How F1 payments work…

People often ask who gets paid what in Formula 1. It is a very difficult question because the total is based on the annual earnings of the Formula 1 group (the EBIDTA), but it is not 100 percent clear what is included and excluded in reaching this figure. The basics of how this is divided up are understood, however, with five percent of the money going straight to Ferrari, two and half percent from the teams’ share and two and half percent from the commercial rights holder (CRH). This is justified on the basis that Ferrari is “The Longest Standing Team. There is then the prize fund, which is divided in half to create two smaller funds (known as Columns). Column 1 is divided equally between all the qualifying teams (in order to qualify they must be in the top 10 for two of the three previous seasons), and Column 2 is divided up on the basis of their performance with the World Champions getting 19 percent of the fund, with the other nine teams getting the following percentages: 16-13-11-10-9-7-6-5-4. There are then various bonus schemes, the most importnt one being the Constructor Champions’ Bonus (CCB) scheme, which rewards the three teams that have scored the most race wins in the previous four seasons. Thus 2013, 2014, 2015 and 2016. This is an odd way of calculating the cash as Mercedes have won 54 victories, Red Bull 18 and Ferrari five, but the CCB does not take into account the actual number of wins, but rather the position in the hierarchy. The current breakdown is $37 million for Mercedes, $33 million for Red Bull and $30 million for Ferrari. In other words, Mercedes gets $685,000 for each win, Red Bull $1,830,000 per win, but Ferrari get a whopping $6 million per win.

If a team wins two consecutive Constructors’ Championships, it gets a one-off payment per year of $30 million, which has helped Mercedes a great deal in recent seasons, having won three of them (to date). When you add it all up, it is very clear that Ferrari gets a fantastic deal from the sport. And if you add in sponsorship, merchandising. licensing and so on, it is clear that the Italian team is not spending a great deal on F1 – if anything. Thus the suggestion that pulling out of F1 will provide savings for the organisation are wrong, and it will need a pile of money to advertise its products, as the sport is doing that at the moment – and Ferrari has no other marketing, beyond a couple of theme parks and a lot of people walking around wearing Ferrari merchandising…

To help understand the structure, here is a chart showing the flows of money and some estimations of the money being paid out.

85 thoughts on “How F1 payments work…

    1. Theer were some but it is hard to know about heritage payments as they don’t tell you this stuff! In nay case, it is not a lot.

    1. Yes, but is based on year-by-year results, so they are getting money now for the first year. You only get Column two after this season

  1. As an expert, what do you think the masses of viewers know about Ferrari’s advantages? Any idea how much Maurizio A.’s former employer still sends into the Maranello maw? I like what Prost said, ‘from the outside you wonder how they ever lose; from the inside you wonder how they ever win.’

    1. With Marchionne on the board of Philip Morris I guess that sponsorship has a good ROI. But why do I feel bad bringing it up?

            1. He’s talking about a story published in the Independent that claims Ferrari’s costs are greater than what they spend…

                  1. He has a better grasp of the finances of F1 than any other journalists that I have read and certainly anyone who comments on this site!

                    1. Given his impressively broad skillset, I look forward to reading his review of the opening night of “F1 In Song”, the much anticipated musical theatre work debuting on Broadway, charting the rise of plucky youngster Bernard Charles Ecclestone – fighting the powers that be, to break down barriers, conventions and corporate jurisprudence, struggling against the odds to take the pinnacle of motorsport from the shadows of obscurity to a unprecedentedly large global audience!

                      If we’re really lucky, maybe Mr Nacl will write the libretto himself?

    2. Thanks Joe, insightful as ever!

      And thanks Mike – I’d never heard that Prost quote before. He really is quite the Professor.

      Has column 3 disappeared because there are only 10 teams now?

      If one or more hypothetical new teams entered, would it automatically come back, or was it payments based on negotiations specifically related to the new teams from 2010?

      1. If Prost did say that, then the ‘Professor’ had better be called before the Dean for plagiarism, because it sounds an an awful lot like Gilles Villeneuve’s comment: “When you go to Ferrari, and you see the facilities, the test track and everything else, you wonder how they ever manage to lose a race. Then over time you see all the politics and intrigue, and you wonder how they ever manage to win one.”

        1. …he can always claim brevity in his defence!

          How did the Canadian hero not anticipate that his prescient notion would decades later, not fit with the confines of the modern social media-friendly soundbite paradigm?

          At least his son didn’t attempt to expound such wisdom. We’d end up with a fucking dissertation, requiring translation into three or more languages – including the one he originally used.

