66 replies to this topic

[LeMans86]

A letter written to Todt by Caterham, Marussia, Sauber and Force India, a copy of which has been seen by AUTOSPORT, laid bare just how expensive F1 was.

It provided an example of what a midfield team was now spending - excluding driver salaries, building leases, hospitality, marketing and media.

Bigger teams are spending more, in some cases much more, while F1's minnows Caterham and Marussia have been trying to get by on much less.

The breakdown for an average team went as follows:

- Hybrid power system $28 million
- Gearbox and hydraulics $5 million
- Fuel and lubricants $1.5 million
- Tyres $1.8 million
- Electronics $1.95 million
- IT $3 million
- Salaries $20 million
- Travel and trackside facilities $12 million
- Chassis production/manufacturing $20 million
- Windtunnel/CFD facilities $18.5 million
- Utilities and factory maintenance $2 million
- HR and professional services $1.5 million
- Freight $5 million
TOTAL $120.25 million

Only surprising nr. for me is the $1.5 million on fuel and lubricants. How can that be so expensive? If let's say 40% of this is for fuel, and they use ~300L per car per race weekend, that would equal $50 per liter of fuel.

(BTW. the nr corresponds to the $1.25 million dollars Caterham owes to Total)

Edited by LeMans86, 28 October 2014 - 11:13.

[rhukkas]

They don't just use pump fuel. Imagine the investment it requires to produce TOP quality fuel. It might only be worth a few tenths but that's a massive about of time in F1 terms.I don't know how many teams a fuel supplier will supply but if the cost of developing top line fuel is say 10 million and you have 5 teams using your fuel.. then it's at least 2 million each

Edited by rhukkas, 28 October 2014 - 11:15.

[ensign14]

And good luck in finding a sponsor when a potential sponsor, say a parcel delivery company, could either risk humiliation of coming last all the time and never appearing on the television, or could spend the money instead on being an Official Partner of the FIA and have the camera angles designed so that their stupid yellow logo with red initials is blabbed right across the world about fifteen times the apparent size of the actual cars.

[RedRabbit]

So, just remind me again how limiting gearboxes and PU's to a measly number per season has actually translated into any type of savings for the teams? I work it out as still approximately $35 mil for PU, gearbox and the electronics to run it for the year. Under Moseley's budget cap, that leaves another $5 mil to build a car to put it in, buy fuel, buy tires and then ship it around the world.

 

Hmmmmm. Seems doable.

 

It really has gotten out of control, and with a midfield team now needing to spend over $100 mil, I don't see F1 surviving very long like it is. FIA and Bernie need to wake the **** up.

[Kristian]

There's got to be some way of FOM subsidising manufacturers to provide cheaper power units using the sport's income - that's a big cost. If that can be brought down by $15m per purchasing team then that will be a start. Getting rid of Ferrari's 'bonus' will help with that. 

 

Don't the top 10 teams get free freight? Why is that figure $5m? This should be free for all competitors...

 

And this list misses off the entry fee, which is quite steep now. 

[Kraken]

So, just remind me again how limiting gearboxes and PU's to a measly number per season has actually translated into any type of savings for the teams? I work it out as still approximately $35 mil for PU, gearbox and the electronics to run it for the year

It would be massively more otherwise as they would be building engines and gearboxes that could just last the race as they would be going for the lightest weight and maximum power.

[Ross Stonefeld]

I hate that the article mixes currencies.

 

 

Income from F1's commercial rights is only around £55 million - roughly half of the cost of competing - for a midfield team like Sauber or Toro Rosso.

 

That's $88m so uhm, quite a bit more than half? Unless it's meant to be $55(which sounds more realistic given F1's revenues).

[Petroltorque]

That sort of Expenditure will impact Lotus and Williams adversely and Sauber certainly can't afford it. McLaren would feel the effect as well were it not for Honda's subsidy. Third cars, customer cars are an 8 month solution till the reaper knocks on the established midfield.

