It is impossible to give correct figures in relation to the Formula 1 payment structure because they are based on the financial returns of each year and then a complex web of percentages, mixed with fixed payments in places. And, of course, the whole thing is confidential and so no-one is supposed to provide the world with details. However, this is the structure that I believe is correct (although no-one can complain if they do not make the real numbers public). The reality is that this is pretty close to what happens, although the historical payments are still rather vague (and may have been one-off payments).
I apologise for a number of revamps as small changes affect the whole thing and one or two things were wrong.
158 thoughts on “The F1 financial structure explained (in four sentences)”
I think the cvc percentage is wrong. Its more than 37%.
I do not agree with you
Thanks for publishing this Joe; I can see now what you meant about the profit CVC take. I can also see that the rights holder’s opex is huge – 1.2bn in effect is operational expenditure.
greg – 37% seems reasonable to me too. CVC, even whilst sweating an asset, will have both a commercial interest in ensuring the payments that flow keep the sport going as well as a series of contractual. But for an investor whose main expenditure happened some time ago and who really doesn’t have to do much each year to make their profits this is a solid return on investment. They bought F1 for US$2bn and according to our best friend and F1 insider Mr Sylt have made $8.2bn profit (I checked and CVC don’t publish annual reports so I can’t verify it independently). 37% is believable, sufficient, and totally within reason both for a private equity firm, and our expectations. Anything more would be farcial and comical.
The sport is owned through a fund, which is different to CVC proper. The fund is in turn owned by investors (including pension funds, HNWs, foundations etc). CVC earns base management fees for managing the equity as well as performance fees if the investment, either individually or as a fund, earns over a certain hurdle. Typically pre-GFC PE funds had BMFs of around 2% of equity as well as performance fees of 20% over a hurdle. That may be around an 8-10% IRR (reasonably low). Without knowing the specifics of the fund’s performance, but knowing that this investment has gone well, you could assume broadly speaking that CVC would be taking home around 15-20% of the profits from F1 (net of costs). The cost of running a fund like this would be around 0.5% of assets p.a. Typically the bigger the fund, the lower the MER.
The sport is not owned.
It’s just the lease of commercial rights for one racing series.
This is a really useful visualisation, thank you!
But i think i might have spotted a small mistake – it looks like 1.6%/30m goes into historical payments, but then two lots of 30m go out, one to Williams, one to Mercedes. I don;t know what (if anything) is out, but it doesn’t seem to add up.
thanks again, though 🙂
I was also thinking the same thing. I thought Ferrari is the only team receiving payments for their “historical importance”? Or is this something else entirely?
Very nice chart that is easy to understand. Thank you, Joe.
It was until last year
How does that historical payment of 30m work? Once to Williams and Merecedes each? Or just Williams?
Sorry made a slight slip up. They both get it (I believe)
How does Mercedes record come close to Williams?
That is not for me to say
No historical payment for mclaren ? How did Ron mess that up?!
I have said that I am not 100 percent sure about historical payments
Maybe the payment originates from the Tyrrell days (rather than having a link to Mercedes), because they were one of the only teams (Williams, Tyrrell and McLaren) that refused to sign the Concorde agreement and negotiated better terms for themselves?
No, it is a recent deal. Last year I believe.
I guess it’s because they would claim some linkage between the modern Mercedes team (which was previously Brawn GP, which was previously Honda, which was previously BAR, which was previously Tyrell) and the original Mercedes team from pre-Formula 1 Grand Prix days. To my mind it’s a tenuous link, but I guess from a marketing perspective, or selling heritage and history, it works?
I remember Mercedes getting pretty vocal about not going to accept getting no money from championships or anything last year John O’ Neil (they did win with Brawn, but that did not count).
If I am not mistaken they made noises of the “we are going to quit over this” and losing them, while supplying 4 teams with engines, was probably not a good perspective for Bernie. That is probably why they successfully bargained for a slice of the prize pot.
Remove the $90 million Ferrari payment. Shift it to column 3 for the 11th and 12th based teams. Share the $90 million between the 11th & 12th teams, 11th place gets more, 12th place gets a lower proportion of it.
That’s just for starters.
But then again, I suppose I am dreaming and being extremely naïve..
Doesn’t FIA get any share from the revenue generated by Formula1?
The FIA gets fees for services rendered. It also charges massively for entries and licences. It is not allowed to take a percentage and the option to buy one percent of Delta Topco is decidedly dubious, given the need for a clear division between regulatory and commercial bodies.
