Where Does The Money Come From?
Discussion
I don't have any interest in F1, so I need to ask you lot.
When I was a kid, F1 teams were referred to by their major sponsors. Marlboro McLaren, JPS Lotus, Parmalat BMW (whoever the heck Parmalat are) and so on.
Those sponsors, along with the lesser ones, presumably paid for the team and its activities.
Nowadays, if I look at an F1 car, it's not always obvious that it's carrying any sponsorship, and they all seem to have fewer sponsors than before.
I heard recently that Lewis Hamilton's signed up for £30m a year. Where does all this money come from? It can't be cheaper to be in F1 today than it was 30 years ago, can it? Does F1 really generate so much extra business for the sponsors that they think it's an effective form of advertising? Do teams get paid to race, or do they win money when they win races?
When I was a kid, F1 teams were referred to by their major sponsors. Marlboro McLaren, JPS Lotus, Parmalat BMW (whoever the heck Parmalat are) and so on.
Those sponsors, along with the lesser ones, presumably paid for the team and its activities.
Nowadays, if I look at an F1 car, it's not always obvious that it's carrying any sponsorship, and they all seem to have fewer sponsors than before.
I heard recently that Lewis Hamilton's signed up for £30m a year. Where does all this money come from? It can't be cheaper to be in F1 today than it was 30 years ago, can it? Does F1 really generate so much extra business for the sponsors that they think it's an effective form of advertising? Do teams get paid to race, or do they win money when they win races?
Lewis Hamilton is used quite well to lower the age demographic that Mercedes cars appeal to.
Which they've managed quite well as it wasn't too long ago that a lot of people just saw them as rich pensioners cars. Now Mercedes appeal to a very large portion of the young population.
F1 to manufactures is just a way to promote their brand.
Which they've managed quite well as it wasn't too long ago that a lot of people just saw them as rich pensioners cars. Now Mercedes appeal to a very large portion of the young population.
F1 to manufactures is just a way to promote their brand.
Doofus said:
So it sounds like a different business model to the old days then.
Many thanks
Depends on which old days you're referring to, 50's, 60's 70's, 80's etc etc. The primary change Ecclestone made was to get money flowing into the sport directly from tracks, promoters and tv rights. Prior to that each team negotiated directly.Many thanks
Sponsorship is nothing like the levels it was in the 90's for example for any motorsport.
Doofus said:
ralphrj said:
The primary source of income for most teams is from Formula One Management (FOM) who sell the TV rights. The way the money is distributed is complicated but essentially it is the prize money.
So it sounds like a different business model to the old days then.Many thanks
Direct team sponsorship by 3rd party non-motoring commercial companies (tobacco, cosmetics, toy manufacturers) only came to European motor sport in the 1960s. Before then, the sport was supported by motor manufacturers (such as Alfa Romeo, Mercedes, Ferrari etc) using money generated from road car sales and customer racing car sales) to fund the works racing teams. Teams and drivers also won prize money and were also given appearance money for just "being there".
The demise of cigarette advertising on TV in Europe in 1966 was the trigger for tobacco manufacturers to approach sports events organisers for sponsorship opportunities. Colin Chapman was the first in grand prix racing to see the monetary bonanza awaiting any team that could get this sponsorship.
The problem was that the F1 governing body was very reluctant to allow this "Americanisation" of European motor sport but by 1968 they had wilted under pressure from the teams and it was in that year that the first "ciggie liveried" cars appeared in the guise of the Gold Leaf Team Lotus.
There are benefits to the major manufacturers merely to be involved in F1. Merc is transcendent. That carries a lot of kudos. They've got the most recognisable logo in car manufacturing and Hamilton is seen wearing it in so many images. They get a fair bit from it. If they didn't they'd be out.
They are selling to those with money, if not to waste, then enough to spend on a badge. When there's BMW, Audi and others all after a cut, Merc being top of the pinnacle of motor sport is a hefty leaver.
Given the following for F1 in the markets they see as their biggest, they can boast of their hybrid technology. Toyota have won Le Mans, but who knows? Perhaps a few more than might have if Alonso hadn't been in the car.
There's a lot more to image management than showing your car in adverts. They'll stay for a couple of years I think, until any new regs threaten. They'll assess the likelihood of them being able to gain an advantage and, if it seems not, they'll be off with more smoke behind them than an F1 Ferrari.
I'd love to see the figures, if only to understand what I'm missing.
They are selling to those with money, if not to waste, then enough to spend on a badge. When there's BMW, Audi and others all after a cut, Merc being top of the pinnacle of motor sport is a hefty leaver.
Given the following for F1 in the markets they see as their biggest, they can boast of their hybrid technology. Toyota have won Le Mans, but who knows? Perhaps a few more than might have if Alonso hadn't been in the car.
There's a lot more to image management than showing your car in adverts. They'll stay for a couple of years I think, until any new regs threaten. They'll assess the likelihood of them being able to gain an advantage and, if it seems not, they'll be off with more smoke behind them than an F1 Ferrari.
I'd love to see the figures, if only to understand what I'm missing.
Doofus said:
I heard recently that Lewis Hamilton's signed up for £30m a year. Where does all this money come from? It can't be cheaper to be in F1 today than it was 30 years ago, can it? Does F1 really generate so much extra business for the sponsors that they think it's an effective form of advertising? Do teams get paid to race, or do they win money when they win races?
