“This is no ordinary sport”. The statement is written in bold. It’s a part of a thumbnail. The video is a year old. It’s Formula 1’s official YouTube channel. “No ordinary humans” is another word written on the title. This video is 7 months old.

These statements reflect the insane level of money and tech involved in motorsport. This includes extraordinary people who would go every day and test their limits. It’s a sport where the driver could easily lose 2-4 kgs due to the temperature being 45C-65C. It’s a sport where the speed of a car could easily exceed an airplane taking off. It’s a sport where drivers are granted the highest driving license (super license) and grade one track license for the roads to meet unmatched standards.  This is Formula 1, a sport for the rich, by the rich.

Formula 1 is a mega sporting event of the world. It’s the most prestigious racing league. With astonishing money being pumped in, the sport continues to rake in heavy dollars in direct and indirect ways for the racing teams involved.

But Formula 1 itself is much bigger than a mere race where the best driver wins and gets the prize. It’s the driving force of wealth for the teams. It’s where the most extreme and innovative of automobiles is introduced and put to the test. And it’s where millions and billions of dollars are poured into only by some of the most exclusive and well-known brands around the globe. Not to mention it’s where all the well-connected elite gather to appreciate a privileged life and to discuss business.

Formula 1 is an instance of motor racing, and the more you dive into it, the more it connects with you.

1946 is When it all Happened

It traces its roots way back to somewhere in France in 1907. There were two major bodies of motor racing: The World Manufacturers Championship from 1925 to 1930, and the European Drivers Championship from 1931 to 1939.  The concept of the Grand Prix was introduced here. It was coined in French and translates to “The Great Prize”

Due to World War 2, the bodies’ operations were halted until 1946 when a new body introduced an updated racing format.

When we say Formula in Formula 1, we speak of the rules that were made for open-wheel vehicles that would race in specially curated race circuits.

Italy was where it all began.

It was a special afternoon in September. The war was over. And the Italian city of Turin was where it all occurred. The first-ever Formula 1 race had officially commenced. It was called the Turin Grand Prix.

This Italian Grand Prix was the first post-war racing event. And it was being governed by a new body. It was called the Fédération Internationale de l’Automobile (FIA).

FIA was new. It was founded in 1904 in France. But it was during the Turing Grand Prix that it became a dominant force behind F1 racing. To this day, FIa manages the Formula 1 business.

Whenever we speak of F1’s history, we can’t ignore the immense contribution of Bernie Ecclestone. This was no ordinary man. He remained CEO of the racing business for 40 years. Formula 1 thrived in his tenure.

Bernie established multiple income streams and was responsible for generating $1.9 billion in annual revenue during the 1970s.

But having Bernie around wasn’t all sunshine and rainbows for the firm. As years passed, the business saw internal conflicts and civil war-type scenarios happening within. The battle of power and politics had ravaged the company. It had shed $1 billion of its value.

It was in 2017 when the USA-based Liberty Media finally acquired it for $8 billion with Bernie still in the CEO seat. Liberty Media today is credited with introducing the F1 business to social media and digital platforms. Today the Formula One Group is worth $19.78 billion under the company with a massive surge in its popularity in the past decade.

A Testing Ground for Innovation

Grand Prix is arguably the best testing ground for innovative technology in the automotive industry. In fact. Many features that we enjoy in our home cars were first experimented with in F1 racing. This includes but is not limited to turbocharged engines, carbon fiber usage,  hybrid technology, and paddle shift gearboxes. Inventions like these have helped in enhancing fuel efficiency, car safety, and better aerodynamic structure- not to mention the powerful engines that often take the spotlight. The event has been a factor that has propelled high-tech innovation and mechanical advancement in automotive technology.

How Much Money is Involved?

From where to start? This is perhaps the most radical part. There was a time when teams would invest more than  $400 million in R&D and manufacturing. Then in 2023, the FIA had imposed a $135 million limit for every team. This helped in the evening game where one could not take advantage by investing heavy bucks in innovation.

This limit cap does not include the fee that is paid to the F1 drivers. This could range anywhere from $5 million to $60 million. Lewis Hamilton of team Mercedes  (and who’ll now be joining Ferrari in 2025) had bagged $55 million in his 2023 earnings while Max Verstappen of Red Bull had earned $70 million which was the most of that year.