  2. Absolutely brilliant diagram Joe, I do so love these when you do them, but unfortunately please let me be the 94th person to mention that Mercedes should have added up to $190.97m.

    To save anybody else that’s as curious as I am getting their calculators out, if you drop the Longest Standing Team Payment and Double Champion Bonuses, the top three become
    $160.97m, $144.15m (unchanged), $128.32m;
    and if you take out the Constructors’ Championship Bonus Fund out too they end up on
    $123.97m, $111.15, $98.32m. I think!

    1. That would leave you with $220m left over – divided by ten teams, that’s $22m each, with seven better off than before.

      Alternatively, $45m of that could be kept for an 11th team, and the other $45m (the former LST payments) put towards developing F1. Ferrari could even keep the payment if it was put towards starting up Alfa Romeo! That would still leave $130m left or $13m per team.

  3. Ferrari get their kickback because Bernie could always rely on them to back him up whenever he played his divide and conquer card. No business could get away with the games Bernie got up to, but with so many team owners who were also dodgy geezers, he wasn’t going to hit problems that often.

    Had Bernie played straight, F1 wouldn’t have financial problems. Manufacturers would have stayed in the sport, but Bernie wouldn’t be half as rich as he is now.

  4. It’s terrible that a team, placed between 2nd to 4th in the last decade, earns about 25% more than the first placed team Mercedes, and about 33% more than Red Bull (1st to 3rd best team last 9 years), which are arguably the 2 most successful teams in short stretches (besides Ferrari and McLaren in the past), just for being ‘historic’.
    Lotus didn’t enjoy the same privilege and McLaren (and Williams) has fought to be seen in the same light.

    I’ve been passionate about F1 and liked Ferrari since I was a young boy, however, from the late 90s, I became more and more disillusioned with the unfair advantage they got. If they cannot and won’t play by the same rules as everyone else, then they need to go.

    No ‘sport’ would (perhaps should) allow one team to use enhancement drugs (in this case specifically give them) while the other competitors are not.

      1. If you split that money in half and gave $45 million to Manor, we know from the administrators that you would have still had at least a $15 million deficit to make up. Manor would still have been running at a fairly sizeable loss and are still very likely to have gone into administration anyway, not to mention that there were the potential liabilities from the lawsuit launched by Bianchi’s father.

        I believe that $45 million is also less than the operating deficit of Caterham at the time that team also went into administration, so it is doubtful that they would have survived either.

    1. +1 – until the payment structure is overhauled, F1 ceases to be a sport and is more akin to sports entertainment. Sad, but true.

      1. And the difference is what Bob? The entertainment factor of any sport is purely subjective. I know people who don’t consider motor sports to be a ‘real’ sport, like football for example (I laugh in their faces of course).

        1. “The entertainment factor of any sport is purely subjective.”

          Absolutely spot on – so is watching a film, ballet or WWE wrestling. None of those three are however are a sport. Those who watch any of these activities are interested in the ‘entertainment’. Those who watch F1 purely for the same reasons are entitled to but not everyone come to motorsports for such reasons.

          For many, the credibility of the competition is the underpinning of it to be considered a sport. Particularly for those who have competed themselves to any level in the same sport who then observe the pinnacle of it. Currently, F1 is more biased towards the entertainment than being a true sporting contest in the same manner as other sporting disciplines. This is a point of frustration for many.

          Fortunately, other motorsports categories such as Rallycross, Isle of Man TT, F2, MotoGP, Superbikes and Rallycross still maintain an emphasis to the contest being as fair as possible. They therefore have greater credibility as a sport over F1 for it.

          1. Is that the same Rallycross (x2) that was specifically developed to cater to TV broadcast entertainment requirements?

            1. Yes, that’s the one – many sports have been introduced under such guises, cricket T20 being the obvious recent example. However, the need for sporting credibility is still required otherwise such projects will fail.

              When the EPL touted a 39th match that would be hosted in other parts of the world for ‘the show’, this was universally condemned since it put the credibility of the competition in jeopardy. F1 however, has been happy to constantly tweak rules with scant consideration for how this unbalances the competition as a sporting contest – the unequal prize money distribution (based on criteria other than merit), double points for the final race, DRS and arbitrary use of multiple tyre compounds being the worst examples.