[Reinmuster]

Are Corcorde Agreement require teams to race in every GP? If not, why don't teams that begin to have certain financial problems to be allowed to enter certain GPs, so that they could save some money.

[SenorSjon]

There's got to be some way of FOM subsidising manufacturers to provide cheaper power units using the sport's income - that's a big cost. If that can be brought down by $15m per purchasing team then that will be a start. Getting rid of Ferrari's 'bonus' will help with that. 

 

Don't the top 10 teams get free freight? Why is that figure $5m? This should be free for all competitors...

 

And this list misses off the entry fee, which is quite steep now. 

 

What about taking 50% of the cake by CVC/FOM? More money demanded from tracks AND 'stealing' their trackside advertising. No wonder tickets go skyhigh. No sponsor would pay 20m for a team if they can get more advertising on every angle for way less.

 

 

 

You used to get travel expenses paid when you finished top 10 in the WCC, but I think that is out of the current deal. It almost makes up for 15% of the costs. Nice those 20 instead of 16 races and going to weird places. 

[LoginError]

In the case of Caterham sponsorship from Renault wouldn't even cover travel expenses in the table above. It's mission impossible to find enough sponsorship for the smaller teams.

[Petroltorque]

The new power plants have tipped teams over the edge. As Moseley said; the costs of engines needs to capped as well as a better distribution of the revenues.

[superden]

For what you get out as a mid-lower order team, that financial outlay represents an utterly crap investment. I cannot understand, with the current governance structure and finance distribution, why anyone in their right mind would p*ss their money away on such a venture. There are other racing series that represent far better value for money, provide great racing and still reach a broad enough audience to make it worthwhile from a marketing perspective. Its clear small teams are not wanted in F1, they don't 'fit the brand' and it's pretty obvious they were only brought in so the investors could stiff a few extra million out of a few more individuals gullible enough to believe that they would ever last.

[Brazzers]

Tell me if I am wrong but are the F1 engines now more expensive than aircraft engines by RR? 

 

The ROI on that, jesus christ. 

[HoldenRT]

So, just remind me again how limiting gearboxes and PU's to a measly number per season has actually translated into any type of savings for the teams? I work it out as still approximately $35 mil for PU, gearbox and the electronics to run it for the year. Under Moseley's budget cap, that leaves another $5 mil to build a car to put it in, buy fuel, buy tires and then ship it around the world.

 

Hmmmmm. Seems doable.

 

It really has gotten out of control, and with a midfield team now needing to spend over $100 mil, I don't see F1 surviving very long like it is. FIA and Bernie need to wake the **** up.

 

Shocking.. but on the other hand.. not surprising.
 

[uffen]

Much of Bernie's $ distribution is based on preserving a meritocracy in F1. That's all well and good but with spending at this level the bottom teams can never get to the point where they can gain any "merit." I say each team should get an equal share of the available funds. Then the value of the sponsor space on their liveries would be determined by their placings in the results. So, the meritocracy is preserved - better results mean more income - but now everyone has a shot based on their technical/sporting merit, rather than their (currently stifled) commercial merit.

[sopa]

I remember here was recently a discussion whether power unit development should be frozen or not. I think here lies an argument, why it should be frozen as it would at least somewhat bring the cost of it down - especially vital for privateer midfield/backmarker teams. Or privateers will purchase some old outdated cheaper versions, but then they'd have no hope of having any success. Reminds me how once upon a time Minardi raced with 3-year-old Cosworth engines.

[Alfisti]

I call borderline bullshit on engine costs. That's hundreds of millions to develop the engines. I don't think so. 

[Tapz63]

I call borderline bullshit on engine costs. That's hundreds of millions to develop the engines. I don't think so.

These are the costs for the "midfield teams". None of them are making their own engines.

Unless you're counting Ferrari that is...

Edit. I think I misunderstood you, IMO hundreds of millions sounds pretty realistic.

Edited by Tapz63, 28 October 2014 - 20:55.

