Wealth in F1

[Fire99]

Bit of a question for those well informed in F1.
Clearly 'Formula 1' has become a huge business (at the detriment of the sport IMO, but that's separate) and there are vast sums of money floating around.
I see that the track 'owners' have to pay a fortune to host a GP and keep facilities top-notch and the money invested by the teams is vast.

So, who are the Net winners in F1? Who pockets the cash?

[JonnyFive]

Bernie?

[Fire99]

JonnyFive said:

Bernie?

Well that is the obvious assumption (and no doubt at least part true) but i'd be interested what the balance books say.
Division of wealth is a very good way to understand how the decision process works.

[bosscerbera]

JonnyFive said:

Bernie?

Yep.

Bernie's genius is to turn just about anybody who signs a deal with him into a 'tax collector' on his behalf.

[Fire99]

bosscerbera said:

Yep.

Bernie's genius is to turn just about anybody who signs a deal with him into a 'tax collector' on his behalf.

Well if that is the case, then you may as well forget F1 as a true sport. Absolute power corrupts and if Bernie is now running F1 using some sort of 'Tesco business plan' then sporting integrity will be as near as damn-it at the bottom of the priority list.

Good example Valencia. 20 odd 'curves', pointless racing but the Bernie cheque-book makes good profit so keep it. If the racing looks too sterile, manufacture some artificial device to make cars pass (not overtake) each other and keep the less-informed cash-cow public amused.

That is NOT the pinnacle of motor racing. It's the pinnacle of a business model.

[anonymous-user]

A few of the drivers can command ridiculous pay because when they know the team really wants them they can just ask for more cash or they'll go to another team. But that is probably only true for Alonso, Hamilton and Vettel.

[zaphod42]

Some of the other well remunerated folk or wealthy thanks to F1 (so excluding the already rich):

Adrian Newey @10m per annum (I heard)
Christian Horner after achieving WDC/WCC had a huge bonus
Ross Brawn post sale of Brawm
Patrick Head post flotation of Williams
Ron Dennis (obviously from McLaren)
Luca di Montezemolo

plus
Frank Williams if he ever sells his stock

historic
Eddie Irvine (mostly from canny property investments)

[bosscerbera]

Fire99 said:

It's the pinnacle of a business model.

It certainly is.

[P-Jay]

bosscerbera said:

Fire99 said:

It's the pinnacle of a business model.

It certainly is.

I don't have a problem with F1 being run like a business, this is something we've our freinds across the pond to thank for.

F1 is a business, who's product is entertainment. Forget which tracks get a race and which don't depending on who cheque book gets opened F1 lives and breaths through TV money and sponsoship money and the amounts are directly linked to how many people plonk their backsides in front of the TV on a Sunday and watch it.

DC made an intersting point on Sunday "why should there be overtakes? Qualifying means the cars start in the order of who's fastest and all things being equal they should finish that way" or words to that effect.

So F1, being in the business of entertaining us for money change the regs to make it more interesting. As fake as they can seem, without them we'd end up with the 'bad old days' of passes happening as the fuel goes in the tank, not as it comes out.

[bosscerbera]

P-Jay said:

I don't have a problem with F1 being run like a business

Me neither.

[hullbilly]

zaphod42 said:

Eddie Irvine (mostly from canny property investments)

When Eddie was at Jaguar, the new head of Ford asked who Mr E. Irvine was because he was on a bigger retainer than him

[zaphod42]

hullbilly said:

When Eddie was at Jaguar, the new head of Ford asked who Mr E. Irvine was because he was on a bigger retainer than him

Yup - I heard that story as well. Shows how disconnected Ford were from that programme and they strategic intent, compared to their peer racing teams and backers.

At least Toyota were passionate and (for a while) committed - certainly didn't withhold or mind investment, they just didn't optimise it (partly because of management culture)

[Ozone]

zaphod42 said:

Some of the other well remunerated folk or wealthy thanks to F1 (so excluding the already rich):

Adrian Newey @10m per annum (I heard)
Christian Horner after achieving WDC/WCC had a huge bonus
Ross Brawn post sale of Brawm
Patrick Head post flotation of Williams
Ron Dennis (obviously from McLaren)
Luca di Montezemolo

plus
Frank Williams if he ever sells his stock

historic
Eddie Irvine (mostly from canny property investments)

Schumacher did ok, he was earning $100 million a year when driving for Ferrari, second only to Tiger Woods in sport income.

Senna too, legend has it that he drove a season for Mclaren for one dollar after flipping a coin with Ron - he didn't need the cash ;-)

[StevieBee]

TV stations pay a fee to broadcast F1. They recoup this through the sale of advertising or, in the case of the BBC, justify the money given to them by the government via the license fee as a result of the number of viewers they get.

They pay this money to CVC Capital who own the rights to F1 (to which Bernie is appointed as consultant). 50% of this money is distributed to the teams. Nobody knows how this is distributed but common census suggests a standard payment to all teams, plus complex bonuses depending upon grid positions, results, etc.

