Post by Wß on Dec 23, 2015 13:18:45 GMT
A very good read from Autosport about the financial breakdown of the sport and how it came to be.
Many factors go into distributing Formula One prize fund
It is no secret that it costs a great deal to compete in Formula One. Hiring the world’s top drivers and building high-tech racers that travel north of 200 mph doesn’t come cheap, which is why the average annual F1 team budget is around $220 million. They are well rewarded with sponsorship and prize money -- this, too, is no secret. What is less well-known is that the better a team performs, the more it has to pay just to enter the championship.
Like everything else in F1, the payment is anything but small change.
The cost of competing has long been in the public domain as it is buried in the Sporting Regulations that control F1 and are written by its governing body, the FIA. However, this was recently thrust into the public eye when Toto Wolff, boss of this year’s F1 champions Mercedes, said that there is a “bittersweet feeling” to winning as “if you score a lot of points, the entry fee for next year is huge.”
Indeed, to defend its F1 title in 2016, Mercedes has to pay the FIA an entry fee of $4.9 million (see chart below) in two components. The first is a flat fee of $516,128 and the other is calculated by multiplying the number of points the team scored during the season by $6,194. As Mercedes’ points tally came to 703 this year, it has to pay $4.4 million.
The price of success is such that although the winning team has to pay $6,194 per point, its rivals are only charged $5,161. It means that Mercedes’ fee is nearly two times higher than that paid by Ferrari, which came second in the standings. In contrast, McLaren, the 12-time championship-winner which has fallen on hard times, only has a bill of $655,475, while Manor, which didn’t score a single point, escapes with just paying the basic fee. The story doesn’t stop there, though.
The fee to F1’s authorities is the cost of entering the sport, but it is more than offset by the teams’ prize money payments.
The prize money is paid to the teams in arrears, meaning that the money they received this year was based on their results in 2014. Payments are made on the last business day in every month of the season (March to November), with the final payment coming on the last business day of the following February.
Unlike many sports series, the division of prize money in F1 is a matter of secrecy. However, the plans to float the sport on the Singapore stock exchange in 2012 lifted the lid on this a little.
Analysis: Just how powerful is Ferrari's F1 veto?
The global financial crisis eventually put the brakes on the flotation, but by the time it hit the buffers, F1 had already produced a 498-page prospectus that confirmed many of the myths surrounding the series. Chief among them was the way that F1 rewards the best performers and the longest-standing teams.
At the core of F1’s prize money is payment to the teams of 47.5 percent of the profit of the series. This payment is divided into two, with one half split among the top 10 teams in the championship on a sliding scale. The other half is split evenly and only goes to teams that have finished in the top 10 in two out of the past three years.
The prospectus revealed that a further 7.5 percent of F1’s profit is handed to the top three teams based on the number of races won in the four seasons prior to 2012, which is when this benefit was first introduced. This bonus pot is known as the Constructors’ Championship Bonus fund and it comes to at least $100 million annually. It is guaranteed regardless of the results that the teams achieved the previous year.
According to the prospectus, this sees “the team ranked first receiving 37 percent of the CCB fund (with a minimum payment of $37 million, the second team receiving 33 percent of the CCB fund (minimum $33 million and the third team receiving 30 percent of the CCB fund (minimum U.S. $30 million).
The money is split between Ferrari, McLaren and Red Bull Racing, which leads the CCB pack due to its string of four championships from 2010. This gives it a minimum of $37 million from the CCB fund with McLaren getting at least $33 million for being ranked second and $30 million going to Ferrari.
In addition, Ferrari gets a dedicated prize money pot comprising 5 percent of F1’s profit, which comes to at least $62.2 million annually. Like the CCB fund, this is paid regardless of Ferrari’s results the previous year as it is a benefit of the Italian squad being F1’s longest-standing team having been racing in the championship since it was launched in 1950.
All in all, Ferrari gets around $164 million in prize money before a single race begins. Furthermore, even though it finished second to Mercedes this year, its prize money haul outstrips that of the German team by a staggering $54.8 million. Two other teams -- McLaren and Red Bull Racing -- also get more than $100 million in annual prize money thanks to their CCB status. These four outfits combined earned an estimated 56.9 percent of the $863.1 million of prize money which was paid out this year.
However, even the outfits at the back of the grid reap big rewards. The last-placed Sauber team earned an estimated $46.9 million, which covers around half of its budget with the remainder coming from sponsors, including Brazilian bank Banco do Brasil.
After deducting the entry fees, F1 teams get a net total of around $847.3 million annually, which makes them some of the best-rewarded outfits in world sport. It is undoubtedly one of the factors that fuelled American tycoon Gene Haas’ decision to launch an F1 team next year. However, it will have to stick around a while to earn the big bucks.
Haas has to pay the basic entry fee of $516,128, but nothing more, as it has yet to score any points. If it finishes in the top 10 in 2016, it will get an equal share of one half of the core prize money. If it wants to get a cut of the other half, it will have to finish in the top 10 in two out of the past three years. It is a war of attrition, and with that in mind, it’s no wonder the rewards are so rich.