>>the option to buy one percent of Delta Topco is decidedly dubious, given the need for a clear division between regulatory and commercial bodies.<< Did not seem to bother Bernie when he claimed he had caused the FIA to change the way the rules on coaching drivers on the radio were applied now did it!
This is really helpful and interesting.
There seems to be one other small error though in case you want to correct it….the total above the Column 1 Top 10 Equal Shares looks like it ought to be £405m rather than £450m and the two percentages breaking down the Teams revenue lines here don’t seem to be right.
Thanks again though
Joe – just a brilliant piece of work. It really has been tough for a mere mortal like me to grasp the finances – whether the values are exact is not as important as conveying the framework. Edward Tufte might applaud!
Maybe another typo – the F1 teams receive 855M$ but hand out 2 lots of 450M$ – or is another 45M$ sourced from somewhere else?
Extremely interesting graphic though.
No, I just pity the wrong number in the boxes. It was not an easy graphic to dream up
No I cannot imagine it was easy. Fantastic effort and very much appreciated.
Key question this raises to my mind is regarding the Commercial Rights Holder – is the $1.8bn distributed after their other expenses?.. or is it the total received in rights?
Ie, is there another % of funds “lost” off the top? To either Bernie / CVC or the debt holders?
The answer to your question is in the graphic
Thanks for that, Joe, a very useful piece of (now graphical) information.
Hi Joe. This is great.
Is it correct that the formula 1 teams pay out $945m but only receive $855m? On the other side the formula 1 group pays out more than it receives from the rights holder group. …..what am I missing. ..interest maybe or income from other sources?
Looking at those figures, Ferrari’s recent performance is pretty shocking!
The $194m discrepancy between the shares of Marussia and Ferrari is pretty shocking.
If 3 different teams came in 11th place over a 3 year period would the Column 1 & 2 figures then have to be shared out amongst 11 teams instead of 10?
No, the 11th and 12th teams get Column 3. $10 million each. But that was a major negotiation last year as I believe Column 3 does not really exist now that we have bilateral agreements.
Excellent – Very useful.
It certainly shows what a bad job Ferrari are doing considering their budget.
The first journalist who has the knowledge, balls and clout to explain the true F1 remuneration package as he sees it in a simple schematic.
Take a bow Joe
I know the figures are aproximate but—– 855mil×2= 1.71bil the missing 90 mil is a sum not unadjacent to that paid to a Bavarian Court earlier in the year orto use a whisky term is it the angels share?
If you look at it you will see the Ferrari payment
Now you have adjusted the figure from 855 to 900 mil it makes sense.
Ah-mazing! Great work to render this as clear as a whistle @Joe
Marussia was 10th in last years constructorś championship, so should get the 10th place share and performance bonus I think.
The top 10 is established using two of the last three years.
Wow. I knew the gulf in payments between Marussia and Caterham was big but not THAT big. Fair play to them for lasting this long, quite frankly
good luck to Marussia/Manor if they can get through this year, they have a good budget to get next year started.
Not looking so good for Caterham, $56m from FOM + sponsors and driver income and still massively in dept!
Yes, that’s odd isn’t it? Added to which all that sponsorship money from GE, Airbus and Dell
lets see if the administrator can shed some light
Tongue just a little in cheek there I think Joe 🙂
Pretty astonishing that a ‘hard nosed’ businessman was duped into giving Ferrari so much. I don’t think that they really bring much to the sport, certainly no more than McLaren or Williams.
They had no choice. Ferrari is the key to F1.
“They had no choice. Ferrari is the key to F1.”
Really? Even now, after several dismal years, and no end in sight? And a whole bunch of younger fans saying they couldn’t give a rat’s patootie about the Red Bunglers?
Yes, when it comes to negotiations, Ferrari is always the key.
Surely not any more? great info thanks Joe – it’s great to see Williams (now) doing so well on their tiny (Hahahahaha) budget – is the turnaround largely attributable to Pat Symonds?
Would F1 really fail if Ferrari left?
I don’t understand this – it’s a bit like saying Liverpool is the key to English football. Apart from a purple patch at the start of the millennium, Ferrari’s performance has generally been that of a midfield team. Ferrari is currently a profligate make-weight in comparison with the other front runners. It appears that the additional cash they get discourages competitiveness. It’s almost like they don’t have any incentive.
