Formula 1 continues to be the passion of a vast majority of people. Over the years, it has evolved to be more than a sport- and an expensive one at that! Formula 1 has morphed into a huge industry and as religious monitors of this sport; we are accustomed to the infinite zeroes that turn up as a driver’s salary or a sponsorship deal. Money makes the world go around and it is no different when it comes to this motorsport. This leads us to wonder why- why do the racers get paid so much? Why do the teams have to pay hundreds of millions of dollars just to compete? Why are Formula 1’s yearly earnings equivalent to the GDP of a small country? Before we go on to decode the why, lets first understand how a Grand Prix is actually staged.
A Grand Prix primarily needs a location or a circuit to race at. And for these locations and circuits, Formula 1 levies a race sanctioning fee. This essentially is the amount of money that a circuit pays to host a Grand Prix. Although the cost of the fee depends on the circuit, on average each circuit is required to pay $31 million to host a race. With only 23 races in a season, the circuits usually engage themselves in an auction-like battle to be one of the venues for a season. Now with the location in place, the next source of revenue is the TV licenses. Broadcasts of the race are filmed by F1 themselves and then sold to broadcasters who either own branding or commentary. To put this in numbers, Sky Sports pays $50 million per year to bring every race to its just UK audience. Multiplications on the global magnitude bring the TV licenses total to $600 million.
Moving on to the events on the paddock, being a Formula 1 racer is an expensive affair. On average, the 20 drivers on the circuit manning the fastest acceleration automobiles on the planet have had to invest about $8 million dollars towards their motorsport career, making it important to be backed by sponsors and racing academies. The rewards for these struggles are salaries that range from $500,000 to $55 million. According to Forbes, Lewis Hamilton continues to be the highest-paid F1 driver with a projected salary of $62 million. The teams that these drivers race for have a particularly tough time being one of the 10 racing teams as well. Setting aside the cutthroat competition, just to enter F1 as a new team you are required to pay $200 million. This is independent of the spending done on performance building. Now that the team is a part of F1, being competitive demands an expenditure of at least $145 million every year courtesy of the new budget cuts. Deep pockets like these are supported by plentiful sponsors, making sponsorship an indispensable aspect of motorsport. Sponsors of an F1 team are willing to put in money ranging from $100 million to $150 million to gain traction with the 1.9 billion watchers of the sport.
Formula 1, glamorous as it is, is among the very few sports that have to deal with worldwide logistics making it an organizational miracle. In a Formula 1 season, the 21 races in 21 different countries are held across the globe. Taking into consideration the ridiculous amount of equipment and the number of staff each team must transport in a short window of 1-2 weeks between each grand Prix makes the logistics cost unquestionably expensive. Estimates show that each team transports approximately 50 tons of equipment per season, accounting for $8 million through varied means of transport subject to the convenience and affordability of the team. Quick math for all the 10 teams brings this total to a staggering $80 million spent solely on the logistics, and we haven’t even covered the actual racing yet!
Speaking of cars, achieving the highest-level performing car is a costly affair. Using the best materials (at least 25,000 separate parts) comes with multiple digit price tags. Breaking down the actual mechanics of a car, the expense of the most basic parts looks something like this:
|Halo above the driver’s cockpit||$17,000|
|Carbon fiber for the main structure||$650,000|
|Set of tires||$2,700|
|Fuel per season||$500,000|
Altogether, the average cost for an entire Formula 1 car is estimated to be around $12.2million dollars. This is independent of the F1 team’s most expensive avenue- research and development. R&D costs for an F1 team can go up to $500 million! Now imagine these numbers and keep in mind that racing comes with crashes (hello, Nikita Mazepin), resulting in constant repairs and replacements, making it even more frustrating for teams like Force India with drivers racing against each other.
Another representation of the huge amount of dollars that go into the sport can be brought about through a comparison with football. Being a global sport with venues spanned across continents as well, and with a viewership of more than that of any other sport, one look at the major football leagues shows that there are 196 football teams in total as opposed to the 10 racing in F1. The 196 football teams are constituted of 2000 footballers worldwide while 20 drivers compete for the championship title, making the sheer exclusivity of the sport a factor for being expensive as well. Looking at this exclusivity from the sponsor’s point of view actually means that with only 20 cars on the track, there is only so much visibility that a team can offer. Bringing in the economics of demand and supply, since the supply of visibility is low, sponsors are willing to pay a higher price for the coveted spot.
With the sport’s pioneering technological achievements, elements such as each car’s materials, each racing team’s crew, its exclusivity, and each Grand Prix’s logistics all are large contributing factors to making Formula 1 the most expensive sport. The absolute glamour and grandness of the sport are validated by the theatrics on and behind the circuits. Laced with intense politics, insane competitions, and ridiculously large cheques, Toto Wolff’s headphone reaction becomes increasingly relevant after a peep into the finances!
By Purva Dafle