Abstract
In the previous chapter, I stated that cost means effort. I also noticed that we only make an effort if we expect to be rewarded. Formula One, therefore, needs the energy of thousands of people who invest their own multiple values. The tangible aspects of these values are inflows, identified as revenues. But when we discuss the revenues of Formula One, we have to distinguish between the revenues of the parent company of Formula One competitions and the revenues of Formula One teams. As a consequence, we will start by clarifying the revenues of the Formula One parent company, and then we will move on to the revenues of Formula One teams. This chapter will detail some important revenues for motorsports, such as advertising, sponsorship and prize money.
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Notes
- 1.
For Collings (2001, p. 155), ‘The “Swinging Sixties” were giving way to the more liberal and licentious Seventies, a more permissive society was settling into British life, hair was any length, authority was there to be challenged and the establishment only existed to be ridiculed. Rock music, free love and the hippy generation arrived and Formula One was ready to embrace it all.’
- 2.
To know more about the FOCA-FISA war, see Collings (2001, pp.159–164).
- 3.
It was named after the plaza in Paris where the discussions took place.
- 4.
The FOM was formerly known as Formula One Promotions and Administration Limited.
- 5.
According to Sylt (2015), ‘CVC acquired F1 in 2006 in a leveraged buyout funded with two loans—$965.6 million from its investment Fund IV and $1.1 billion from British bank the Royal Bank of Scotland (RBS).’ CVC is the venture capital division of the financial services firm Citigroup.
- 6.
It is relevant to make a distinction between advertising and sponsorship in Formula One. For example, there are brands that advertise during the race broadcasts but have no official relationship with Formula One or the teams. Conversely, sponsors enjoy the benefits of an official relationship that allows for the use of Formula One (or team) marks and imagery in connection with their products or services, as will be highlighted in this chapter.
- 7.
The Indycar series prize money (including the Indy 500 prize money) increased approximately ten times between 2004 and 2012. However, for 2012, the Indy sum represented around 7% of the Formula One prize money. The NASCAR Sprint Cup series is more generous, but its prize money has been one-tenth of the Formula One prize money for each season of the last decade.
- 8.
These fees are usually paid in advance.
- 9.
For more details on this discussion regarding price discrimination, we suggest Armstrong (2006)
- 10.
A survey of British respondents found that 70% of subscribers consider as important or very important motorsports for a pay-TV channel’s grid (Ofcom 2010 ).
- 11.
As some reviewers warned me, for most advertisers, more important than generic audiences is the percentage of audience members matching the profile of target customers. Therefore, local media (like regional radio stations or local newspapers) may be more attractive for advertising a local product than national broadcasting channels are. Or Formula One may be much more attractive (albeit more expensive) to some target customers (like men valuing high-tech products) than other sports, such as marathons, are.
- 12.
With historical advertisements like Zepter’s (a lifestyle company) advertisements in the tunnel under the Fairmont Hotel.
- 13.
Check Juanarena (2016).
- 14.
We refer to officially licensed merchandising products, although there is a significant volume of trade related to unofficial souvenirs, clothes, jewelry, home decorating products, office supplies, and software games exploiting Formula One brands, teams, cars, and drivers.
- 15.
According to Hotten (2000), this correlation can still be reinforced due to the definition of performance-related deals, as Flavio Briatore used to do when managing the Benetton team in the late 1990s.
- 16.
Vasconcelos (2015, Autosport, p.10).
- 17.
Other examples come from nowadays. Walker (2015b) discusses how the Venezuelan government has used the sponsorship of PDVSA (one of Pastor Maldonado’s major sponsors) for advertising Venezuela in recent seasons.
- 18.
Check Bishop (2014).
- 19.
Some reviewers reminded me that most teams’ commercial personnel refer to sponsors as partners and the team personnel have titles such as Director of Commercial Partnerships.
- 20.
In other motorsports, like NASCAR, sponsors are usually categorized as primary sponsors, associate sponsors, and contingency programmes (Martin 2000, p. 28).
- 21.
Check Parkes and Rencken (2012).
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Mourão, P. (2017). The Oil in the Engines—The Revenues of Formula One. In: The Economics of Motorsports. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-60249-7_3
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