For me, Ferrari needs F1 far more than F1 needs Ferrari (except maybe now we only have 9 teams). Take the $90m off them. Spread the team fund equally amongst the competitors and let increased sponsorship revenues be the reward for success.
The performance of the team doesn’t matter. Its the number of fans that support the team that counts. A bit like Justin Beiber’s latest album.
True, but would Ferrari dare to leave F1. I know the factory leaves other sporting categories up to independent operations, but Ferraris generally are not competitive. There is virtually no ROI in road racing. Ferrari seems to actually make a profit from F1. I believe Ferrari do deserve a special deal…it’s absurd to say McLaren or Williams (my favorite team) as much as Ferrari…or Red Bull for that matter. It’s I believe in the top 10 of most recognizable brands (some study) and more importantly it brings instant cool. Sorry, but kids aren’t going to come to F1 because of Williams’ Victorian operation.
Ironically, I don’t think F1 sells very many cars at the end of the day. If I was a major auto executive I would never sanction a 300m a year F1 budget. As a racer myself, it pains me to question the marketability of motor sports.
I doubt it
I wouldn’t begrudge CVC or Bernie a penny of what they take from F1 if it wasn’t at the expense of the participants.
It’s no wonder Marussia struggled as they clearly get so little from the ‘sport’ and so had to rely on their sponsor (who ran for the hills as soon as his ‘home’ GP was over).
The question for Caterham is why they couldn’t survive (I use the term loosely) on an income broadly in line with the other small teams.
It’s widely reported that it takes $100m to run a ‘small’ team so the shortfall between this and the estimated income from the sport has to come from a combination of increased borrowing, sponsorship and pay drivers. The larger teams will use the excess over $100m on more and more R&D and bigger motorhomes.
Now looking at some of the elements of the table:
Column1 equal shares, is I believe only paid to the signatories to the Concorde Agreement (probably the wrong term) but as the rules ‘cap’ the number of teams at twelve, would it not be more equitable for all to get an equal share?
Column 2 prize money, probably right to restrict it to top 10 as this is the payment where reward comes from success.
Constructors Championship bonus, again it’s right to reward success but I’d reduce the amount paid and restrict it to the top three.
Historic payments and the ‘Ferrari payment’, this is where the inequity really shows. I don’t believe the HP to Williams and Mercedes is warranted and the massive amount paid to Ferrari is simply immoral. If payments to these teams is justified then I believe they should each get the same, say $20m.
By re-jigging the finances along these lines the lowest ranked team would still get a minimum of $64m before sponsorship and pay drivers are taken into account.
And that’s without CVC and/or Bernie leaving more in the sport which could be used to bring the minimum team income from just the sport to a more realistic $80m. The shortfall between this and the actual running costs would still be met by sponsors etc.
This creates a fairer base for the teams (but not quite enough to be a ‘gravy train’) so they would still be required to find additional income streams and manage their budgets accordingly. So failure of a team would still be possible from bad management but without the greed of some areas contributing to those failings.
Top/successful teams would still attract more sponsorship and would still be able to pay for R&D etc but they would find their sporting income trimmed a little although I accept that Ferrari would be hit hardest. But they are possibly more able to absorb this than others.
Once the ‘rewards’ are more equitable then it would be possible to have a sensible debate regarding cost caps or at least cost regulation via the rule book and the sharing of common parts.
I wonder if anyone at the top of the sport is reading this?
But is it CVC’s fault that the teams are in a financial arms race? They control the revenues, but not the costs.
The forgotten element to this is that the rise in teams cost base has benefited the motorsport industry through better wages (perhaps weighted towards the super start designers/managers, more employees and then through to the third party suppliers that support those teams. I feel that any discussion of cost cutting should be conscious of the negative effect it may have on suppliers and team employees.
So… is this how last years money was split up? Can you make a chart for this year? How will Marussia do if they hold 9th?
Historical payment for Mercedes & Williams but not for McLaren?
I find the team payout levels hard to believe. Having previously worked in F1 and seeing some numbers my question if the above info graphic is true is, where is all that money going? And why do some teams still struggle to get budgets passed from their owners? Even for a top team of 500ish people at an average salary of £45,000 that’s around £22.5M. Still there’s overhead and infrastructure but that’s a big jump for say Mercedes which is on par for over $150M this year, plus sponsorships? Of course currency differences as well…
Where is the money going? Did you see the “leaked” letter from Lotus, Sauber et al to the FiA that laid out the read cost of F1? It seems you can ring up a bill of 120 million without much problem in a season these days…
formeremployee… you, like me will have witnessed the crass abuse of bottomless pits of cash to which the most staff in varying capacity have access, in one way or another, particularly areas in development such as CAD/CAM & RP
I think it has been reported that an engine deal for a season is something like $20m per team. And then carbon fibre ovens, and wind tunnels, and fancy CFD computers, and motorhomes, and titanium downforce-adjusting-spanners, and …
Also, for the big teams, paying drivers like ALO, HAM, VET etc. is many millions added to the payroll so the £45k average you suggest seems low.
