THE MONEY IN RACING FAST

Answering common questions about the finances of the world’s most expensive sport: Formula One

Featuring the quickest cars, the world’s best drivers, the biggest of companies, successive
Netflix specials, and the grandest of events, is Formula One. Since its inaugural season in
1950, F1 has been the highest and most prestigious form of auto racing sanctioned by the
FIA.
With millions of users tuning in, to watch their favorite drivers race in different circuits all
across the globe, Formula One has gained a prominent place in the most-watched sports.
Owing to an aggressive marketing campaign, by the new owner, Liberty Media, starting in
2017, the motorsport now has a cumulative audience of a figure exceeding 2 billion. But
behind the loud engine roars and the thick smoke is perhaps, the most expensive sport of the
world.

The motorsport being a money-making event is one which offers employment to over 50,000
people and gives out huge cash prizes to the winners, but where do they get the money. The
company owning F1, Liberty Media, gets most of its revenue from selling broadcasting
rights to media channels such as the Sony Network and Sky Sports. The F1 races are
broadcasted in 52 countries around the globe, which results in an addition of ~$6,00,000
million to Liberty Media’s coffer.
The second most important revenue stream for the giant is what it charges from the circuit
to hold a formula one race there. Each track pays a large sum of money upfront to host a
Grand Prix Race. This fee makes up around 20% of liberty media’s revenue. Other major
revenue streams include paid partnerships with companies for advertisement all across the
track such as Rolex, DHL, Aramco, and much more.
Like every global competition, the winner gets to walk away with a sum of cash. Weirdly,
the distribution of prize money in these races is very unusual. Every team is rewarded with
a 35 million dollar payment, and then come in the rewards based on finishing positions.

Every year, the top teams try to come out with the fastest, lightest, and the best performing
car on the grid, and this involves a Research and Development mechanism costing up to
even $500 Million sometimes. With a single gearbox costing around 500 thousand dollars
and the engine unit coming around at 10 million, the average car cost comes around to 12.2
million Dollars.
Formula One witnesses a 21 race schedule in 21 different parts of the world, and having to
move the expansive equipment, including the car and the huge staff, in short periods
requires hefty logistics costs. According to an estimate, each team transports around 50 tons
of equipment every race, accounting for at least 80 million dollars.
A very important question that comes up in our minds as we read these big numbers is that,
where does this money comes from. The money, coming in from the government that pays
up the race fee to the company forms a greater part of the sources. Increased tourism profits,
the boost in employment, and the general involvement of a great number of industries are
what attract the governments to host a race. Second, we have faithful fans who purchase
tickets to the races and last but not least, sponsors. We see various sponsors, both, in the
form of race sponsors and team sponsors, who pump huge sums of money into the conduct
of the race in exchange for massive publicity and advertisement.

With an extraordinary business size and a direct impact on a large number of regional
economies and communities, the F1 is bound to be an appealing avenue. But like everything
else, this too comes with great costs. The world as we see it is moving towards a more
sustainable and environment-friendly way of living and F1 contributes a fair share to the
pollution levels of Grand Prix cities. Even though F1 has claimed to reduce its carbon
footprint to zero by the year 2030, the industry might face challenges in the coming years.

In the end, all I hope is that you keep these finances in mind, the next time you tune in to
your sports channel to watch the Grand Prix.