How Do F1 Teams Make Money? |Their Formula For Millions

We all know that F1 had an annual revenue of around $2.57 billion in 2022, driven by extended viewership. But have you ever wondered how do F1 teams make money? Formula One is an expensive sport that requires a million of investment before you participate in it, and so is the reward. As per the Concorde Agreement, the team prize pot makes up 50% of F1’s commercial rights profit; however, the share is not always 50% after Formula One crosses a certain revenue threshold. 

As we mentioned earlier, F1’s total revenue was around $2.57 billion, and the prize pool was around $1.157 billion, which is roughly 45% of the total revenue. However, it takes millions of investments to attract the best drivers, logistics, R&D, etc. activities, and yet profitability is not guaranteed. In 2021, Mercedes and Redbull made a profit of around $10-20 million, while the remaining eight teams broke even or at least came close. Let’s now delve into how do F1 teams make money.

F1 Revenue Model Analysis

We have already given you a brief idea about F1’s revenue model; let’s now look at it in detail. Formula 1 implements a multifaceted strategy to monetise its global Grand Prix events. One aspect involves granting broadcasting rights to local media companies in each host country, thereby ensuring widespread coverage and engagement with local audiences. Additionally, Formula 1 maximises revenue streams by selling advertising spaces to luxury consumer brands, leveraging the sport’s high-profile platform to target affluent demographics. 

The financial model extends to charging hosting fees for each race, compensating racetrack owners while securing a percentage of ticket sales, further bolstering profitability. However, orchestrating a worldwide tour presents formidable logistical challenges. To address this, Formula 1 has forged strategic partnerships with industry leaders like DHL, which boasts a longstanding collaboration spanning over four decades. 

Also, check how F1 contributed to building Las Vegas’s image as a global sports destination.

How Do F1 Teams Make Money?

F1 teams invest millions of dollars in sporting events, which we have already told you about. Now, let’s look at the sources on how do F1 teams make money:

Sponsorships

Sponsorships are the primary source of money for F1 teams, and the sponsorship money may range anywhere from 500K Euros to a staggering 50 million Euros in a year. This amount is highly dependent on the success of the team. The more successful a team is, the more sponsorship they can ask for. It also widely depends on the intent of the sponsor as well.  If the sponsor is paying around 1 million Euros, they can get a can logo on a mid-range car, while a 3-5 million Euro sponsorship can get a logo on Ferrari, Mercedes, etc. 

List Of Top 5 Sponsors Of F1 Teams In 2024

Payments From Formula 1

Another major source of how do F1 teams make money is through compensation and prizes. We do not have the exact estimated figures the champion usually receives, but we can provide estimated figures on our research. Until 2023, the champion used to get 20%, and the last person used to receive 6% of the pool money. However, this arrangement has been changed; champions now receive 14% of the pool money, while those who are 10th still get 6%. 

F1 CONSTRUCTORS PRIZE MONEY 2023

Pay Drivers

This is another source on how do f1 teams make money. Pay drivers are the people who, instead of receiving pay for driving, bring in sponsorship money to get a racing seat. However, the era of pay drivers has come to an end. With new rules and regulations, it has become very difficult for the paid drivers to get a chance in F1. 

F1 has imposed spending restrictions, making it harder for teams to trust the pay drivers. Steiner, team principal of Haas, said, “In the old days, you had financially unstable teams. Now we’ve got 10 very solid teams, so nobody needs to rely on a pay driver right now,”

Manufacturers

What can be better marketing than the Formula One race event? Companies that manufacture cars use this as an opportunity to market their cars; how, you ask? People who follow F1 racing and their teams are very well connected to the team’s success. If their favorite team wins, it increases the chances that the person who is connected to that team will buy the car of that company. For example, people who are fans of Red Bull are most likely to buy a Honda car over a Mercedes or Alpine. Below is the list of Top manufacturers of F1 car

List Of Manufacturers

Ending Note

We hope that the above probable sources have given you an idea about how F1 teams make money. However, we have already mentioned that the above stats and figures are estimated and may change. If you want to know anything related to sports, comment in the section below.

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