It is more than that
“……where is all that money going….”
see my comment a few days ago about EJ’s boat!
So assuming all 3 survive, and Sauber & Caterham score no points, how much would Manor GP earn next year? What Caterham got this year, or more than Caterham and Sauber?
Thanks Joe. Nice graphic of what you have written previously.
Super Stuff Joe ! I have always wanted to figure out how much are the teams making and as part of what payment structure ! While the number may not be exact, the structure seems more or less in line with bits we read about on thenet. Thanks for sharing the details with this depiction and not saving it for the next edition of Grand Prix + !
I will explain it all in detail in GP+.
Really great job, Joe. And well played too. Congratulations!
..Awesome… having just subscribed to gp+ I really like the parting shot page…
Just a question, do you guys shoot the photos for the mag yourself ?.. how does that work?
.Awesome… having just subscribed to gp+ I really like the parting shot page…
Just a question, do you guys shoot the photos for the mag yourself ?.. how does that work?
sorry I posted this here… this was a reply to joe above
Peter Nygaard is out photographer. http://www.grandprixphoto.com
What year is this based on? If 2013 (or 2014) shouldnt marussia receive the money as they finished at least 10th (2013) and potentially 9th (2014)?
It is based on 2013, but the top 10 is established with the best of two of the last three years
Thank you for sharing this great infographic Joe. Are the ‘Historical Payments’ that Williams and Mercedes receive a payment they contractually receive every year because of their historical relevance to the sport or is it historical in the sense that they were paid that money in the past, but it’s not a recurring payment?
As far as I know it is recurring, but I don’t know 100%
I’m not a free-love hippie Earth mother sort, but these figures really make you choke. It shouldn’t be necessary, for the good of the sport, to spend more than $20 million dollars to design, build and run a competitive racing car. This, despite it being short, is probably Joe’s best ever post as it drives home the absurdity of the current ‘crisis’ and sums up all that is wrong in the commercial structure of F1 at the moment.
What do you know about what it should cost to build a space ship on wheels? Probably nothing. Neither do I, but $20m might not even cover travel expenses for a 19 race international season for a large team.
Then make the team smaller, Nick.
You miss the point, deliberately perhaps. The point is that, leaving aside the rights and wrongs of the breakdown illustrated by Joe, if designing, building and running a competitive F1 car demands such huge amounts of money then it’s hardly surprising that not many teams can find the money to be competitive. The implication of my point is to say that fans of the sport don’t really care if it cost £20m or £200m to run a F1 team, all they want is exciting and entertaining racing – so finding a way to have an entertaining and exciting race series that is more financially accessible has to be a positive. Quite clearly, if a decent team like Force India is receiving $80m plus whatever commercial and shareholder investment they attract on top of that, yet still struggle to be consistently competitive and commercially viable, then F1 is not viable.
The trick is in the word “competitive” – although it isn’t strictly required, being “competitive” is made much much easier if you have “competitive” resources. What I’m trying to say is that it’s perhaps more useful to avoid discussing absolute amounts of money* and talk instead in relative terms.
Ignoring Marussia’s plight (because the merits and methods of limiting the grid to 10 teams are to an extent a separate discussion) the top teams earn 4 times the amount that the bottom teams earn from the basic participation in the sport. So even before any owner investment is put in, before counting sponsor rates, before adding merchandising sales and licensing revenues, the top teams have a huge advantage.
As an analogy, divide all the numbers by 1000 and assume you’re trying to buy a car, let’s say an Audi, to go out and do track days with. Caterham can buy an Audi A4 while Red Bull can buy an Audi R8, probably the scary V10 version.
The racing might be best served, and the results most representative of skill and ingenuity, if all teams were in the market for an RS6 – or to convert back to the proper numbers, if the top earners were pegged back to about $150M and the bottom earners were brought up to about $100M. Binning the Historical Payments, Constructor’s Championship Bonuses and Ferrari’s side deals and throwing all that extra cash into column 1 would do the trick.
