Formula One (F1) is a global motorsport that attracts millions of fans and generates billions of dollars in revenue each year. But have you ever wondered how F1 teams make money? In this article, we will explore the different ways that F1 teams generate revenue and how they use their funding to compete at the highest level of motor racing.
How Do F1 Teams Make Money?
F1 teams receive a share of the money generated from television rights and race fees, which can be a significant source of revenue. In addition, teams can also generate revenue from sponsorships and partnerships with companies that provide them with financial support in exchange for branding and advertising opportunities.
Finally, teams can also generate revenue from the sale of merchandise and other products. Of course, it’s important to note that operating an F1 team is a very expensive endeavor, and not all teams are profitable. It takes a lot of skill and resources to run a successful F1 team, and not every team is able to do so.
How Is F1 Revenue Split?
The revenue generated by F1 is split among the teams in a number of different ways. First and foremost, the teams receive a share of the money generated from television rights and race fees.
This money is divided among the teams according to a number of factors, including the team’s performance, their history in the sport, and other considerations. For example, Ferarri receives roughly $68 million per season as they are a ‘long standing team’, having taken part in every F1 Championship since 1950.
Williams is another team that receives a similar bonus. They reportedly earn $10 million per season under a ‘heritage payment’, as they have taken part in the sport since 1977.
Formula One Business Model Explained
The business model of Formula One is based on the organization and promotion of motor racing events. F1 is a global sport, and its races are held in various locations around the world.
The organization that runs F1, the Formula One Group, is responsible for promoting and organizing these races, as well as managing the commercial rights to the sport. The Formula One Group generates revenue from a number of sources, including television rights, race fees, and sponsorships.
The teams that compete in F1 also generate revenue from their own sponsorships and partnerships, as well as from the sale of merchandise and other products. Overall, the F1 business model is centered on the organization and promotion of motor racing events, and it relies on a combination of revenue streams to support its operations.
Who Funds F1 Teams?
F1 teams are typically funded by a combination of sources, including sponsorship deals, partnerships with companies, and investment from team owners and investors. The exact sources of funding for each team can vary, and some teams may be more reliant on one source of funding than others. In general, though, F1 teams require a significant amount of funding to operate and compete at the highest level.
What Is A Pay Driver In F1?
A pay driver in F1 is a driver who is able to secure a seat on an F1 team primarily due to the financial support they are able to provide, rather than their skill or track record as a driver. In other words, a pay driver is a driver who is able to “buy” their seat on an F1 team by providing the team with a significant amount of money.
One current ‘pay driver’ is Lance Stroll. His Father, Lawrence, reportedly paid Williams $80 million to get his son a race seat back in 2017.
This money is typically used to help fund the team’s operations and allow them to compete at the highest level. Pay drivers are not uncommon in F1, and many teams rely on this source of funding to help them operate. However, pay drivers are often criticized because they may not have the talent or experience to compete at the highest level of the sport.
How Much Do F1 Teams Spend?
The amount of money that F1 teams spend can vary greatly from team to team. Some teams may have more funding and resources than others, which can allow them to spend more on things like research and development, engineering, and other expenses.
This money goes towards a wide range of expenses, including the cost of building and maintaining the cars, hiring and paying drivers and other team members, and traveling to races around the world.
F1 Budget Cap
F1 budget cap rules are regulations that limit the amount of money that F1 teams are allowed to spend on certain aspects of their operations. These rules are designed to level the playing field in F1 and prevent teams with more financial resources from gaining an unfair advantage over teams with less funding.
These rules are enforced by the sport’s governing body, the FIA, and teams that exceed the budget cap may face penalties or other consequences. The implementation of budget cap rules in F1 is a controversial topic, and some teams have opposed the rules, arguing that they restrict their ability to compete at the highest level.
The first cost cap, which was introduced for the 2021 F1 season was $145 million. This was reduced further by $5 million to $140 million for the 2022 season.
For the 2023 F1 season, the cost cap has decreased even more to $135 million per season.
F1 Prize Money Breakdown
As mentioned above, teams can generate revenue by where they finish in the championship. Below we break down how much teams earn for winning races and competing in the Championship.
How Much Do F1 Teams Make For Winning A Race?
Teams don’t get any money for winning races, but they receive prize money based on where they finish in the overall constructor’s standings.
How Much Do F1 Teams Make From The Constructors Championship?
Roughly 23% of the prize money that F1 gives to teams is based on performance in the constructor’s championship. The specific figures each team makes aren’t made available to the public.