional advertising.

 

Back in 92 - 93 I was working for Marriott... and we were talking to Allsport about providing all the catering services for the Paddock Club, that's the VIP entertainment area normally above the pits or just next to the Paddock... anyways a 3 day ticket ( if you can actually buy one ) is around $5000.00 ... Bernie and FOM along with Allsport ( Paddy McNally) control every piece of the pie... from bill boards, track signanage, each vendor must be FOM licensed and kicks back the 1st 20%-30% of its revenues to FOM... they Wanted Marriott to pay for the rights to serve food outside the Paddock Club!, but only a (nominal fee - 5% back in the day ) for the Paddock club there is a fixed expense amount which is like 300% less than the actual price of the ticket... and we are talking realatively good food and booze... every item used during a GP weekend has been contracted, costed, and agreed to.. all so Bernie can make $$$ from every thing associated ... its really a fantastic business model ... thats why the big banks bought F-1.... now the teams only get a slice of the TV revenue... world wide... which in it's self is big $$$ and each team sponsor pays the team Millions for prime locations - sidepods, wings etc... and the further up the field you are and the more TV exposure time you have the more $$$ you comand. ... most teams can make a profit if they dont get crazy like McLaren did with its mobile Tech center... I think that is why M-Benz was stingy on engine RD cause he was doing so many capital expenditures... anyway thats how the teams make $$$ ... they get a slice of overall TV revenue, prize and points money... ( very small) and then sponsorship... try to slap a stiker on an F-1 car while strolling the paddock... and they will put you in Jail.... it aint like the good old days... the contracts cover appearances, driver sponsor meetings, how the pits will look etc.... its amamzing how much $$$ is floating around.

 

Garagiste was Enzo's derisive term for those who assemble rather than build their race cars.

Ferrari only started selling road cars, which until the mid-sixties were more often than not merely de-tuned race pieces, to finance his racing team. There was a time when making a profit was not the sole point of F1. It is now the only advertising the do, and still a large element of their tech development stream.

Some non-obvious trickle downs, shared as well by Honda, are CFD analysis of vehicle aerodynamics and engine gas flows, metalurgy, materials and lubricants science, and vehicle dynamics and control analysis.

Ie, the 355 heads were based on the 412T2's race engine, iirc, Honda used bearing materials developed in F1 for the G2 Integra 4cyl, the 360 underbody aero was modeled with the same sort of programs used for F1.

NB - It is reported that it was just last week that Montezemolo declared Ferrari's race team to be free of assistance from parent company FIAT. (Although I expect they will still carry a FIAT sign somewhere.)

 

$3,100-5,100, depending upon venue, from gptours.com, and a fine way to see a race, indeed. I think Ferrari dealers have them as well, at a significant markup, for the Ferrari-specific club area.