* = Absolute amounts have their place though, but only really to compare the average or possibly the bottom team budget with budgets elsewhere. After all, people watch Formula 1 in part because it’s supposed to be the fastest, most technologically advanced racing out there. Otherwise we might all consider watching the 24 hours of LeMons (not a typo).
High finance isn’t my strong point, but, 50% of the $1800m Commercial Rights Holder’s operating profit isn’t $855m. $90m seems not to have trickled down.
Look at the Ferrari payment
Very interesting table. Helps a lot to understand how the money goes round.
Got a couple of questions if I may?
The Historic Payment to Mercedes? Is that due to their overall team history going right back to Tyrell?
As someone mentions, no Historic Payment to McLaren – is this because they have already featured in the Bonus Fund for this year and that supersedes the HP?
I have no idea what justification there is for this payment. It just suited someone to do that.
If I remember rightly, wasn’t Merc refusing to sign the Concorde Agreement last time round (2012?) as it wasn’t happy with Ferrari and Red Bull getting these payments. There was even talk of referring the matter to the EU to see if it breached competition law. Then it all went quiet, Merc signed up and everyone seemed happy.
As regards McLaren, I wonder if 2007-gate put paid to their “Historic Payment”?
Fascinating. Well done on untangling the ball of string into a graphic that makes sense.
Clearly the disparity of equality in flow down to the teams is incredible.
What I would love to know know is the actual margin made. That box for Expenses & Taxes could be significant. If for example the actual OI for CVC is only 17-18% I would no longer think of them as greedy villains. If it was 30%……well that’s far from what I would expect in a sustainable business model.
Do not forget that if CVC has to make loan repayments it is because they have taken out huge chunks of money. Expenses are not that great. There are freight costs, bills for moving people and equipment around, the fees paid to the FIA for its services. And debt repayments. This is all tax-deductible and designed to be so. They tend to take dividends on a regular basis, rather than annual numbers. They are not starving…
Sorry, I’m not here to criticize but I just want to understand the figures.
Somehow the numbers don’t add up. The Formula One Group divides $900m (including the payment to Ferrari) but the Formula 1 teams only $855m (including the payment to Ferrari). So there seems to be $45m missing (2.5%).
And the 23.75% for Column 1 and 2 is over $855m and not the full $900m
I understand that the money is divided after payment of Ferrari, so both sides should divide $855m.
And what about the payment to the FIA? I seem to recall that both the Formula One Group and the teams pay a small percentage to the FIA.
It is a very complicated graphic and I had to change a couple of bits, that required other changes to be made so if you refresh the page you will see what I think are the correct figures.
Seeing the 60 going to Wiiliams and Mercedes doesn’t make Ferrari’s 90 look as bad. The only thing totally out of wack seems to be the 37.7% to CVC. If you go to any F1 races, you see the majority of the fans with Ferrari clothing etc., maybe justifying their payment.
With Ferrari’s veto can anything in this structure be changed on the right side of your column?
Great insight, thanks
Brilliant Joe. I trust you’ve emailed a link to Andrew Benson et al.
It is brilliant, (and very worthy of a Pit Pass rebuttal) 😉
I am sure that their business correspondent will write some snide piece, in which he quotes his own articles in other publications, as per usual
Amazingly helpful to see this visually. Thanks Joe!
Now let’s apply this to some F1 team economics. There’s an article that says Mercedes AMG F1 spent $294m (£184m) to run the team, not including engines.
Looks like under the F1 money distribution that they were paid $135.5m in 2013. That leaves them with another $159m they need to fund to team – minus the $75m that they get from Daimler = $84m.
The same article notes that the team lost millions in 2013, but perhaps that’s just how the accounting works.
It’s pretty clear that for Mercedes/Daimler, these losses are acceptable because there’s a larger goal in mind. But it’s also fair to say that if not for the team’s 2014 success, at some point those loses would be hard to justify in Stuttgart.
I wrote this in Autocar…
Mercedes has spent the recent days celebrating its Constructors’ Championship and telling the world about it, with a “Formula Won” advertising campaign. The Drivers’ title will follow with Lewis Hamilton now seeming to have the upper hand over Nico Rosberg. The team has also let it be known that every team member will be getting a £10,000 bonus, which will cost the team £6.6 million.