  5. Thanks for this, Joe.
    If I were able to attend one of your “reader meet aurhor” events at a Grand Prix I’d like to know how drivers are paid. I half- remember reading a quote from Frank Williams a couple decades ago saying most of the drivers contracts were owned by other parties.
    I kmow Alonso and Verstappen are doing rather well, but do they keep everything?
    (There is a tax evasion joke in there someplace, I am sure.)
    Would Alonso still be paying Briatore a fat percentage?
    Would Verstappen owe anything to those who helped him on his way up?
    Thank you,
    Mark

    1. @Mark McDonald – Eddie Jordan had some involvement with drivers contracts. In his book, he told how one driver moved teams and as part of the deal, Jordan received all of the money for the adverts on the driver’s overalls. No wonder some overalls look like a patchwork quilt.

  6. Thanks for this Joe. Me and the rest of the armchair generals have been discussing a fairer way of distributing commercial rights revenue for some time (our opinions will make no difference, but as an exercise, it’s quite fun!) can you fill in one blank for me? Over the last few years, on average, what was the total ‘pot’ to be divided between the teams after CVC/FOM/Liberty have subtracted running costs?

  7. Remove the payment to Ferrari, and do away with the double champion and championship bonus funds. Add this money back to the prize fund. Expand column 1 to include all teams (should there be more than 10) and give it 2/3 of the split from that prize fund. I think that should work out to each team getting about $71.6m instead of $42.75m. It would reduce the Column Two money to $358.3m, down from $427.5m.

    It obviously means Ferrari, Merc, and RBR will get significantly less. But they also have more exposure and sponsorship and merch sales than the small teams. Also two of those three are auto manufacturers. So here is the worlds smallest violin playing for them.

    That said, in return I think the current manufacturers should have their voices heard over Red Bull in the direction of the future engines.

    Edit: Using my numbers there (the prize fund would be at $1075m) , and keeping the percentages for Column 2 the same, each team would get (in millions): Merc $139.75 / RBR $129 / Ferrari $118.25 / Force India $111.08 / Williams $107.5 / Toro Rosso $103.92 / Renault $96.75 / Haas $93.17 / McLaren $89.58 / Sauber / $86

    This seems way more fair. Currently Sauber get $158.47m less than Ferrari. With the idea above, they would only be $53.75m short of Mercedes, the highest paid team under this scenario, and would have $26.15m more than they do now.

    1. If any team ought to be influencing the new engine regulations, should it not preferably be a genuine customer team such as Red Bull, who are the most likely to be faced with the difficulty of designing a car around one engine – then being forced to modify that design to accommodate another?

      I’m no fan of the sickly-sweet soft drink marketing vehicle. However it seems both foolish and dangerous to give engine manufacturers more power and influence than their customers, during negotiations as important as these are.

      Furthermore, how would you quantify the value of having “their voice heard” in such circumstances?

      Wouldn’t the sport be prudent to cautiously take care to hear all voices from all sides of the equation, when it comes to steering the future direction that will dictate the quality of the racing we watch a few years from now?

    1. Well, depends. Take out that 5% “off the top” & the other stuff from outside the first two columns, move some of the C2 money into C1 and do Ferrari’s numbers suddenly look more normal and less “gravy”?

  8. Thanks Joe, such a clear way to show the payments, I had not realised half the Ferrari money came from the team side of the pool, it is a total joke and I hope Liberty call their bluff.

  9. Hi Joe, just some accounting geekery to improve future versions of the chart:

    1) It’s usually called “EBITDA”, not “EBIDTA” 🙂 (“Earnings Before Interest, Tax, Depreciation and Amortisation”). However, note that this is different to revenue (i.e., the money the sport takes from its customers), so I think the first paragraph contradicts the top box in this otherwise very enlightening diagram?

    2) Is it actually based on the revenues that the sport brings in before it has paid any costs, or is it on what’s left after costs are paid? If the latter than I suspect it would make sense for it to be paid based on what would be “EBT” (“Earnings Before Tax”) for most companies. This is your profit after you’ve paid everything but taxes, and is generally the amount you are taxed on. The higher your total pre-tax accounting expenses, the lower your EBT, and therefore the lower your taxes. Lower taxes = more money.

    You say that it’s not clear what the top box actually is, so perhaps to reflect that lack of transparency it should be titled something like “total funds for distribution”, which is a deliberately vague term but not incorrect!

    3) More a general q, is the top box at the Formula One Group level, or is there another entity that sits there that distributes the funds between the teams and the Formula One Group?

    Regardless of the above, this is one of the best explanations I’ve seen. Thanks!

  10. Why don’t they just pay everybody the same and let the winners cash in on ad revenue?

    I s’pose you’d need some mechanism to stop backmarkers from just pedalling around slowly without spending enough to really try… but other than that…

  11. If they’re really gonna replace the current rigged system with something sensible, then if I was a gazillionaire I’d buy Force India provided the staff stays on…

  12. Awesome Joe!! A far cry from the late 70’s when I worked for Bernie and Ann (his assistant who sat in his office with him) would figure out the payments based on the Autosport finishing charts!!!

