How Formula 1 Teams Make Money

21 Nov 2023 (1 year ago)

Chapter 1 - Leading an F1 team (1m29s)

Toto Wolff is a highly successful team principal, CEO, and part owner of the Mercedes F1 team.
He balances technical understanding necessary for managing a design team and the business operations for monetary success.
Wolff states it's crucial to create a framework for performance teams to thrive and manage the business aspect.
The CEO of McLaren Racing similarly focuses on acquiring the best people, resources, and corporate partnerships.

CNBC is a sponsor of McLaren Racing; key individuals in F1 teams started in the sport at an early age.
Team principals often have a long history in racing, sometimes starting as mechanics or drivers, which informs their leadership.

Running an F1 team is expensive, with costs over $400 million including marketing, mechanics, and driver salaries for Mercedes in 2022.
A single F1 car costs around $2.5 million to make for one season, and continuous development is necessary to remain competitive.

F1 teams generate revenue through sponsorships and prize money from Formula 1, with additional historical payments for teams like Ferrari.
Revenue streams are usually predictable with long-term sponsorship contracts.
Teams tailor sponsorship placements and leverage F1's global presence for brand marketing, matching demographic profiles of their fanbase with corporate partners.
Success in F1 can enhance a company's brand recognition and connect to product offerings; profitability can be measured through global brand promotion.

The $135 million cost cap for 2023 was introduced by Liberty Media to control expenses and level the playing field among teams.
The aim is to make F1 businesses sustainable, similar to the American sports leagues with salary caps.
The cost cap has led to strategic development decisions and a push for profitability within teams, moving away from unlimited spending practices of the past.