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Where the money goes.
11-30-2011, 05:39 PM
Post: #1
Where the money goes.
This interesting analysis of the breakdown of the billion or so Bernie generates is only available on the pay section of Autosport so I've reproduced it here. Some seem to think all the money generated by FOM goes into funding Petra and Tamara's lifestyles. Few associate how the majority of it actually goes into the teams coffers.

How Ferrari still beats Red Bull in the prize stakes

Red Bull may have dominated on the racetrack for the past two seasons, but it is still Ferrari that is bringing in the money. Jonathan Noble investigates F1's prize money to assess the sport's financial winners and losers

As the Formula 1 teams packed up for the last time in 2011 at Interlagos on Sunday night, you could have been forgiven for thinking that in the super rich world of grand prix racing, it would be back-to-back title winners Red Bull Racing that would be walking out of the paddock as the highest paid team on the grid.

After all, its record over the past two seasons is unmatched – and no rival outfit can come anywhere close to boasting about its run of results.
Ferrari is still ahead of Red Bull in the money stakes in Formula 1

Red Bull has secured both drivers' championships, both constructors' championships – as well as winning 23 of the last 40 races, and 13 of the last 20. It has also been on the podium at every race this season, apart from Abu Dhabi.

Yet, despite all that success, thanks to the quirky nature of F1's top secret prize money fund, it is not Red Bull that comes out on top – and not even McLaren that has been its closest challenger this year. Instead, it is again Ferrari that – despite winning just one race this year and finishing third in the constructors' championship – heads into the winter happy in the knowledge that it will take the biggest slice of income among the teams.

Historically the way the prize fund is worked out in F1 has been a closely guarded secret, with teams and Bernie Ecclestone never publicly revealing any details about how the distribution figures work.

After some extensive research among paddock sources however, a glance of documents distributed among teams detailing earnings, and a few nods and winks here and there, a clearer picture has emerged about just how the money is divided up.

Estimating the earnings

Of course, without full access to prize money documents, the Concorde Agreement or the contracts that Ecclestone has regarding the full income of the sport, it is impossible to give a definitive answer on the exact prize money figures.

We are however able to calculate the trends and estimate figures based on previous confirmed earnings, so we at least have our best glimpse yet on how the structure works.

According to documents in the public domain, F1's total income in 2010 was around $1 billion – with a total of $658 million going to the teams as their prize fund. With income growing each year, amid informed estimates of five per cent growth, then we can roughly work out that income to the teams in 2011 should be around $691m.

The definitive figure will only become clear when the yearly accounts of Formula One Management are lodged at Companies House before the end of the next financial year – so the final figures could be much lower, or even higher still, but the balance or earnings between teams will at least remain the same.

So how do Ferrari walk away with the highest figure then?

The key to Ferrari's financial bonus is the fact that it remains F1's most important team – and its 'unrivalled' historical contribution, consistent presence and strength of the brand means that once the teams' pool of prize money is in place, Maranello gets it hands on the first 2.5% of the prize money fund.

So Ferrari's initial bonus from an estimated $691m will be $17.3m, before it also gets more of what are known as 'Category B' entitlements based on world title winning success – which amount to another $16m.

Before Ferrari even turned a wheel in 2011 then, it began with a starting fund that based on our estimates could be as high as $33.3m.

With that in place, Ferrari's third place finish in the constructors' championship further bolsters its income – with teams getting two separate payments if they finish in the top ten of the constructors' championship.

The two types of payment, split into categories called Column 1 and Column 2, are divided equally 50/50 based on the remaining fund once initial payments for the 'Category B' title-winning teams (Ferrari, Red Bull Racing, McLaren, Mercedes, Renault, Williams) plus the new team bonus of $10m each that goes to Virgin Racing and HRT have been taken out.

Column 1 payments are shared equally among the top ten teams (so 10 per cent each), and you qualify for this entitlement if you finish in the top ten of the constructors' championship for two of the previous three years.

Calculating the payment based on the projected income for 2011, this payment should be worth around $31m to each of the ten teams.

Then there are Column 2 payments, which are distributed on a performance basis to any team that finishes in the top ten of the championship in the previous year. According to documents, the distribution currently works out in a percentage split like this: 1st = 19%, 2nd = 16%, 3rd =13%, 4th = 11%, 5th = 10%, 6th = 9%, 7th= 7%, 8th= 6%, 9th = 5% and 10th = 4%.

