Formula 1 delves into the "hundred billion" business empire 🚨

Formula 1 delves into the "hundred billion" business empire. 🚨

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How can a Formula 1 car or a Formula 1 car "build a great empire"? Let's delve into business models we may not know.

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1.Formula 1 Group, the industry's money-producing machinery.

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F1 is a sport that can make a fortune. They grossed up to $3.65 billion in 2024, with the main source of revenue coming from...

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Copyright live broadcast (33% / about $1.2 billion) Television stations and streaming platforms around the world are willing to pay huge sums for live broadcast rights.

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Host fees (29%) Racetrack owners or local governments have to pay anywhere from $15 to $60 million per year for the right to host the Grand Prix, especially for new Middle Eastern venues that pay a high price. [If Thailand wants to host, we have an investment budget of $40 billion].

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Global sponsors (15-20%) Big brands like Pirelli, Heineken, Aramco throw huge money to be part of the F1 brand through ads across the racetrack.

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Other revenue: comes from Hospitality packages, copyright merchandise, and digital platforms like F1 TV.

Dividing revenue to F1 Group teams does not keep all revenue on their own; they divide about 38% of revenue (about $1.2 billion in 2023) to the 10 teams competing.

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The division is not the same. The better-performing teams will get a greater share, including the older teams like Ferrari, and they will receive a special bonus. A team like Ferrari or Mercedes may win more than $150 million, while the last team may only get $60-70 million.

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2. The huge cost of building an F1 team

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Before 2021, F1 teams had no spending restrictions, some spending up to $400-500 million, with the main costs coming from...

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Racing Car Development There are hundreds of engineers doing research and development work to increase even a small amount of efficiency. Each car is a "prototype" with specially manufactured parts.

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Power Units, the team that bought the engine from the manufacturer, pay about $15 million a year.

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Personnel. The big team employs 800-1,200 people, and the small team still employs 300-400 people.

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Transporting F1 cars and teams around the world 24 racetracks, including parts and spare parts, is a huge cost.

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Racer salaries New drivers may start at $500,000 a year, but top racers like Lewis Hamilton or Max Verstappen tooth out to $55-60 million a year.

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Use of the "Budget Cap": To control spending, F1 has set the 2021 budget ceiling at $145 million; and reduced it to $135 million a year.

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3.Where does the F1 team make money from (other than prize money)?

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The prize money may sound like a lot, but actually, "it hardly covers anything in this sport." The team's real revenue comes from:

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Sponsorship:

Title Sponsorships, the primary sponsor for which the team is named, may pay up to $50-100 million per year (e.g., Oracle pays Red Bull $100 million / year).

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Major Sponsorships: Logo on Car in Key Position, Cost $10-30 Million Per Year

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Smallest Sticker: A small sticker still costs about $500,000.

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Business and Catering Network (The Paddock Club) The real value of sponsoring an F1 team lies not just in seeing the logo hurled along the racetrack, but it's what happens "behind the pit" in the Paddock Club.

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This is an Exclusive Hospitality Zone that companies use to bring important guests to close business deals and network with other big companies. Millions of dollars worth of business deals are happening here.

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4. From losses to huge profits

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Historically, most F1 teams were at a loss, and it relied on wealthy owners, or on marketing expenses for automakers.

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Budget Cap Impact With a limited maximum budget, teams are finding ways to turn "marketing projects" into profitable businesses.

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Profitability example: The Mercedes F1 team reported a profit of £83.8m in 2023. Ferrari F1 is also believed to be profitable. The McLaren Racing section flipped from a loss of £9m in 2022 to a profit of over £12.9m in 2023.

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The average value of F1 teams in 2024 is nearly $2.31 billion.

by Ferrari, worth $4.78 billion; and Mercedes, $3.94 billion.

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Williams Racing, which used to be bought for $180 million in 2020, is now worth nearly $1.24 billion; representing a return of nearly 600% in just a few years.

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Formula 1 has moved from a pastiche-driven motorsport to a complex global entertainment franchise with huge money.

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For F1 teams is a powerful platform for marketing, technology development and branding. F1 is no longer just a matter of competition, but a proof that "burning money" can also lead to incredible "empire building."

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