But all of this comes at a cost and the latest filings at Britain’s Companies House make interesting reading, although it must be said that reading balance sheets only tells you what the accountants want you to see. The returns reveal that in 2013 the race team spent a total of £184.3 million, which was an increase of 27 percent over the £145 million spent in 2012. This was a further acceleration in spending following the 15 percent hike in 2012. In the course of 2013 the team increased its staff levels from 612 to 663 and costs went from £41 million to £57 million, indicating that, on paper at least, the team was paying its new employees a great deal more than the existing staff members.
The team says in its filing that the costs went up because of “increased expenditure on in-season upgrades to the 2013 race car; increased costs arising from the parallel car programmes for 2013 and 2014 and increased personnel costs”.
The rewards in Formula 1 are considerable and winning attracts bigger sponsorship deals (the team’s turnover went up by £10.3 million in 2013) as well so in the end the team cost Mercedes only £51.1 million, which is a relatively small price to pay for the publicity gained from the activities of Lewis Hamilton and Nico Rosberg. We will have to wait another year to discover what this year’s programme has cost but there is no question that the rewards will be much higher.
The Mercedes F1 team buys its engines from Mercedes AMG High Performance Powertrains in the same way as the latter company’s other clients but the engine company was a much more cost-effective operation, with a turnover of £141.4 million compared to £133 million in 2012. This was a significant increase in comparison to 2010 when the figure was just £81.7 million, an indication of how much money the new 2014 engines have cost. Having said that the technology that has been developed in F1 is already being fed back into the road car programmes which form a key element in the future strategy of the company. On paper, the engine company turned over £141 million in 2013, compared to £133 million in 2012. It made a profit of £6.6 million after tax and spent £73 million on research and development. With around £48 million coming in from its customers (including the Mercedes F1 team). It added only a few staff, increasing by 21 to 523.
One can lump the two Mercedes units together and come up with a number of staff and a sum of money but this does not really represent the true picture of the costs involved as there is no allowance for promotional and advertising costs. Mercedes has been rather more active in this respect than some of its rivals as it has heavily promoted the fact that the new hybrid 1.6-litre V6 turbos perform in a similar fashion to the old 2.4-litre V8s but do so using around 30 percent less fuel. Formula 1 as a whole has failed to get this impressive message across to the world, largely because the FIA seems either disinterested or incompetent when it comes to communication and the Commercial Rights Holder does not seem to think that promotion is part of his job, the primary emphasis for the Formula One group being to exploit the sport financially.
The Mercedes financial figures will not help the overall situation in F1 as car companies are generally not keen on profligate spending. In an industry where everything is focused on cost-control, F1 remains incongruous and illogical. If teams were competing within a regulated cost-capped environment, they would not only save money but would also be able to show the world that they were more efficient and cleverer than their rivals. Spending money in F1 is easy; spending it well is more difficult, but turning racing into a profit centre ought to be the goal of everyone involved. Attempts to introduce cost caps have been blocked by those who are insecure about their ability to perform well without a financial advantage, but as Ferrari is currently proving, getting more money than your rivals does not make you a better team. As always what wins in F1 is brains, energy and inventiveness.
‘Spending money in F1 is easy; spending it well is more difficult’………. see Ferrari.
Very well said.
And what I have found missing from F1 for many years now is the word Profit.
Im sure the 51.1m loss of Mercedes will be transferred to a parent company to offset profits, so really its 51.1m less tax – so somewhere in the vicinity of 35m cost to Mercedes.
Great article Joe. Good water cooler talk today. As such, I’ve drunk a heap of water.
The definition of why a picture is worth a 1000 words.
Nicely done, thank you,
I don’t often comment here but felt obliged to say a big thank you Joe for putting this together, it really helps the casual fan to gain a better understanding of the structure of the sport.
As you indicate in your post, the actual numbers are secret (and many of the players would like to keep it that way) but thank you for piecing together the clues to come up with a plausible infographic.
I bet those internet monkeys and bottom dwellers are hitting the cut and paste as we speak, but this could only have been put together by someone who has their finger well and truly on the pulse of F1 – Thank you Joe.
Great article, what I find most unusual is:
– a 36% return on your investment has been unrealistic for any investment vehicle since they hay days before the financial crisis. And I’m sure CVC know it but no-one appears to have the ability to do anything about it, which given the players involved is just sad.
– if you think about it, perversely, CVC will argue they agreed a 50% share originally and have agreed to cut this to 36% for the benefit of the sport by cutting these side deals.