So Ferrari's third-placed finish in the constructors' championship was worth 13 per cent of our estimated $310m prize fund – which works out at $40.3m

In total, it means that Ferrari's revenue from 2011 should come in at around $104.6 million – which is the $33.25m Category B 'historic' payment, the $31m Column 1 payment and the $40.3m Column 2 prize fund.

Ferrari's total is in excess of that which McLaren and Red Bull – ahead of it in the constructors' championship – took in.

Using the same calculations of the funds that were used for Ferrari, based on historical precedents, we can estimate McLaren's income to be from Column 1 ($31m), Category B ($4.2m) and Column 2 ($49.6m) to be about $84.8m

For Red Bull Racing, its Column 1 ($31m), Category B ($3.2) and Column 2 ($58.9) payments mean it should take home around $93.1m.

Why Red Bull is not unhappy

After the season that Red Bull has had, the team could have every right to feel that it is unfair that it does all the winning and Ferrari gets about $10m more of the spoils. However, there is very much a pragmatic approach among its rivals about the extra money Ferrari gets – because every team on the grid recognises the value of having the Prancing Horse there.

That magical 2.5% bonus, which it is understood is a key stipulation from all teams that must remain in the next Concorde Agreement, may well help Ferrari's bottom line first of all.

Having the Maranello team around is also good for F1 as a whole - and invariably boosts the overall income of the sport, which in turns helps increase the coffers of everyone out there. Red Bull Racing Christian Horner told AUTOSPORT in Brazil last weekend that there were no complaints about Ferrari's privileged financial position.

"It is better that Ferrari are here, than not," explained Horner. "Ferrari and F1 are synonymous and, for us, the prestige of winning in F1 with Ferrari in it is immeasurably higher than if they were not.

"They are historically the most significant team and it is understandable why their commercial terms are slightly different to the others."

When asked if there was not some frustration at seeing a rival team enjoying a better financial position, Horner said: "I think that obviously they have a good deal, but that is the way it is.

"We have managed to beat them for the last three years so I don't see it as a problem. You have to recognise and be respectful of the Ferrari brand and the Ferrari heritage, and we would far rather race in a championship with them – and it is great prestige to beat a team like Ferrari."

More winners and losers

The way the prize fund works means that even further down the grid the end of season constructors' championship positions are absolutely vital. And looking at the winners and losers of the year, there are a few other interesting snippets.

Using the same calculations as above, Force India's successful season, in moving up from seventh to sixth position, netted it an estimated extra $6.2 million in prize money.

Williams was the only team that slipped down the order between 2010 and 2011, and its drop from sixth to ninth is the difference in Column 2 prize money of £12.4m. Williams's poor performance in 2011 could have cost it as much as £12m

Yet the biggest winner year-on-year was Team Lotus, which finally moved into the big league. Its 10th place finish in the constructors' championship meant the team to be known as Caterham F1 from next year added the $31 million bonus for becoming a Column 1 team, to its predicted $12.4m 10th place Column 2 money.

It was no wonder that on race morning in Brazil team principal Tony Fernandes expressed his eagerness for the event to be over, and said it was 'critical' that the team brought home the result to get itself that tenth place.

As Fernandes left the paddock on Sunday night, he was probably even happier than Ferrari...

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12-01-2011, 06:21 AM
Post: #2
RE: Where the money goes.
Thanks for putting this up here, I was looking for this article. Very interesting and great insights.
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12-01-2011, 06:16 PM
Post: #3
RE: Where the money goes.
It seems to me that this system is logical and fair.
It is not a problem that Ferrari makes a bit more of money than Red Bull, considering that Ferrari will still be there in 20 years.
Red Bull is just an energy drink company and they probably won't stay long in F1.
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04-07-2016, 08:04 AM
Post: #4
RE: Where the money goes.

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Go FERRARI !..... Go HAAS !
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04-07-2016, 10:25 AM
Post: #5
RE: Where the money goes.
Way to find an old thread!

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04-07-2016, 08:15 PM
Post: #6
RE: Where the money goes.
(04-07-2016 10:25 AM)Yaaay Wrote:  Way to find an old thread!
Thanks! As we reach our familia's 700th F1Weekly Podcast, by digging up this old thread, I'm showing appreciation toward Clark for spending his hard-earned money to maintain the servers that carry these old threads.

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