• The research and development costs alone could add up to $100 million.
• The manufacturing and testing phase of vehicles could easily cross $50 million.
• The travel and logistics expenses could be anywhere around $20 to $30 million a season
• Operations that are conducted during the racing event could cost a company no less than $30 million.

“In 2019, Mercedes spent around $484 million while Ferrari spent $463 million, and finally, Red Bull invested $445 million. Following the top teams, the richest mid-field team is Renault, who recorded annual spending of $272 million in 2020”

– Rohit Kumar, Essentially Sports.

It’s not only the teams involved. One of the features of Formula 1 racing is that it brings together businesses from all walks of life. Corporations and global brands heavily sponsor each of the F1 teams. This helps teams focus on top-notch tech and talent.

Formula 1 prize is not a fixed amount. It gets distributed from a pool of funds which then is rewarded to the drivers and the construction championship winners and runnerups. While there is no fixed number of that fund, it was reported to be of the highest sports price in 2023 according to Statista. Teams like Ferrari get royalties due to being the oldest team even when they don’t win a championship.

From the brand’s perspective, it helps them reach a wider and niche audience. Due to this, the teams are heavily valued. According to Visual Capitalist, Ferrari, the richest team, is worth $3.9 billion. Second comes Mercedes which is $3.8 billion. Red Bull comes at thrift with a $2.6 billion net worth while Maccleren is $2.2 billion.

Moneygram is a key sponsor of the $780 million Haas team. Oracle proudly partners with the Red Bull team while Aramco sponsors Aston Martin. There’s not one but many sponsors of a single team. Their partnership isn’t just about giving money. It’s about creating this relationship with one of the most exquisite sports in the world. It allows them to be a part of something greater and where the world has its eyes on a sport with a massive following and with the indulgence of the elites.

From Where Does Formula 1 Earn Money?

My extensive experience in these years has established strong income streams for the F1 events. When asked Perplexity Ai about the contributions of each income stream to the overall revenue of 2022, the following data was revealed:

• Broadcasting rights created the most money: $936 million.
• Sponsorships by brands generated $445 million.
• Race hosting fees are another unique money stream for F1 and could go up to $50 million. In 2023, Azerbaijan had paid $57 million to host the race.
• The prize money was a whopping $1.25 billion and was distributed among teams depending on their winning positions.
• Merchandising sales are vital income generators that have seen an increase on an annual basis.
• Ticket prices make up a decent contribution and can range from $100 to $1700 an event. Different venues

Several other sources also play a part in making money. While an F1 race is not cheap to attend, it’s even more expensive to get registered in it.

Investopedia says that drivers need to pay a basic registration fee that could cost $11,000. This amount is not fixed and can vary drastically. For instance, Max Verstappen of the Red Bull team had to pay $1 million to compete in the 2023 season despite being a champion in 2022.

Is It Profitable?

The revenue generated by F1 seems to be increasing every year. In 2022, F1 had earned $2.57 billion in revenue. In 2023, that figure was $3.22 billion. The ongoing 2024 season has projections of concluding with at least 20% higher. Each of the income streams of F1 as an organization alongside the teams involved. These revenue figures have been reported while also observing record numbers of attendance and media coverage.

The New Era

F1 has entered a new era. Throughout history, it has been labeled a rich man’s sport. But that is about to change. The management has made efforts in the past years to bring sports to the masses.

In 2019, Netflix’s Formula 1: Drive to Surve aired on the streaming platform and captured the hearts of millions. The fly-on-the-wall series featured the never-before-recorded lives of race car drivers, their managers, and the team. The series featured the dangers and the dreams of the drivers as they helmed some of the fast-moving motor vehicles on the planet. It showed the tension and the emotions that brew among the people on the racetrack.  It unveiled a whole new perspective on the sport. It was something people could connect to.

And it did. More than 6 million people attended the race all over the world in 2023. Liberty media is now in pursuit of turning Formula 1 into a “sports for all” instead of “of only a few”. Young fans are now rushing to watch the games. Online streaming and attendance have gradually increased. People are flocking to see these drivers and their teams in action.

 

Formula 1 is rapidly changing. It’s becoming exclusive while simultaneously becoming the sport of the people. It’s a high-end racing league where exceptional humans are involved and yet share feelings like everyone else. They connect, they race, and they share their stories. It’s business and emotions all in one combined. This brings me back to the two titles I had viewed on the F1 YouTube channel.

 

“This is no ordinary sport”

“No ordinary humans”