FIA Formula One World Championship is the highest class of single-seat auto racing. Despite of the popularity it has won among the mass, its money-making strategies now has gained more and more attention. And I would like to explain how F1 achieved its financial success.
Formula One Group—the company owns commerical rights to F1—is made up of multiple companies. The Group is owned ultimately by Delta Topco, a Jersy-based company owned primarily by investment companies CVC Capital Partners, Waddell & Reed, and LBI Group, with the remaining ownership split between Bernice Ecclestone, other investment companies and company directors.
Despite of the financial crisis of 2007-2008, the revenues and profits F1 earned have gone up. In 2007, it earned $ 1.156 billion and in 2008 the revenues come up to $1.388 billion. And just four years later in 2012, the revenues soar to $1.6 billion and this is almost 300 million more than those of the year 2008. Well, that’s really something.
But how is that money generated? Well, generally speaking, $500 million comes from the fees that promoters pay to host races and then another $500 million comes from the fees that broadcasters pay to screen the sport. And the remaining $500 million comes from sponsorship or corporate hospitality. One thing needs to be noted is that the key drive of the growth is the fees that come from circuits. Most of these contracts include clauses that increase the rate by up to 10% annually. And the key of increase is that Ecclestone has taken races to emerging markets, for example, Asia, for it has become apparent for the Asian countries like China, Singapore, India and South Korea that hosting a Formula One Group is a good way to put their country on the global sporting map so that these countries will spare nothing to gain the permission to hold the race.
Also, what’s increasingly happening is that sponsorship deals are being done with F1 owners. And as a F1 sponsor, one can get numerous things, getting packages of trackside advertising around the circuit, guaranteed exposure, so that the revenues generated in this aspect has a lot to expect.
A great success story, isn’t it? And we hope F1 will create more miracles in the future. Let’s look forward to it.