      1. That reminds me of something I vaguely remember reading years ago (sometime in the late 1980s or early 1990s?) that prize money for individual races was based on the running order at certain points of the race – e.g., lap 1, quarter distance, half distance, etc. If I remember correctly, it was in the context of a Tyrrell (or other such backmarker) taking a late tyre stop, in order to appear higher up the order at a particular intermediate point to get some prize money, before dropping down again.

        Perhaps Steven (or Joe) can confirm if my memory of how the prize money was calculated is correct?

        Also, do you know if there is still prize money attached to individual races, or is it all the revenue distributed via the annual payments now?

        Very insightful diagram, by the way!

        1. Derek, I remember reading the same thing (about 1/4, 1/2, 3/4 distances) myself sometime in the mid-2000s, quite possibly right here, so you’re not imagining it. It certainly explained why some lower teams would insist (against the protests of their drivers in an age of widespread testing) on repairing a wounded car and sending them back out there 10 laps down just to trundle around.

          I have absolutely no idea if it still applies though; perhaps Joe could enlighten us as you suggest.

        2. Honestly Derek, I don’t recall if that was the case -but I don’t believe that it was other than, A. showing up, B. finishing position. But there were certainly teams who sent a go-fer to Chessington on Thursday afternoon to get their checks!!

  13. I started reading the article believing there’d be a balanced point of view, what a joke.

    Apart from the anti Ferrari brigade that applaud your every syllable, there are no doubt many others who are fed up with the constant sniping.

    I do not remember a solitary occasion when you have used your unique position to attack Bernie’s underhand methods of running the sport. He made millions for CVC and gifted huge sums to some of the richest auto companies in the world whilst effectively neutering the minnows.

    Of course it’s unfair but were Ferrari and the others – who get historic payments – ever going to suggest to Bernie they wanted a level playing field?

    As to merchandise sales etc, Ferrari is a brand built over decades of success and people buy into it. Isn’t this the same of all huge sports enterprises?

    I’m fairly certain that Man. Utd, Liverpool, Barcelona, Real Madrid etc earn more in merchandising sales than Northampton Town, Accrington Stanley, Gerona and Brindisi et al?

    In football terms in the U.K., the minnows, such as Stevenage Town FC, welcome the opportunity to play the big clubs because TV rights bring fundamental benefits to their annual turnover.

    Its simple showing figures that apportion all the ills at Maranello’s door, but in the same way manufacturers build ‘halo’ cars to draw the public in to their brand, I wonder what effect the Ferrari viewers have on brand recognition of the other teams dponsors…

    1. Go and read someone else if you don’t like what you get here. I really don’t give a monkeys about you and your biased ideas. Put some long trousers on and accept the truth. Ferrari has never played fair – and still cannot win.

      1. I’m grateful I can read what you write Joe, although I totally disagree with your stance about Ferrari.
        In my opinion there are two different levels: one level is regulations, sporting and technical, and they are the same for all players: this is why I utterly differ when you say Ferrari is unsporting. The second level is money: I believe you are honest and you don’t have any second goal when you write what you write, and I also believe you are simply wrong: when we are talking money everybody just want to have the larger share. They seat at the table and negotiate. The stronger guy eats first and get the largest portion; full stop.
        You will say that this is not fair because with more money you can go faster, but that would be the same even with a flatter distribution: is it fair for Ferrari to fight against a company which is 100 times bigger (MB)? Was it fair for RB (that are paying for their engines and drivers) against McL (that were not because they were paid by Honda)? Is it fair that RB are getting a sort of advanced “historic team” bonus as a remuneration for their engagement to stay in business until 2020? Is it fair to grant a bonus to Renault ( they are in F1 since 40 years but not continously as a team , just a supplier…)?

        1. Ok, answer this. Why is it fair for Ferrari to be given piles of money to fight MB, but not far that Ferrari outspends small teams to the same extent? Where’s the fairness in that?

            1. Absolutely, and by fans having this info and expressing an opinion we strengthen the hand of Liberty to create a more level playing field.

          1. Am with you on this one Joe – the status quo is grossly unfair and if F1 generates billions in revenue yet is unable to field a dozen financially viable teams, then something has gone awry.

  14. Spectacular graphic chart Joe, thank you.

    What we need now is a similar chart that shows how much each team spends annually.

    1. That team spending comparison chart would be fascinating, if only to provide more insight into how Force India have managed to be so consistently sucessful?

