F1 Expenditure and Profit 2010

( 4 Votes )

It took around $170 million to run a team in F1. Most of the money for the team come from sponsorship.

F1 2010 season was one of the most exciting one in the history of F1 with 4 drivers in contention for World championship title raced to the final lap of final race in Abu Dhabi and the title being grabbed by the young Sebastian Vettel making him the youngest world champion in F1 history.

This allowed injecting 7million increase in the viewership taking a total of 527million viewers world wide.

In the four decades of F1 Racing, this will be first season which will see 5 world champion fighting for another title with some others likes of Felipe Massa, Mark Webber equally clinching their hands to grab their first.

According to F1's industry monitor Formula Money, the teams' total sponsorship has increased by 9.6% to $831m in 2011. It is a world away from last year when they started the season with $705m in sponsorship, 14% less than they had in 2009. It represented the biggest fall in the past five years and, remarkably, it came despite the number of teams rising from 10 to 12 as newcomers Hispania, Team Lotus and Virgin joined the grid.

However, it soon became clear that several teams would be vying for the title in 2010 and sponsors realised that this would fuel an increase in viewing figures. It led to a steady stream of deals signed in 2010 including $8m in sponsorship of Mercedes GP from British software company Autonomy and a further $8m which Lotus received from Malaysian telecoms firm Maxis. This upswing continued over the winter break.

The biggest of this year's new sponsors is the Lotus car company which has paid around $40m to the Renault team to become its new title sponsor. It means that for the first time F1 will have two teams with Lotus branding this year and it heralds a return of sorts for car manufacturers.

One of the biggest new deals after Lotus is the sponsorship of Red Bull Racing by Nissan's luxury Infiniti brand. This will see its logos appear on the Red Bull cars alongside those of the team's engine supplier Renault and it will cost Infiniti around $10m annually. The final new manufacturer signing in F1 this year is Russian sports car maker Marussia which bought into Virgin Racing as the 2010 season was coming to a close.

The biggest loser is Williams which has parted with an estimated 40.8% of its sponsorship from 2010. It was the team's biggest fall in the past decade and in total it lost an estimated $46.5m from six brands including German insurer Allianz, a Williams sponsor since 2001, and UK government-owned bank Royal Bank of Scotland, which was alone paying $20m to the team annually.

In 2011, Williams also become the first F1 team to be publicly traded and listed on the Frankfurt Stock Exchange.

It is also set to lose its engineering director Patrick Head who is expected to retire this year. Earlier this month he floated an 14.5% stake in the team on the Frankfurt stock exchange giving himself a £31m payout before he leaves.

This year Williams has dropped highly-rated German driver Nico Hulkenberg in favour of Venezuelan Pastor Maldonado who brings with him an estimated $16m of sponsorship from local businesses including oil company PDVSA. It takes the team's sponsorship tally to $44m but puts most of its eggs in just a few baskets as the float prospectus revealed that Williams' income from prize money and its three largest sponsorship agreements "represent between 80% and 90% of the group's contracted income."

Sponsorship typically provides around 60% of a team's budget but this is increasingly harder to attain. When companies cut their marketing budgets it made them look even harder at the returns they were getting from sponsorship. So whilst the budgets of the best-performing teams ticked over, it became even harder for the back markers to sign sponsors. This has led to the funding gulf between the top and bottom of the grid growing ever wider.

The top three outfits last year - Red Bull, Ferrari and McLaren - together pull in over half of the teams' total sponsorship revenues. HRT, which finished in penultimate place last year, is believed to have less than a million dollars of sponsorship committed so far this year. Remarkably this is nearly 1,000 times smaller than the income of F1's biggest sponsorship earner Ferrari. Instead of getting most of its money from sponsors, HRT is relying on payments from drivers and its owner Spanish businessman José Ramón Carabante.

To prevent teams from hitting the wall if owners decided to pull the plug on funding the Resource Restriction Agreement (RRA) was introduced. This limits areas such as staff numbers, size of computer storage space and the amount of days cars can be tested on track. However, there are significant exclusions from it such as marketing costs and engine development which accounts for around $350m of annual spending. They may make all the difference.

The RRA was introduced in 2009 but this didn't stop Red Bull Racing's costs increasing 8.8% to £156.9m in its bid to win the championship. To maximise lead time, development work on F1 cars is done the year before they are introduced and in 2009 Red Bull Racing's spending on research and development increased 18.8% to £57.2m. It was far from the only focus of the team's investment drive as it also spent £4.9m on improving its engineering facilities and although staff numbers remained stable at 592 their total pay increased 21.9% to £45.9m.

To cover the increase in costs Dietrich Mateschitz, co-founder of the Red Bull energy drinks company which owns the team, agreed to boost investment in F1 by 29.5% to £107m. It gave the team victory and proved that although the championship seems to be decided on track the off-track battle of budgets is an equally important part of the season.

Add comment


Security code
Refresh

F1 Statistics

Brazil GRAND PRIX
23-25 November, 2012

Practice 1 : Result

Practice 2 : Result

Practice 3 : Result

Qualifying : Result

Race : Result

1 Sebastian Vettel 281
2 Fernando Alonso 278
3 Kimi Räikkönen 207
4 Lewis Hamilton 190
5 Jenson Button 188
6 Mark Webber 179
7 Felipe Massa 122
8 Romain Grosjean 96
9 Nico Rosberg 93
10 Sergio Perez 66
Full Table

1 Red Bull Racing - Renault 460
2 Ferrari 400
3 Mclaren - Mercedes 378
4 Lotus - Renault 303
5 Mercedes 142
6 Sauber - Ferrari 126
7 Force India - Mercedes 109
8 Williams - Renault 76
9 STR - Ferrari 26
10 Marussia-Cosworth 0
Full Table