It is no secret that it costs a great deal to compete in Formula One. Hiring the world’s top drivers and building high-tech racers that travel north of 200 mph doesn’t come cheap, which is why the average annual F1 team budget is around $220 million. They are well rewarded with sponsorship and prize money -- this, too, is no secret. What is less well-known is that the better a team performs, the more it has to pay just to enter the championship.
Like everything else in F1, the payment is anything but small change.
The cost of competing has long been in the public domain as it is buried in the Sporting Regulations that control F1 and are written by its governing body, the FIA. However, this was recently thrust into the public eye when Toto Wolff, boss of this year’s F1 champions Mercedes, said that there is a “bittersweet feeling” to winning as “if you score a lot of points, the entry fee for next year is huge.”
Indeed, to defend its F1 title in 2016, Mercedes has to pay the FIA an entry fee of $4.9 million (see chart below) in two components. The first is a flat fee of $516,128 and the other is calculated by multiplying the number of points the team scored during the season by $6,194. As Mercedes’ points tally came to 703 this year, it has to pay $4.4 million.
The price of success is such that although the winning team has to pay $6,194 per point, its rivals are only charged $5,161. It means that Mercedes’ fee is nearly two times higher than that paid by Ferrari, which came second in the standings. In contrast, McLaren, the 12-time championship-winner which has fallen on hard times, only has a bill of $655,475, while Manor, which didn’t score a single point, escapes with just paying the basic fee. The story doesn’t stop there, though.
The fee to F1’s authorities is the cost of entering the sport, but it is more than offset by the teams’ prize money payments.
The prize money is paid to the teams in arrears, meaning that the money they received this year was based on their results in 2014. Payments are made on the last business day in every month of the season (March to November), with the final payment coming on the last business day of the following February.
Unlike many sports series, the division of prize money in F1 is a matter of secrecy. However, the plans to float the sport on the Singapore stock exchange in 2012 lifted the lid on this a little.
Analysis: Just how powerful is Ferrari's F1 veto?
The global financial crisis eventually put the brakes on the flotation, but by the time it hit the buffers, F1 had already produced a 498-page prospectus that confirmed many of the myths surrounding the series. Chief among them was the way that F1 rewards the best performers and the longest-standing teams.
At the core of F1’s prize money is payment to the teams of 47.5 percent of the profit of the series. This payment is divided into two, with one half split among the top 10 teams in the championship on a sliding scale. The other half is split evenly and only goes to teams that have finished in the top 10 in two out of the past three years.
The prospectus revealed that a further 7.5 percent of F1’s profit is handed to the top three teams based on the number of races won in the four seasons prior to 2012, which is when this benefit was first introduced. This bonus pot is known as the Constructors’ Championship Bonus fund and it comes to at least $100 million annually. It is guaranteed regardless of the results that the teams achieved the previous year.
According to the prospectus, this sees “the team ranked first receiving 37 percent of the CCB fund (with a minimum payment of $37 million, the second team receiving 33 percent of the CCB fund (minimum $33 million and the third team receiving 30 percent of the CCB fund (minimum U.S. $30 million).
The money is split between Ferrari, McLaren and Red Bull Racing, which leads the CCB pack due to its string of four championships from 2010. This gives it a minimum of $37 million from the CCB fund with McLaren getting at least $33 million for being ranked second and $30 million going to Ferrari.
In addition, Ferrari gets a dedicated prize money pot comprising 5 percent of F1’s profit, which comes to at least $62.2 million annually. Like the CCB fund, this is paid regardless of Ferrari’s results the previous year as it is a benefit of the Italian squad being F1’s longest-standing team having been racing in the championship since it was launched in 1950.
All in all, Ferrari gets around $164 million in prize money before a single race begins. Furthermore, even though it finished second to Mercedes this year, its prize money haul outstrips that of the German team by a staggering $54.8 million. Two other teams -- McLaren and Red Bull Racing -- also get more than $100 million in annual prize money thanks to their CCB status. These four outfits combined earned an estimated 56.9 percent of the $863.1 million of prize money which was paid out this year.
However, even the outfits at the back of the grid reap big rewards. The last-placed Sauber team earned an estimated $46.9 million, which covers around half of its budget with the remainder coming from sponsors, including Brazilian bank Banco do Brasil.
After deducting the entry fees, F1 teams get a net total of around $847.3 million annually, which makes them some of the best-rewarded outfits in world sport. It is undoubtedly one of the factors that fuelled American tycoon Gene Haas’ decision to launch an F1 team next year. However, it will have to stick around a while to earn the big bucks.
Haas has to pay the basic entry fee of $516,128, but nothing more, as it has yet to score any points. If it finishes in the top 10 in 2016, it will get an equal share of one half of the core prize money. If it wants to get a cut of the other half, it will have to finish in the top 10 in two out of the past three years. It is a war of attrition, and with that in mind, it’s no wonder the rewards are so rich.