  15. Let’s not be naive. F1 will survive without Ferrari and vice versa. Liberty has a huge investment to make back and if Ferrai leave, there is a huge chance that revenue will drop making Liberty’s return take much longer to recoup there investment. They are smart business people and will give in to Ferrari for extra payments and Ferrari know this.
    I strongly agree with what Peter Windsor said “ F1 without Ferrari will be just another racing series”
    Tennis, golf and I’m sure there are other sports that pay recognized/top people to attend their events knowing they bring in lots of fans, as does Ferrari for F1.
    I can see the amount being reduced, but there will definitely be extra for the red cars.

      1. I agree on this. By the way, interesting note from Toto who doesn’t seem so happy that Liberty Media is spending 70 millions a year for the new directors / consultants, money that the teams won’t be able to share… Toto doesn’t like money disappearing from his hands…

        1. Toto may not like it, but he must surely realise that Liberty are not going to be able to implement their plans to grow the audience without spending some money.

  16. I think the sport could have a lot of fun creating lots of these “one-off payments” to give all the teams more money and equalise the field somewhat without necessarily being forced to rip up the whole structure (which obviously will be resisted by the biggest beneficiaries).

    So e.g. along wit the “Longest Standing Team” payment you could have:

    “Most Pink Livery” for Force India
    “Yellowest Car” for Renault
    “Team with Most O’s In Their Name” for Toro Rosso
    “The Two A’s Together, That’s a Bit Different” category for Haas
    “25th Anniversary Bonus” for Sauber
    “Most Impressive Team Headquarters” for Mclaren

    etcetera, etcetera, you get the idea with that. The more ludicrous the better.

    1. I think it only fair to accompany such a scheme with similar financial penalties for nomenclature most appropriate to easy negative wordplay.

      Loose $100,000 for every justified press reference to the “Red Bullies” and so forth…

      Plus, why not penalties for bad or dreary corporate liveries?

      Haas might sharpen up the look of their horrible cars; Force India might smarten up their amateur-knitted-quilt-esque race suits!

    2. The existing rules were I believe written exactly in this way, to reward the teams that someone had decided to reward at the expense of the rest. Of course, the difference is that the rules chosen were designed to look *as if* they were neutral and that they just happened coincidentally to have the results that they did…

  17. I thought Bernie had made a special deal with the big 6 including Renault, Williams and McLaren.

    Was this just a one-off payment to get them to sign a Concorde agreement?

    I also had the impression that the start / end date was one year later for Renault making it difficult to negotiate with all teams equally for 2021?

    1. This stuff is all secret. So if you know better please tell me. This stuff doesn’t come out in press releases!

      1. I thought that I read it here, but a quick Google suggests that I read it in the Guardian. I then noticed that the writer was non other than Cristian Sylt, so, as you say, the real answer is probably a secret.

  18. Amazing chart! Would love to see it with ad/marketing revenues added and operating expenses subtracted …

  19. Hey Joe,
    This post and what you have said in the past (as well as the Indy 500) got me thinking about a ‘fairer’ distribution.
    I adjusted your chart into 4 columns.
    Columns 1 and 2 are still under the F1 Teams Fund with $900 million.

    However, I added columns under the Formula 1 Group with Grand Prix Prize money of about $100 million.
    Columns 3 and 4 would be used as bonus (extra incentive) for each GP, where each team and driver can win money in several ways, IE winning, podium, pole, fastest lap and pit stop etc.

    If you are interested I can send it to you.

  20. Utter rubbish. So Ferrari will always be the longest running team and therefore benefit no matter what there performance is. What a croc of s**t.

      1. Wouldn’t the budget cap help fix this? Everyone spending to the same limit, but having Ferrari participate is worth extra money (profit to them).

  21. Joe, has this scheme bin in place since the early noughties? if so, Ferrari’s earnings must have been obscene back then in comparison to other teams, based on results… I calculate close to $300mn as compared to not even $150mn for the next contender, based on current gross F1 income

  22. OK, so it obviously won’t happen, but hypothetically speaking if Ferrari were to leave, would McLaren get that 5% “Longest Standing Team” payment?

  23. In terms of their cars, Ferrari needs no advertising. Even if you have the cash, it’s hard to get a new one from the factory as there is a much greater demand than supply of the cars. Customer seniority and I’m guessing also the prestige of the buyer and of course who they know plays a big role. That being said, I’m sure merchandising/licensing/etc. is buoyed by great exposure to the unwashed masses. Even there though, I doubt they require much brand awareness building.

    Nevertheless, Ferrari’s quit threat is ridiculous. I find it highly unlikely Liberty will fold to their bluff.

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