Published September 27, 2008

Money spinner

Formula 1 rakes in more than all EPL clubs combined

By SAMUEL EE
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IF you care to whiz around the high-speed empire that Bernie Ecclestone has built, it shouldn't surprise you to note that its tracks are paved with gold. Big numbers - always whispered but rarely confirmed - are routinely tossed about while discussing Formula One riches. It's only when you heap them atop each other that the true size of the monster emerges.

PEDAL TO THE METAL
One hot machine rounding a corner last night in a practice run opposite the Singapore Cricket Club, with the stunning City Hall in the background

Here's a simple fact to chew on. Last year, according to Formula Money, a publication which monitors the motor-racing industry's key performance data, F1's global revenues touched US$3.9 billion. In comparison, it was reported that the combined revenues for all the English Premier League clubs combined were just US$3 billion.

What's more, these numbers are poised to rise as new circuits such as Singapore come onstream. According to Formula Money, total revenue from all F1 businesses this year will hit a record US$4.7 billion. Of this, the biggest component is the US$1.6 billion spent by the team owners - up from US$1.47 billion in 2007 - thanks to the arrival of the Force India team owned by billionaire Vijay Mallya.

And here's another milestone that has just flown by. For the first time, the amount of F1 race fees collected has exceeded television rights. These so-called sanction fees have to be paid to Formula One Management for the right to stage a race. The UK-based Formula Money says race-hosting fees now bring in more money to F1's commercial rights holder than broadcasting rights.

It says that the two new races this year - Valencia and Singapore - have driven up the total to US$403.5 million, or US$23 million more than the income from TV.

Singapore is said to have paid a sanction fee of about US$35 million to US$40 million, higher than what other countries which joined the franchise earlier coughed up. There are 18 Grand Prixes for the 2008 Formula One season.

So ushering in new circuits while phasing out older ones is profitable by itself. In contrast, revenue from ticketing is said to represent less than 10 per cent of F1's kitty. The 11 teams that are part of the 2008 season are responsible for most of F1's wealth - but they are not doing too poorly themselves.

Toyota is the world's biggest car maker, so it is no surprise to learn that its racing team has the biggest budget in Formula One. According to Formula Money, Toyota Motorsports GmbH can fall back on about US$445 million in resources this season.

This includes everything from sponsorship and supplier deals to prize money and team-owner contributions. In second place is McLaren with US$433 million and Ferrari at US$415 million.

Officially, Toyota and the others refuse to confirm these numbers - for reasons of competition. 'We spend a lot on F1 - as much as Ferrari, McLaren or BMW - but we never speak about the exact value,' says Tadashi Yamashina, chairman and team principal of Panasonic Toyota Racing, the official name of Toyota's F1 unit.

Overall, team sponsorship is estimated to have increased to US$836.9 million, with Ferrari leading this increase by becoming the first team with over US$200 million in sponsorship in a single year.

Sponsorship is the biggest source of revenue for an F1 team. Those logos plastered all over a Formula One car have earned the right to be there.

For example, tobacco company Marlboro reportedly pays US$50 million a year to have its name associated with a pair of scarlet cars from Scuderia Ferrari Marlboro.

Meanwhile, Dutch financial services giant ING shells out US$35 million annually to be the title sponsor of the Renault F1 team.

Add advertising and other costs and ING's tie-up with the French team since last year is at least double that figure, making it the biggest non-tobacco sponsorship deal of its kind in F1 history. The benefits are clear. An ING spokeswoman explains that F1 allows it to showcase the breadth and depth of its global presence as the No. 1 global financial services provider in the world, ranked by Fortune 500 in August 2008. Together with the 'very visible branding opportunities', F1 offers the perfect opportunity to treat ING's VIP guests to a 'seamless brand experience' that mixes business with pleasure.

Hence, the numerous high-profile corporate partnerships in F1. They include Vodafone (with McLaren), Panasonic (Toyota), Petronas (BMW), AT&T (Williams) and Red Bull (Toro Rosso), among others. Only the Honda F1 team does not have the name of a title sponsor anywhere, preferring instead to sport a livery of soothing greenery for its 'Earth Cars'.

Along with other income from merchandising and profit-sharing (teams get a performance-based share of the fees collected by the F1 administration), these sponsorship deals provide the F1 teams with big budgets to spend on their cars, drivers and staff.

Between them, the teams competing this season weigh in at just over US$3 billion in total resources. But when you consider that Formula One is the most-watched motor sport with an estimated 500 million viewers per race, it sounds like a fair price to pay.