[ANF]

This thread needs a bar chart.

████████████████████████████ - Hybrid power system $28 million
████████████████████ - Chassis production/manufacturing $20 million
████████████████████ - Salaries $20 million
███████████████████ - Windtunnel/CFD facilities $18.5 million
████████████ - Travel and trackside facilities $12 million
█████ - Freight $5 million
█████ - Gearbox and hydraulics $5 million
███ - IT $3 million
██ - Utilities and factory maintenance $2 million
██ - Electronics $1.95 million
██ - Tyres $1.8 million
██ - Fuel and lubricants $1.5 million
██ - HR and professional services $1.5 million

[ExFlagMan]

Extrapolating from this then if the mid field teams had to run a third car to keep the numbers up they would roughly need the following extra funds.
$14 M Engines
$10 M Chassis
$2.5 M Freight
$2.5 M Gearbox etc
$0.65 M Electronics
$0.6 M Tyres
$0.5 M Fuel

This gives a total of almost $31 M without adding any extra staff costs or travel/trackside costs or driver salary.

I guess Toto Wolfe wasn't that for out when he quoted £25 million for Mercedes to run a third car.

I wonder how many teams could afford that.

Edited by ExFlagMan, 28 October 2014 - 22:14.

[Timstr11]

This FAZ article revealed how much money Ferrari, Redbull and Mercedes receive as signees of the concorde agreement:

http://www.faz.net/a...e-13064790.html

 

Ferrari: 100 million USD

Redbull: 70 million USD

Mercedes: 12 million USD

(doesn't say how much Mclaren, Williams and others receive as signatories)

 

If you take 12 million USD as the norm, tand re-disribute 146 million USD = engine bills for 5 teams.

 

What I'm trying to illustrate is that by far the biggest problem is the unequal distribution of funds.

[SHODAN]

Not sure what those numbers are supposed to tell us. Yes, F1 is an expensive venture. Everyone entering the sport know it. And?

[FerrariFanInTexas]

Why is everyone so worked up about unequal distribution of funds when Bernie/CVC take 50% of all revenue AND control the trackside advertising?  Sure, redistribute the 50% given to the 10 teams as much as you want, but until you slide some of the revenue away from the commercial rights holder and put it on the side of the teams, you're wasting time and a lot of angst.

 

Let's say we do a perfectly equal distribution of revenue, all 10 teams get 5% of all revenue (and the dog in last place gets zilch).  Is that going to give them each the ablity to spend $100M+ each season?  No, not unless Bernie is clearing $2 billion annually from his activities.  And if he is, that means he and CVC are divvying up $1 billion each season.  I know they make a lot of money for themselves, but I don't think they're clearing a billion each season.

Edited by FerrariFanInTexas, 28 October 2014 - 22:37.

[scheivlak]

Not sure what those numbers are supposed to tell us. Yes, F1 is an expensive venture. Everyone entering the sport know it. And?

Have a look at Timstr11's post above you.

 

F1's business model is completely perverted.

[Murl]

Extrapolating from this then if the mid field teams had to run a third car to keep the numbers up they would roughly need the following extra funds.
$14 M Engines
$10 M Chassis
$2.5 M Freight
$2.5 M Gearbox etc
$0.65 M Electronics
$0.6 M Tyres
$0.5 M Fuel

This gives a total of almost $31 M without adding any extra staff costs or travel/trackside costs or driver salary.

I guess Toto Wolfe wasn't that for out when he quoted £25 million for Mercedes to run a third car.

I wonder how many teams could afford that.

 

 

I don't agree with this extrapolation.

 

The engine and chassis numbers include a lot of fixed costs for development. After they are covered the per-unit cost comes down significantly.

[LeMans86]

Why is everyone so worked up about unequal distribution of funds when Bernie/CVC take 50% of all revenue AND control the trackside advertising?  Sure, redistribute the 50% given to the 10 teams as much as you want, but until you slide some of the revenue away from the commercial rights holder and put it on the side of the teams, you're wasting time and a lot of angst.
 