– Re: Ferrari – Everyone assumes you can plug teams into formula’s and get to a fair answer, but that’s not realistic of any business really. But if you take the Ferrari payment, the historical payments and the bonus pot you do effectively have a third performance reward category.
– Red Bull do really well. They should given performance but are rewarded for performance and rewarded again by the bonus fund. Seems a bit off.
Thank you for the graphic.
I find it ironic that Ferrari can perform so badly – on track – considering the cut they take and yet enjoy healthy road car sales as a result of their F1 ‘advertising campaign’.
Could you hazard an explanation?
Negotiations in another era
Doesn’t take Joe to answer that, unless it was meant as a rhetorical question. Ferrari owners are not influenced by F1 performance (many are big fans, but they’re bright enough to see how little connection there is). It is possible the professionalization of the team though under non-Italians such as Brawn and JT rubbed off on Ferrari when they started getting serious about road car quality in the late ’90s/early ’00s. That and heaps of Fiat investment. I used to drive a 355. Beautiful, but what a piece of crap.
If Ferrari’s sole form of marketing is F1 and its road car users are bright enough to disregard the connection then I would have to assume that its current executive is bright enough to realise that there is no necessity to remain in the sport.
My personal view is ‘brightness’ doesn’t come into it – Ferrari has successfully transformed itself into an international brand over the decades and that the name itself is enough to trigger a Pavlovian response to connect with ‘performance’ or ‘desirability’.
This reminds me of the diagram you did a couple of years ago showing the team lotus/lotus cars/lotus racing family tree. God knows what that would look like now is you tried to add the caterham and related companies shenanigans to it!
What a great chart Joe, making me a subscriber methinks… Why do Mclaren not get Historical payments?!
They may do, but this is where the whole thing is very blurred
Its a very weird and complex way to understand how the F1 Works. I just say one thing: Its unacceptable that Ferrari -Make a good or a worst job- always takes a good piece of the cake. Its shameful. Someday the Formula Uno will acept that can survive with or without Ferrari offering them a fair deal thats allows to the others team feel that no team rule the sport. ¿Dont like this tifosis?
Good work Joe, keep it up!
What a mess! I think Bernie was telling the truth when he said he had no idea how to fix it!
if ive read this right then it appears that if williams get that no.3 spot in the constructors this year its a huge increase in their money. the equivalent of a decent sponsor
Thank you Joe,
My first thought was WOW Caterham really suck compared to Marussia!
My other thought after reading the Ferrari info in this article WOW Ferrari really suck…period!
And I can only laugh thinking how bad they would have been if they had kept Kimi and Massa, not signing Alonso, utter tripe.
Great graphic! Certainly McLaren receives a historic payment that is confidential. Nevertheless, apart from clearly the 11th place team needing an equal share and the left hand column needing to re-invest possibly up to half back into the sport either through hard cash or development of new revenue — it represents a realistic if not overly complicated competitive reward system. Times change though and everyone needs to compromise for overall prosperity.
Joe, I do think someone reads you’re blog.
“How long is a piece of string.” – Andrew Benson
your… (damn autocorrect!)
Or vice versa…!
Well, this drawing may be one of the most visited on the internet today. I see it circulating.
Wow, great work to visualise something so complex in such a simple way. Thanks for helping us understand this.
Your such a good soul, thank you for this Mr Joe Saward….
Excellent diagram. I though Caterham and Marussia were on the same kind of budgets. Makes Marussia’s performance even more impressive. So $200 million buys you 4 sec of lap time then? Worth it?
Having studied your splendid infographic for some time, my brain distilled it down to a one word conclusion – Bernie.
Joe, my first comment but like many others here, I thought your graphic was so superb in simplifying something so complex it worth saying a big THANKYOU 🙂
Brilliant stuff, Joe.
Whether the numbers are exact or not, and the historical payments are right or not is not _that_ important.
The graphic does a great job visualizing who complex the distribution model is, and how (and why) it is not an equal share for all teams.
Best explanation of this I have seen so far.
Good job – as always!
Joe, well done on the mountains of interviews, investigation, research and doorstepping that must have taken place to be able to put this together. It is a real pleasure to see true F1 investigative journalism in action here and in Grand Prix Plus.
Wow, seeing the numbers like this, it’s even more shocking.
Thank you Joe for this insight!
Thanks for that, Joe. It all makes a lot more sense now.
For specific values of “sense”, obv.
