Formula One is the mainstream motorsport competition in the world and it has been for a few decades, although Formula 1 finding it hard to expand to next level but if we look at the last decades it has increased more than double since 2003 when the operating profit was $729million in 2003 which has steadily reached $1800 million in 2014. Formula 1 profits are controlled by private equity firm CVC which is later distributed to among teams through prize money and of course between CVC capital partners Bernie Ecclestone and other stakeholders.
So today we take in-depth look at the financial structure surrounding F1, although it is almost impossible to come up with accurate because they are based on yearly figures provided by F1 which are further complicated by web of percentages and fixed payments and to top that off all these figures are highly confidential. before we go into complex web chart of Formula 1 profit distribution a short look at how F1 generate money should be a good idea.
Formula 1 Financial Structure Explained:
Like we mentioned before the exact figures are anybodys guess because the confidential status of money numbers but we do have some good info on yearly profit and how its distributed among stake holders.
Formula One Revenue in and out-flow streams:
The chart below shows a vague picture of how the money comes and flow through different channels in Formula 1 from race promoters, sponsors and tv rights to CVC & stake holders leading to teams and drivers. There is another chart below this one which shows some financial figures.
Circuits as race promoters pay a certain race fee to commercial rights holders of F1, who also recieve money from highly lucarative TV rights deals plus sponsorships like F1 game and merchandise sales and than there is corporate hospitality packages which generate good money for F1 now once all these streams provide a inflow of cash to f1 commercial rights holder group than starts the outflow of cash which is divided into two parts. 1) prize money fund which is 50% of the total profit 2) the other 50% goes to formula 1 groups which is later divided into several parts.
How Formula One Profit is distributed among teams and stakeholders ?
The profit pie is divided into two main categories first goes to teams through prize money and equal share and the second part is divided between fixed & historic payments and of course portion goes to CVC and stakeholders.
here is a small diagram which kind of show the outflow of profit among teams and shareholders. Again the numbers might not be accurate but this is as close as it gets since most of the information is confidential.
So the total profit ($1800 million in case of 2013 figures) is divided into two funds.
Prize Money Fund
- First one the 50% of total profit goes to Formula 1 teams (Prize Money Fund)
- Prize Money fund is further divided into two parts of 23.75% each.
- 23.75% goes into the equal share given out to teams while the other 23.75% is divided among top 10 teams on how they finish on the table.
- %2.5 of prize money fund goes to Ferrari as they have a special arrangement with F1, Ferrari also nets another 2.5% of 50% allocated to Formula 1 group.
Formula One Group Fund
- The second half of total profit goes to Formula one group fund which is divided into several payments.
- like we mentioned before 2.5% goes to ferrari.
- 7.5% goes to constructors championship bond fund.
- 3.3% goes to historic payments to mercedez and williams teams
- .55% goes to 11th place team in the constructors championship (this will be removed starting from 2015 seasons)
- the 36% goes to parent company delta topco ltd who shares its with CVC capital partners and shareholders, after expenses and taxes debt repayments.
So this is how the Formula 1 financial structure works, in the next part of Formula 1 Finanical chart flow we will take a deeper look into the prize money fund and how much the teams actually get paid after 1 single season. let us know your thoughts in the comments below, if you want to add something in above numbers and figures shout it out.