Let's say we do a perfectly equal distribution of revenue, all 10 teams get 5% of all revenue (and the dog in last place gets zilch).  Is that going to give them each the ablity to spend $100M+ each season?  No, not unless Bernie is clearing $2 billion annually from his activities.  And if he is, that means he and CVC are divvying up $1 billion each season.  I know they make a lot of money for themselves, but I don't think they're clearing a billion each season.

What exactly does CVC do with their 50%? Besides putting it in their pockets?

[aguri]

One way to solve the engine problem is if you had one engine supplier with no works team that instead supplied latest spec kit to 5-6 midfield teams. 

 

Imagine if Cosworth had an engine as good as the mercedes. They could supply Caterham, Lotus, Sauber, Williams and FI at a pinch. Supplying 5 teams would surely provide enough revenue to keep up development.

 

Before the next engine formula change the FIA should give Cosworth the draft regulations a year or two early, loan them a few million for development and then make some quasi draconian laws around works teams to push the privateers onto the Cosworth. 

[Incast]

Not sure what those numbers are supposed to tell us. Yes, F1 is an expensive venture. Everyone entering the sport know it. And?

 

It is virtually impossible for an F1 team to make a profit and be a viable business. 

 

Think of what their revenue streams are:

1. FOM Income - Only a fraction of what Formula 1 makes as an entity and it is unevenly distributed to the teams as Tim's post points out.

2. Sponsorship - Revenue from this has collapsed. Quite why isn't fully clear to me. I appreciate tobacco sponsorship's departure caused a hit, but US racing seems to cope.

3. Pay Drivers - A double edged sword, provides some much needed cash, but you risk worse results. It also hurts your credibility and that of the sport.

 

This has proven to be insufficient and you then get to a point where wealthy individuals prop up teams until they can no longer drain the cash.

 

I think both the FOM income and sponsorship element needs to be looked at. What can be done (if anything) to get more revenue re-invested in the sport, it's presumably in CVC's interests to ensure it remains in a healthy state to maximise the price they ultimately sell it for. Secondly, there needs to be a serious investigation on why sponsorship has collapsed. How has Formula 1 become so toxic to companies that they don't want their advertising appearing on the cars?

[SHODAN]

Have a look at Timstr11's post above you.

 

F1's business model is completely perverted.

 

 

But that has nothing to do with the personnel and material costs of running a team, which is what the quote from the first post is about.

 

Would it be better if all the teams got more of the ad revenue, in a more reasonable spread? Yes. Would it help the tail end when paying what looks like a 150 million a year bill? Doubtful, unless F1 would quadruple in popularity.

[scheivlak]

But that has nothing to do with the personnel and material costs of running a team, which is what the quote from the first post is about.

 

Would it be better if all the teams got more of the ad revenue, in a more reasonable spread? Yes. Would it help the tail end when paying what looks like a 150 million a year bill? Doubtful, unless F1 would quadruple in popularity.

It's not about just ad revenues and it's not about 150 million (you should learn either to count or simply to read - see the OP).

It's about a business model that makes the rich richer and the poor poorer.

[pdac]

Why is everyone so worked up about unequal distribution of funds when Bernie/CVC take 50% of all revenue AND control the trackside advertising?  Sure, redistribute the 50% given to the 10 teams as much as you want, but until you slide some of the revenue away from the commercial rights holder and put it on the side of the teams, you're wasting time and a lot of angst.

 

Let's say we do a perfectly equal distribution of revenue, all 10 teams get 5% of all revenue (and the dog in last place gets zilch).  Is that going to give them each the ablity to spend $100M+ each season?  No, not unless Bernie is clearing $2 billion annually from his activities.  And if he is, that means he and CVC are divvying up $1 billion each season.  I know they make a lot of money for themselves, but I don't think they're clearing a billion each season.