Does CVC get much income from GP2/3 or does it essentially just cover it’s costs and gives them some series to run during the european gp’s
They take a 25 percent profit
It seems to be the opinion that CVC are taking a big chunk for themselves, but is it not the case that they are in business on behalf of those that invest in thier funds (a bit like unit linked pension funds). Do they not have to provide a return for thier investors? If this is the case, and I think it is, then most of thier “slice” should go to those who provide them with funds to invest.
Look here: http://www.cvc.com/About-Cvc/Our-Investors.htmx
What a mess. I can untangle spaghetti much more easily.
Now we can see why some teams are almost destitute. A team will have to invest hundreds of millions and hope it pays off and hope they win the constructors even at that, they will be in the red for a few years more unless they consistently win the championship consecutively.
And then for anyone outside the top 10, best for you to just stay at home because there is just no point you have no hope.
So out of all of this, how many F1 racing teams per se (not counting road car sales, etc) turn a profit?
Excellent insight Joe! Have you received any backlash from drawing attention to this type of information?
No, it is just guesswork, isn’t it?
I realize there is subjectivity at work here but clearly based on experience. Excellent work and thank you. The comments are a lively and for the most part informed discussion.
Brilliant, thanks Joe.
Any idea what is the formula used to calculate the “Constructors Championship Bonus Fund”?
I’ve heard it is wins over last three years? In which case there will be a big shift from RBR/Ferrari/McLaren towards Mercedes next year?
I believe it is based on the previous four seasons using race victories with percentages.
Brilliant stuff Joe, thanks for doing this so thoroughly.
1 Joe Saward > 1000 Norris Boneheads from Dunstable 😉
Wow – what an eye opener! Thanks Joe.
In comparison to North American leagues, the teams are taking an inordinate amount of the pie vs. ownership.
NHL/NBA/NFL are close to 50/50 splits in revenue between owners and players.
In F1, the teams (players) are taking 64% and the owners 36% – huh, wait, WHAT! The teams are raping the owners on their relative revenue share!!!
Guess who needs to ante up to who? The problem is not what the owners are taking, the problem is ownership giving in to threats/whiners and handing out exceptional deals thinking that they are critical to their league!
CVC promotion of the sport? Why should they given their relative revenue share when compared to North American sports leagues. CVC could present a strong case that if the sport wants the owners to promote it, then they should give up some of that 64% taken by the teams.
The teams need to figure out a solution that works for everyone, not go back to the owners and ask for more handouts. Is that likely to happen?
One could argue that Bernie is being generous and would only further band aid the problem when saying he would match whatever share the bigger teams give to the smaller teams. He really should not have to as the teams are already getting an inequitable share of the revenue relative to other leagues.
Ferrari, Red Bull, Merc, Williams time to take a look in the mirror and do what is right for the sport! Yeah, right. Until they do, ownership should continue to milk the cow as any additional handouts will only extend the slow death, when the patient(s) need a serious intervention!
Hey Razor… Players have NO, ZERO operating costs. F1 teams have HUGE operating costs. If you are comparing apples to apples take the drivers wages against the Owners take……. Do the math
Reblogged this on and commented:
Joe Saward’s reworking of F1’s finances. Quite interesting.
$1.8bn looks a large pie to divide, but N.F.L. revenue last year was about $9 billion (New York Times)
You can surmise that F1 is under performing.
The financial structure explained in 5 words!. Greed,Greed, and more greed!
Rather easier than creating the graphic
I have the solution to all problems.
Divide the money in 3 columns containing same amounts.
Column 1 money shall be distributed between all teams in same amounts.
Column 2 money shall be distributed between all teams according to how many years they are in F1.
Column 3 money shall be distributed between all teams according to their success in the last 5 years.
In this case historic and successful teams would get more, fair enough.
Now that would be a fair system.
“Ironically, I don’t think F1 sells very many cars at the end of the day. If I was a major auto executive I would never sanction a 300m a year F1 budget. As a racer myself, it pains me to question the marketability of motor sports”.
It has been calculated that the marketing value in F1 of the Mercedes Benz brand during the 2014 was worth $1.3 billion. Not bad for the investment of around 300 million Euros. And will sell lots of cars
F1 is no longer a sport. It is a very strange business.
I’m sure you’ve answered this in the comments already, but why do the performance related bonuses seem to have little to do with performance? Is it a 2 or 3 season average thing, or negotiated with the teams?
It is all secret. Don’t you love transparency in sport
Wasn’t red bull getting “historical payments” as well when they left FOTA and did a deal with Bernie?