Monday 1 October 2018

How Does F1 Make Money?

There is something unmistakably glamorous about F1, which is probably why it still draws in more punters than any other motorsport. Despite overall slumps in UK viewership, a peak audience of three million UK viewers tuned in recently to watch Lewis Hamilton dominate the Japanese Grand Prix, which is pretty impressive, particularly given that the race aired at 5am UK time!

But what is it about F1 that really keeps petrolheads coming back for more? It's not just the speed, and it's not just the ever-present threat of potential disaster; it's the cars. These are perfectly sculpted and precisely engineered feats of mechanical wonder that are a joy to watch tear around a track. However, as beautiful as they might be, they also cost almost as much to manufacture and maintain as the prima donnas that drive them. That's not to mention the amount of logistical planning that goes into keeping your average F1 team afloat. And this all costs. Big time.

Where Does the Money Come From?

Bonuses are a major boon when it comes to F1 team funding. Right out of the gate, any classified team that's been racing for the last two seasons gets a $36 million bonus and an additional amount is rewarded, depending on how well the teams performed last year. Bonuses are also rewarded for new signings and there are numerous other prizes and awards that change from year to year, all of which adds up to potentially hundreds of millions of dollars.

Every F1 fan also knows that sponsors play a monumental part in keeping most F1 teams afloat and have been a major aspect of the sport for decades. There is also, however, the impact of the road car industry to consider, as everyone from Honda to Ferrari often uses their motorsport and retail groups to fuel each other.

The Road Car Effect

Many have argued that F1 has essentially become a glorified advertising platform for manufacturers to promote their latest road cars, but the profits made in road car sales are also often fed back into the sport. McLaren has received major boosts to their automotive road car division in recent years and many of these profits are filtered back into the F1 team. F1 provides manufacturers the chance to show off their latest engineering feats and promote their brand to millions of eager fans. So, of course, the sport is going to have an impact on the retail market and vice versa.

Trickle-down Tech

Finally, there's also the trickle-down effect to consider. This refers to the technologies being developed by manufacturers for F1 eventually finding their way into the cars we drive to and from work every day. This represents a practical ROI for manufacturers, particularly those whose bread and butter might be in road cars, rather than supercars.

Of course, there's a marked difference between these cars in price, ergonomics and performance. There's also the practicality to consider. Can you imagine the GAP Insurance cost, for example, of a Ferrari SF70H if you were planning on taking it out for a bi-weekly spin? Indeed, these cars are so powerful you wouldn't even be able to legally take them out on the roads.

There are, however, a number of surprisingly mundane technologies that originated in F1 - from push-button ignition and suspension to engine air intake and carbon fibre bodies. In some cases, there are even noticeable parallels to be drawn between F1 and road car designs. This proves that F1 and road cars are now, and forever will be, inexorably linked. Both technologically and financially.


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