Costs of F1 racing?
Discussion
In a word, phenomenal.
There have been a few magazine articles recently showing how much each team spends and on what. I think the best stat that really shows the difference is the fact that (IIRC) Ferrari spend more on hospitality in a season than Minardi's entire race budget.
More info here
There have been a few magazine articles recently showing how much each team spends and on what. I think the best stat that really shows the difference is the fact that (IIRC) Ferrari spend more on hospitality in a season than Minardi's entire race budget.
More info here
The only person who really knows is Bernie!
Teams like Toyota, Ferrari, McLaren, - all operate on annual budgets of around £300million.
Minardi's budget is nearer £40million.
Revenue comes from a share of the TV rights - half being distributed amongst the teams, the rest goes to FOM (Formula One Administration) who also receive 100% of all track side advertising.
Other income comes from sponsorship and to a lesser extent, merchandising.
It's difficult to assess the full flow of cash due to the widely dispersed nature of the stakeholders - geographically and physically. But one can assume it to be huge.
I seem to recall that the annual GDP of F1 is around the the £2billion mark.
The book "Bernie's Game" gives a more detailed overview.
Teams like Toyota, Ferrari, McLaren, - all operate on annual budgets of around £300million.
Minardi's budget is nearer £40million.
Revenue comes from a share of the TV rights - half being distributed amongst the teams, the rest goes to FOM (Formula One Administration) who also receive 100% of all track side advertising.
Other income comes from sponsorship and to a lesser extent, merchandising.
It's difficult to assess the full flow of cash due to the widely dispersed nature of the stakeholders - geographically and physically. But one can assume it to be huge.
I seem to recall that the annual GDP of F1 is around the the £2billion mark.
The book "Bernie's Game" gives a more detailed overview.
No one really knows. The real figures are kept secret by Bernie and the teams.
Some of the costs incurred are blatantly immoral and excessive. Looking at ITV's F1 coverage on Sunday, they ran a piece on how Mike Gascoyne commutes EVERY DAY from his home in the UK to the Toyota F1 HQ in Cologne. Now, in this day and age where we are being encouraged to travel less, use IT to communicate and generally consider other things apart from our own immediate business and economic needs, is this the right image that F1 really should be presenting?
I note that the plane (a big twin turboprop Cessna) carried an American registration with he last two letters of the reg being "MG" - so he has a personalised reg number on his plane too
Some of the costs incurred are blatantly immoral and excessive. Looking at ITV's F1 coverage on Sunday, they ran a piece on how Mike Gascoyne commutes EVERY DAY from his home in the UK to the Toyota F1 HQ in Cologne. Now, in this day and age where we are being encouraged to travel less, use IT to communicate and generally consider other things apart from our own immediate business and economic needs, is this the right image that F1 really should be presenting?
I note that the plane (a big twin turboprop Cessna) carried an American registration with he last two letters of the reg being "MG" - so he has a personalised reg number on his plane too
They may get masssive exposure but, as Ford/Jaguar have realised, it's not always worth it. In my opinion, F1 is probably the least effective form of advertising there is. Companies that decide to put money into F1 are usually headed up by individuals who happen to be motor sport fans and they often persuade their board to go down the F1 route. When these individuals retire or leave the company for any reason, the board usually reasses their committment to F1 - and often pull the plug.
There have been notable exceptions of course - Marlboro in particular, but the cigarette companies are working to a different agenda to most other businesses.
There have been notable exceptions of course - Marlboro in particular, but the cigarette companies are working to a different agenda to most other businesses.
Eric Mc said:
They may get masssive exposure but, as Ford/Jaguar have realised, it's not always worth it. In my opinion, F1 is probably the least effective form of advertising there is. Companies that decide to put money into F1 are usually headed up by individuals who happen to be motor sport fans and they often persuade their board to go down the F1 route. When these individuals retire or leave the company for any reason, the board usually reasses their committment to F1 - and often pull the plug.
There have been notable exceptions of course - Marlboro in particular, but the cigarette companies are working to a different agenda to most other businesses.
I agree Eric. I cannot imagine anyone going out and buying a Renault Clio because their F1 cars are currently winning. Neither, for that matter can I think of anyone who wont buy a Clio because their cars ARENT winning.
The big difference in the economics of F1 compared to the past is the drift towards "emerging nations" and away from the historic base of Grand Prix racing, Europe. The pull of these countries is two fold - slack or non-existant anti-tobacco legislation and emerging consumer demand for products the "old" world is already familiar with.
Note that virtually NOTHING to do with the move to these regions has anything to so with sport or even motor sport per se but EVERYTHING to do with the material ambitions and desires of a perceived new group of consumers of products ands services.