To put it in context - Lewis Hamilton's Salary would keep Merecedes research and development department running for about 40 hours. A lot comes just from the factory if they see it as good advertising.
At the time of the stunning black and gold liveried Lotus 77, a 'directive' went out to all the various media reporting on F1 that the car should be called John Player Special, and no mention should be made of Lotus. Given its record, I would assume that Chapman was a bit miffed that everyone ignored the wishes of Players.
You could watch F1 free on regular tv in years gone by. Now the tv fights are sold to the highest bidde all over the world.
In recent years the fee payed to host an F1 GP has increased greatly.
The proceeds of above all go to FOM and part of that is paid to the teams under a complicated agreement based on team history and finishing places of previous season.
In recent years the fee payed to host an F1 GP has increased greatly.
The proceeds of above all go to FOM and part of that is paid to the teams under a complicated agreement based on team history and finishing places of previous season.
Also money laundering... willfull and agressive tax avoidance in companies (resulting in the tax payers pay for a great deal of the show) There was a story about F1 teams having 3 accounts,: One for the tax office, one for FOM and one for real.... My friend and I have a long running joke when we go to the pits (mainly in in GT and prototype racing). Where is the washing machine??? (for money). It must be around somewhere :-)
One just have to look at many of the types of people who lurk around in the background of motorsport (and many other high value sports) to guess what is going on...... you will meet some of the most obnoxius people imaginable
Just think about it... why has Bernard Charles not been knighted (or something in order) for service to motorsport??? After all he has made a lot of people very rich....
One just have to look at many of the types of people who lurk around in the background of motorsport (and many other high value sports) to guess what is going on...... you will meet some of the most obnoxius people imaginable
Just think about it... why has Bernard Charles not been knighted (or something in order) for service to motorsport??? After all he has made a lot of people very rich....
Edited by Great Dane on Saturday 4th August 11:10
Exige77 said:
You could watch F1 free on regular tv in years gone by. Now the tv fights are sold to the highest bidde all over the world.
In recent years the fee payed to host an F1 GP has increased greatly.
The proceeds of above all go to FOM and part of that is paid to the teams under a complicated agreement based on team history and finishing places of previous season.
And Ferrari get a massive bonus for just being Ferrari and turning up... that bonus in itself is bigger than what many smaller teams get in totalIn recent years the fee payed to host an F1 GP has increased greatly.
The proceeds of above all go to FOM and part of that is paid to the teams under a complicated agreement based on team history and finishing places of previous season.
Vocal Minority said:
To put it in context - Lewis Hamilton's Salary would keep Merecedes research and development department running for about 40 hours.
A lot comes just from the factory if they see it as good advertising.
Not to mention the car manufacturers Renault, Merc and Mercedes (And to a lesser extent Mclaren and Honda) are also are able to offset some development costs using F1 innovations in road cars funded by the motorsport division with the attendant "Free" hype. A lot comes just from the factory if they see it as good advertising.
Doofus said:
When I was a kid, F1 teams were referred to by their major sponsors. Marlboro McLaren, JPS Lotus, Parmalat BMW (whoever the heck Parmalat are) and so on.
To a large extent they still are - if not in the team name then in their logo - see this page https://www.formula1.com/en/championship/teams.htm...Eric Mc said:
First of all, you only need a "business model" if what you are doing is actually being run in the nature of a business. From the very early days of motor sport right up until the mid 1960s, motor sport was looked on more a sporting endeavour with marginal business impact. Sure, car and component manufacturers liked to cash in on the success of their products in motor sport but to those who ran the teams and the drivers, motor sport was far less of a pure monetary exercise as something they did because it was something they had a passion for.
F1 political problems stems from the inception of F1 GP WC post war when Enzo Ferrari made a disparaging remark of British privateer teams as garagistes and therefore the battle between manufacturers vs privateers that continues to this day.FOCA was formed in the 60s as F1CA and was made up of the British teams who wanted better money from the race organisers. Bernie took over FOCA and offered better money for teams especially with TV rights deals and so commercial power swayed to him via FOM,
entropy said:
F1 political problems stems from the inception of F1 GP WC post war when Enzo Ferrari made a disparaging remark of British privateer teams as garagistes and therefore the battle between manufacturers vs privateers that continues to this day.
FOCA was formed in the 60s as F1CA and was made up of the British teams who wanted better money from the race organisers. Bernie took over FOCA and offered better money for teams especially with TV rights deals and so commercial power swayed to him via FOM,
It was "post war" - kind of - in that it was the late 1950s before British F1 manufacturers started posing a serious threat to the domination of the continental manufacturers. A British team with serious title capability did not emerge until 1957 (Vanwall) and it was 1958 before a British car was able to give a driver a World Drivers' Championship title - Jack Brabham in a Cooper. It was in that period (1957/58) that Ferrari started calling British teams "garagistes" in a disparaging tone.FOCA was formed in the 60s as F1CA and was made up of the British teams who wanted better money from the race organisers. Bernie took over FOCA and offered better money for teams especially with TV rights deals and so commercial power swayed to him via FOM,
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