F1NANCE - The economy of Formula 1

20 fast cars - 23 beautiful,but dangerous circuits - 20 brave drivers - 1 winner

Formula 1 is a sport with huge amounts of sponsorships and paid-for branding. It’s an expensive sport, after all, and F1’s business model is essentially built on and around sponsorships. I personally view it as a sport for nerds and rich people.

So who pays? Taxpayers (the government of the region pays to hold the race);

Motorsport lovers (people who pay for tickets, merch, or anything related to the event);

Sponsors (firms that partner up with the events to fund the remaining part of the required investment).

All of that is general knowledge, let’s talk about how the sport affects the economy overall.

Firstly, an event of a certain magnitude, such as a Grand Prix, can put a city on the map, boosting the image of it, therefore encouraging tourism, which ultimately leads to further investment in infrastructure and amenities, making the city more appealing to both locals and visitors.

Secondly, as Formula 1’s owner, Liberty Media is a publicly traded company, we can see their financial reports. it is proven that in the 2022 calendar, the sport has revenued €2,505,396,750 (2.5 billion euros), following another 2 billion in 2021.

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Now, let’s see how exactly F1 teams make money. For starters, FOM payments (Formula One Management). Each team receives first division payments of 36€ million if they’ve participated for two seasons (money gathered from TV rights and circuit sponsorships). Second division payments are given to the teams according to their places and points acquired after each race.For the third division, an amount of 68 million dollars is awarded to the longest-standing team of F1. This award is also known as the Ferrari budget as it is only given to them.

Teams also make money through paid drivers. They are drivers that instead of getting paid by the team, pay the team to get a seat. For example, former driver Nicholas Latifi had a seat for Williams due to the huge amount of sponsorships provided by his parent's companies.

In conclusion, Formula 1 is a sport with an impressive legacy of economic prosperity, mostly achieved over the many years, because in this sport longevity matters a lot, hence the fact that there are pretty much no new teams introduced to the sport.

Congratulations Max Verstappen for the Austria GP win! 🏁