Like the move to overseas call centres where the product or service alienates itself from its original core target, this is a totally disastrous trend and will ultimatley lead to the demise of the activity by in its original home - be it banking or F1.
Luckily for us in Europe, there should be adequate motor sport to step into the void created when F1 disappears up its own proverbial.
Note that virtually NOTHING to do with the move to these regions has anything to so with sport or even motor sport per se but EVERYTHING to do with the material ambitions and desires of a perceived new group of consumers of products ands services.
Like the move to overseas call centres where the product or service alienates itself from its original core target, this is a totally disastrous trend and will ultimatley lead to the demise of the activity by in its original home - be it banking or F1.
Luckily for us in Europe, there should be adequate motor sport to step into the void created when F1 disappears up its own proverbial.
Eric Mc said:
In my opinion, F1 is probably the least effective form of advertising there is. Companies that decide to put money into F1 are usually headed up by individuals who happen to be motor sport fans and they often persuade their board to go down the F1 route.
As a sole means of building brand awareness then yes - it's a waste of time, but then so would be relying purely on press or TV ads.
Any good campaign needs to feature a mix of media and with F1, brands can benefit by association but they need to promote that association through other means.
Quite often, the main benefits are not neccissarly to do with brand exposure but the contacts it gives.
We got quite a way into negotiating a deal with a car production software company and an F1 team. It would of cost them about a £1m but put them in front of some the worlds leading auto manufacturers - at the most senior level possible - people who can sign a deal there and then.
I think you'll also find that in the lower formula, there is a great deal of sponsorship given on the basis of a business person's interest in the sport but with F1, most deals are still done as part of a strategic, considered marketing programme.
That said, there are some appaling marketing/sponsorship examples - including the Ford/Jag example you state.
williamp said:
I cannot imagine anyone going out and buying a Renault Clio because their F1 cars are currently winning. Neither, for that matter can I think of anyone who wont buy a Clio because their cars ARENT winning.
The year Mansell won the world championship (using a Renault engine) sales of Renaults in the UK rose by 11%. The research they did on this showed that of this rise, 8% was directly correlated to the exposure Mansell gave the brand.
The effect may not be as dramatic today, but if they get it right, it does have an impact.
Eric Mc said:
Companies that decide to put money into F1 are usually headed up by individuals who happen to be motor sport fans and they often persuade their board to go down the F1 route. When these individuals retire or leave the company for any reason, the board usually reasses their committment to F1 - and often pull the plug.
Beatrice being a prime example
I just dug out Autosports xmas special, which looked at the budgets of a few teams:
Toyota total 2004 budget: $368.5 million
of which Engine developments: $175 million
Compares to BAR Honda:
2004 budget: $309.8 million
Engines: $165 million
Compares to Minardi:
2004 budget: $46.57 million
Engines: $10 million
Toyota spent $66.6 million on testing alone...
Toyota total 2004 budget: $368.5 million
of which Engine developments: $175 million
Compares to BAR Honda:
2004 budget: $309.8 million
Engines: $165 million
Compares to Minardi:
2004 budget: $46.57 million
Engines: $10 million
Toyota spent $66.6 million on testing alone...
team underdog said:
I just dug out Autosports xmas special, which looked at the budgets of a few teams:
Toyota total 2004 budget: $368.5 million
of which Engine developments: $175 million
Compares to BAR Honda:
2004 budget: $309.8 million
Engines: $165 million
Compares to Minardi:
2004 budget: $46.57 million
Engines: $10 million
Toyota spent $66.6 million on testing alone...
Hmm.
I have a copy of Equipe Elf from the Racing Car show of 1975. So, what were the costs to run a top team 30 years ago?
Ken Tyrrell said:
"In 1974 Elf Team Tyrrell spent £600,000 to build, maintain and race a competitive two car team in formula 1, and that figure is 20 percent higher than in 1973 when we won the World Championship. Costs are rising all the time."
He was not wrong in his last observation.
Mike Gascoyne was, at one time, team manager for Tyrrell iirc. (Though not in those days.)
robsinfield said:Well I never ! (and steeviebee).
Renault sales in Spain are already up 15% this year due to the Alonso effect. It would take more than a few wins from Fernando to make me want to buy a Modus though...
Rob
I take it back, muttering something about getting my facts right before posting!
This demonstrates the power of the individual rather than the product - notice that sales were linked to Mansell's or Alonso's success, not the success of the car or the team.
For a so called global sport with global reach, having a short lived boost in sales in the home country of one driver is not that remarkeable.
>> Edited by Eric Mc on Thursday 12th May 15:35
For a so called global sport with global reach, having a short lived boost in sales in the home country of one driver is not that remarkeable.
>> Edited by Eric Mc on Thursday 12th May 15:35
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