The remaining 50% goes towards administering F1 (staff, etc) and of course a few quid for a rainy day.

CVC also pay the FIA for the rights to run the championship and a fee to cover the policing of the championship. They also "own" GP2 and GP3 which IIRC are loss making entities but seen as important to the whole.

A grand prix is normally put on by a circuit owner or national or regional government.

A circuit owner who wishes to run a GP pays CVC Capital a fee to do so. In return, the get a fully packaged, all inclusive, ready to go Grand Prix weekend. They retain all gate takings, food and some retail concessions and hospitality packages (except the Paddock Club). They also have the opportunity to cross sell other circuit offerings (track and driver days, other race events, etc) to the thousands that attend.

A government may decide to run a GP and benefit from the increased profile their country or region gets as a result as well as the increase in visitor spend in that region during the GP weekend.

The teams top up their TV money from CVC with sponsorship. The sponsors benefit from the increased exposure the sport gives them leading (in theory) to more sales.

It's easy to say with derision that CVC are the biggest winners financially (or their shareholders to be more accurate) but they are also taking the biggest financial risk. If interest and viewers of F1 fell significantly, the income to CVC would fall off a cliff quicker than a Pirelli tyre. F1 would continue is some way shape or form but CVC would find themselves many many $billions out of pocket and quite possibly be the largest bancruptcy ever.

[norman156]

StevieBee said:

A circuit owner who wishes to run a GP pays CVC Capital a fee to do so. In return, the get a fully packaged, all inclusive, ready to go Grand Prix weekend. They retain all gate takings, food and some retail concessions and hospitality packages (except the Paddock Club). They also have the opportunity to cross sell other circuit offerings (track and driver days, other race events, etc) to the thousands that attend.

I can understand that, but what I still don't get is how GPs like the Australian can shed so much money? I recall hearing the last one (or it may have been 2010 I can't quite remember) lost something like $49 million, which seems completely mad given how much F1 tickets tend to cost. Is it that the CVC charge is gigantic, the attendance for the event is pitiful, or a bit of both?

[anonymous-user]

Ozone said:

Senna too, legend has it that he drove a season for Mclaren for one dollar after flipping a coin with Ron - he didn't need the cash ;-)

Nope, for the 93 season they were arguing over the last $1 Million of Senna's fee, so they flipped and Ron lost, so he had to pay an extra $1 Million on top of what he wanted to pay.

[Fire99]

bosscerbera said:

Me neither.

I wouldn't in part, if there was balance and the racing didn't suffer.

Bottom line for me is that I want the best drivers driving the best cars on the best circuits and all providing the ultimate challenge.

It is either the pinnacle of motor racing or not. It can't be Business 1st, 2nd and 3rd and racing somewhere down the line but still be the pinnacle of racing.

Pushing the limit is not writing the longest numbers on a cheque.

[StevieBee]

norman156 said:

StevieBee said:

A circuit owner who wishes to run a GP pays CVC Capital a fee to do so. In return, the get a fully packaged, all inclusive, ready to go Grand Prix weekend. They retain all gate takings, food and some retail concessions and hospitality packages (except the Paddock Club). They also have the opportunity to cross sell other circuit offerings (track and driver days, other race events, etc) to the thousands that attend.

I can understand that, but what I still don't get is how GPs like the Australian can shed so much money? I recall hearing the last one (or it may have been 2010 I can't quite remember) lost something like $49 million, which seems completely mad given how much F1 tickets tend to cost. Is it that the CVC charge is gigantic, the attendance for the event is pitiful, or a bit of both?

The Australian GP is effectively funded (or underwritten) by the local government. The GP runs at a loss but the government considers that is worth the investment as the profile of Melbourne has been enhanced and more (public sector phrase warning!!!): 'inward investment' has been made.

In plain English, more money is being spent in Melbourne as a result of GP.

There have been some noises being made recently though that the cost of hosting the GP is becoming untenable there (Imagine if Aylesbury Vale District Council stumped up the £17m fee for the British GP!!!).

As for the question whether the CVC fee is too big; in business, a constant that has always run and always will is that the buyer always feels they have paid too much and the seller always feels they have charged too little.

[Shotgun Rider]

zaphod42 said:

Some of the other well remunerated folk or wealthy thanks to F1 (so excluding the already rich):

Adrian Newey @10m per annum (I heard)
Christian Horner after achieving WDC/WCC had a huge bonus
Ross Brawn post sale of Brawm
Patrick Head post flotation of Williams
Ron Dennis (obviously from McLaren)
Luca di Montezemolo

plus
Frank Williams if he ever sells his stock

historic
Eddie Irvine (mostly from canny property investments)

That list could go on and on and on though.

[zaphod42]

Shotgun Rider said:

That list could go on and on and on though.

True, but the list of ones who have been made much poorer by F1 is also quite long!