 

There was a chart showing the distribution in 2013 somewhere. It showed that the column 1 payments (which is 50% of the total prize fund and divided equally amongst the top 10 teams) were $35m per team. That equates to a total of $350m, so the total prize fund would have been $700m. If, as you say, the prize fund is only 50%, that means they cleared $1.4 billion that year.

 

Edit: Here's the link http://bleacherrepor...-and-per-season

 

Edit2: Which of course means that if the money were just divided equally amongst the teams, they could have each received $63.5m

Edited by pdac, 28 October 2014 - 23:25.

[FerrariFanInTexas]

There was a chart showing the distribution in 2013 somewhere. It showed that the column 1 payments (which is 50% of the total prize fund and divided equally amongst the top 10 teams) were $35m per team. That equates to a total of $350m, so the total prize fund would have been $700m. If, as you say, the prize fund is only 50%, that means they cleared $1.4 billion that year.

 

Edit: Here's the link http://bleacherrepor...-and-per-season

 

Edit2: Which of course means that if the money were just divided equally amongst the teams, they could have each received $127m

Only if they divided all the money, not the 50% they actually split.  Given those numbers, the teams would each have received $61.35m each, with an equal distribution to all 11 teams, or $70m each if we continue to kick the last place team to the curb each year.

[pdac]

Only if they divided all the money, not the 50% they actually split.  Given those numbers, the teams would each have received $61.35m each, with an equal distribution to all 11 teams, or $70m each if we continue to kick the last place team to the curb each year.

 

Already corrected (but I made it $63.5m)

[scheivlak]

There was a chart showing the distribution in 2013 somewhere. It showed that the column 1 payments (which is 50% of the total prize fund and divided equally amongst the top 10 teams) were $35m per team. That equates to a total of $350m, so the total prize fund would have been $700m. If, as you say, the prize fund is only 50%, that means they cleared $1.4 billion that year.

 

 

Last year CVC got $ 1.8 billion out of it http://joesaward.wor...e-for-a-moment/

[FNG]

I had no idea the teams paid for the tires. I thought they were supplied by Pirelli as the official tire.

[scheivlak]

I had no idea the teams paid for the tires. I thought they were supplied by Pirelli as the official tire.

It's really bizarre. Teams have no free choice of tyres and still they have to pay for it.

Meanwhile the Pirelli ads are shoved in our faces at every track anytime we watch a GP.

[pingu666]

looking at the engine cost, makes me wonder how cheaply could you get say a nascar motor? for a season supply.

 

think a top team has a budget of 20-30million per car? in nascar

[Myrvold]

looking at the engine cost, makes me wonder how cheaply could you get say a nascar motor? for a season supply.

 

think a top team has a budget of 20-30million per car? in nascar

 

Depends on the team. I know Phil Parsons Racing, was going on about 100'000 USD per race. So that's sub 4 mill for a year. (backmarker, very little sponsorship, using prize money from each race to part-finance the next. Got much help from Dogecoin/Reddit and the all-star race)

[Sausage]

I know F1 finances are all sort of messed up but I'm not sure i should be sorry for any team, high middle or low. They all signed the new concorde agreement last year and it probably lists how much they get paid, so they know what they signed up for I assume. If you make a deal with the devil you're gonna pay for it, as awful as that may be on a personal level for employees and third parties etc.

[Ev0d3vil]

I attended a talk by Graeme lowdon in Singapore. And it's pretty accurate. He says just to put two cars in fia spec it takes 100million. Without any performance parts. Just the required stuff.

[SonJR]

This thread needs a bar chart.

████████████████████████████ - Hybrid power system $28 million
████████████████████ - Chassis production/manufacturing $20 million
████████████████████ - Salaries $20 million
███████████████████ - Windtunnel/CFD facilities $18.5 million
████████████ - Travel and trackside facilities $12 million
█████ - Freight $5 million
█████ - Gearbox and hydraulics $5 million
███ - IT $3 million
██ - Utilities and factory maintenance $2 million
██ - Electronics $1.95 million
██ - Tyres $1.8 million
██ - Fuel and lubricants $1.5 million
██ - HR and professional services $1.5 million

That's so Grand Prix World. Awesome.

