Member Article

Formula One means business

This article intends to give some facts about Formula One:

• The Formula One Group is a group of companies responsible for the promotion of the FIA Formula One World Championship and exploitation of the sport’s commercial rights
• Bernie Ecclestone, a former Formula One team boss, has run the company since gaining control of the commercial rights.
• With annual spending totalling billions of US dollars, Formula One’s economic effect and creation of jobs is significant.
• Its high profile and popularity have created a major merchandising environment, which has resulted in great investments from sponsors and budgets in the hundreds of millions for the constructors.
• Since 2000 the sport’s spiraling expenditures have forced several teams, including manufacturers’ works teams, into bankruptcy. Others have been bought out by companies wanting to establish a presence within the sport.
• The revenue from F1’s commercial rights, based in London, UK, will reach more than $3bn annually by 2016, according to new research from F1 industry monitor Formula Money.
• The research, based on data contained in the new edition of the annual Formula Money report, predicts that revenues for the sport’s commercial rights holder, the Formula One Group, will rise at a rate of 12.7 percent a year reaching $3,253m in five years’ time.
• One of the key areas of expansion is expected to be race hosting fees, which brought in an estimated $568m in 2010.
• Most race contracts include an annual escalator and upcoming races in new markets such as Russia and India are expected to pay above the average rate.
• Formula Money predicts that the highest race hosting fee, which currently stands at $50m, will be more than $100m by the end of the decade.
• The revenue increase would be a boost not only for the Formula One Group but also for F1’s teams, the majority of which are based in the UK, which receive 50 percent of the sport’s underlying profits as prize money.
• Formula Money predicts that in 2016 the total prize fund will come to $1,575m, with the winner of the constructors’ championship taking home a $222m reward. This amount is bigger than the entire annual budget of seven of the current 12 teams and compares to the $87m that Red Bull Racing (Milton Keynes, UK) received for winning the championship in 2010. This could mean that prize money overtakes sponsorship as the biggest source of revenue for F1’s teams.
• Formula Money calculated that total team sponsorship and supplier deals came to $802m in 2010 as they fell for the fourth time in five years.
• However, early indications are that the sponsorship market is improving in 2011 as F1 accelerates away from the recession. At the start of the season the teams’ sponsorship total had already reached $887m, an increase of more than 10 percent on 2010.
• During the formula one 2014 season there are 19 races, some of which include Monaco, Italy and Britain.

This was posted in Bdaily's Members' News section by Hugh Waddell .