22 November 2017

How F1 payments work...


Joe Saward is a motorsport journalist, primarily covering Formula 1, and has done since 1988. Joe has attended over 500 races and is therefore considered one of a very small group of opinion formers at the very centre of this multi-billion dollar global business.

People often ask who gets paid what in Formula 1. It is a very difficult question because the total is based on the annual earnings of the Formula 1 group (the EBIDTA), but it is not 100 percent clear what is included and excluded in reaching this figure.

The basics of how this is divided up are understood, however, with five percent of the money going straight to Ferrari, two and half percent from the teams’ share and two and half percent from the commercial rights holder (CRH). This is justified on the basis that Ferrari is “The Longest Standing Team. There is then the prize fund, which is divided in half to create two smaller funds (known as Columns). Column 1 is divided equally between all the qualifying teams (in order to qualify they must be in the top 10 for two of the three previous seasons), and Column 2 is divided up on the basis of their performance with the World Champions getting 19 percent of the fund, with the other nine teams getting the following percentages: 16-13-11-10-9-7-6-5-4. There are then various bonus schemes, the most importnt one being the Constructor Champions’ Bonus (CCB) scheme, which rewards the three teams that have scored the most race wins in the previous four seasons. Thus 2013, 2014, 2015 and 2016. This is an odd way of calculating the cash as Mercedes have won 54 victories, Red Bull 18 and Ferrari five, but the CCB does not take into account the actual number of wins, but rather the position in the hierarchy. The current breakdown is $37 million for Mercedes, $33 million for Red Bull and $30 million for Ferrari. In other words, Mercedes gets $685,000 for each win, Red Bull $1,830,000 per win, but Ferrari get a whopping $6 million per win.

If a team wins two consecutive Constructors’ Championships, it gets a one-off payment per year of $30 million, which has helped Mercedes a great deal in recent seasons, having won three of them (to date). When you add it all up, it is very clear that Ferrari gets a fantastic deal from the sport. And if you add in sponsorship, merchandising. licensing and so on, it is clear that the Italian team is not spending a great deal on F1 – if anything. Thus the suggestion that pulling out of F1 will provide savings for the organisation are wrong, and it will need a pile of money to advertise its products, as the sport is doing that at the moment – and Ferrari has no other marketing, beyond a couple of theme parks and a lot of people walking around wearing Ferrari merchandising…

To help understand the structure, here is a chart showing the flows of money and some estimations of the money being paid out.

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