[Tombstone]

Tell me if I am wrong but are the F1 engines now more expensive than aircraft engines by RR? 

 

The ROI on that, jesus christ. 

 

Same ballpark, depending on the engine of course. Roughly $30-40 Million* each for an A380 engine, and therefore considerably less for smaller, less powerful ones.

 

*The engines make up circa 1/3 the cost of an arliner. 1/3 for the structure, 1/3 for fixtures, fittings & software.

[ANF]

Only surprising nr. for me is the $1.5 million on fuel and lubricants. How can that be so expensive? If let's say 40% of this is for fuel, and they use ~300L per car per race weekend, that would equal $50 per liter of fuel.

(BTW. the nr corresponds to the $1.25 million dollars Caterham owes to Total)

Rhukkas already pointed out the fuel development. And I hadn't really thought about this until I saw Jay Leno's McLaren feature, but of course there's a continuous analysis and development of lubricants as well...

[ExFlagMan]

I don't agree with this extrapolation.
 
The engine and chassis numbers include a lot of fixed costs for development. After they are covered the per-unit cost comes down significantly.

Which mid-field team makes their own engines? So where are the development costs you are claiming.
Chassis figures are quoted for production/manufacturing. Chassis development cost are presumably mainly staff costs, which are covered separately, plus wind tunnel/CFD/IT which are again quoted as separate items.

Given that these where the figures given by the teams I assume they are accurate.
If you know better then please enlighten us.

[Wingcommander]

That's so Grand Prix World. Awesome.

So I wasn't the only one thinking about GPW 

 

That game needs a sequel. Now!

[ExFlagMan]

Lots of talk about 'customer cars being the solution, but looking at those figure I cannot see that they would make a big dent in the teams annual costs.

Figures for PU, drive train, fuel/lube travel, fright factory overheads would all be the same.
The only figures you might save on are chassis production costs, and R&D costs like salaries and wind tunnel/CFD etc.

So we have potential maximum savings of -
$20 m Salaries
$20 m Chassis production/manufacturing
$18.5 m WT/CFD.
Looking at these 3 figures, what are the actual savings likely to be.
Salaries - The main savings would be the design/development team but I assume you would still need some of these if you wanted to remain competitive with the other customer teams.
Production costs - Tricky one this - depends on what the supplier provides - you still need some production if you have to make any new parts and if you have to make/repair chassis.
WT/CFD - again you might still need these if you want to remain competitive.

So you might save some of the almost $60 from these costs but how much depends on what is supplied and how much that costs.
If the customer cars are last years models then I assume you would have higher figures for chassis production/maintenance as I assume the original suppliers would no longer keep/supply spares for last years cars, else they would have increased staff costs them selves which would no doubt be passed on to the customer.
Against these possible saving you have to factor in the cost of the cars/support.

Assuming my assumptions are reasonably close then I do not see customer cars saving much more than $20-30m for a 2 car team - so probably $90-100m for a seson.
Even a single car team is probably going to cost at least $60-70m.

[ANF]

In 2003 there were 16 grands prix in a season spanning 32 weeks.
In 2015 there will be 20 grands prix in a season spanning 38 weeks.

I wonder what effects a longer season with an increased number of events would have on the revenue, the costs, and the budgets of the teams at the top and the bottom of the prize money table.

[Bloggsworth]

I see that Haas is riding for a fall "The teams that failed made mistakes..." And he won't?

[pdac]

I see that Haas is riding for a fall "The teams that failed made mistakes..." And he won't?

 

He has the advantage now that, assuming nothing changes and two teams are out and Kolles other project doesn't make the grid, he'll be team 10 in a series that only pays the top 10. So he'll be assured of getting some prize money at some point.