The surprising truth about the cost of F1 v other sports

Formula 1 is, inevitably, a cripplingly expensive sport in which to run a team.

These cars don’t come cheap, neither do top drivers and then, of course, there are the huge payouts to the sport’s shareholders.

But how does it compare with other sports? And what about the stars – are they left looking jealously at other sporting arenas?

There’s a lot of secrecy around F1 finances but there is enough information out there to give us a good idea of the answers to all these questions. So…

What’s the cost of competing in F1?

To run the smallest team in F1, you’ll need to find more than a run-of-the-mill lottery win.

In fact, the biggest lottery prize in UK history – a £161.6million EuroMillions win in 2011 – would keep you going in F1 for a couple of years … if you were happy to pootle around at the back of the grid.

Spend that lottery win in a single season and you’d still be lucky to compete with the midfield teams.

Want to take on Mercedes and challenge for the title? You’re going to need at least two of those record lottery wins.

Here’s how much each team raised from the three largest revenue streams for the 2015 season, compiled by Business Book GP. Although this doesn’t give an actual cost for competing – it doesn’t account for teams making large profits or losses, for example – it does give a good idea of how much money F1 teams are expected to generate.

It’s pretty sobering reading if you follow one of the smaller teams. In 2015, the smallest team, Marussia (pictured, behind Mercedes) had about 18 per cent of the budget of the three biggest teams.

The total team budget includes sponsorship (at its simplest, logos on cars and hats), partnerships (more detailed tie-ups between teams and sponsors, for example involving the partner supplying a service as well as money) and money from FOM (Formula One Management).

FOM collects revenues from sources including TV and other media rights, trackside sponsorship, hospitality and the hosting fees that tracks pay.

Some 35 per cent of this was kept by FOM for its shareholders in 2015, with the rest divided up between teams using a complicated and extremely controversial set of rules.

Part of the FOM pot is divided equally between teams (Autosport estimated this to have been worth $33.5million to each team in 2015, or around £25.8million at current exchange rates).

Another pot of FOM money is divided up according to where a team finished the previous season, with the winning team getting 19 per cent of the total and the bottom team just 4 per cent. You can see that the leading teams get a big financial boost to help them stay ahead.

But there are further, murky complications. Ferrari get a big wad just for turning up; Williams get a ‘heritage bonus’; Mercedes get extra for hitting a target of two Constuctors’ World Championships; Red Bull receive more because they were the first team to sign the current agreement with FOM.

The net result is that payments can bear no relation to where a team actually finished. Autosport’s figures suggested McLaren received $82million under this scheme after finishing ninth in the championship; Force India, which finished fifth, got only $67million.

And Red Bull was given an estimated $144million for finishing fourth, while third-placed Williams got only $87million.

This, of course, is only scratching the surface of the financial challenges you’d face if you were trying to finance your own F1 team.

Do you build engines or buy them? Do you have any money left from last season? Do you have access to a truck division that can help you develop a fantastic turbocharging solution (because Mercedes do)?

In short, funding an F1 team is brutally expensive and fiendishly complicated.

But is it expensive compared with other top-level sports?

Funny money: F1 v football

Let’s compare F1’s estimated 2015 revenues with the 2014-15 turnovers of English Premiership (by far the biggest generator of football revenue in Europe) teams in the same year.

We’ll take the most financially successful teams, least financially successful teams and the two mid-table teams (financially) from each sport to get a feel for how much money flows through in comparison with each other. It’s not an exact science but this is to get a sense of scale, rather than generate an accurate profit-and-loss account.

The average pound-euro conversion rate in 2015 was £1 to €1.378 – that’s the rate we’ve used to convert football turnover figures into euros. Just out of interest, we’ve also used a current exchange rate of £1 to €1.16, for a post-Brexit vote feel – the numbers get even closer.

Lo and behold. The figures are astonishingly similar – for example, the richest F1 team, Red Bull, raised about €468million, while the richest football team, Man Utd, raised between €458million and €544million, depending on the conversion rate used.

Of course, this isn’t to say big budgets guarantee big results – think Leicester City, think Brawn GP – but, in general, this snapshot suggests that F1 is not an unusually expensive sport when it is compared with other top-level sports, where huge sponsorship deals and TV money are fighting for similar audiences to F1.

What about the stars?

Faster, stronger, richer

Given how much F1’s owners have made out of the sport, it seems churlish to criticise the drivers’ remuneration.

(Private equity firm CVC, which is handing over control of the sport to Liberty Media, invested $965.6million in F1 in 2006; it is estimated it made a 532 per cent return on that investment in the last decade. It’s safe to say you’re not getting that from your savings account.)

But how much would you have to pay to hire a top F1 driver for your team? And how does that compare with the big names in other sports?

Forbes magazine’s 2016 sporting rich list does a nice job of pulling together the salaries and endorsement fees that sports stars command. Not surprisingly, there are a few F1 names on the list.

Fernando Alonso is named as the 24^th-highest paid athlete on the planet, taking home an estimated $36.5million, $35million of which is effectively salary, thanks to his generous three-year contract with McLaren (perhaps he should give some of it back so McLaren can afford to build a car that can finish in a podium position).

In 19^th place on the Forbes list is quadruple world champion Sebastian Vettel, with$41million annual earnings, $40million of which comes from Ferrari.

The highest-paid F1 star on this list is Lewis Hamilton (pictured), at No.11, pocketing $46million including $42million-a-year from his three-year contract with Mercedes. Including bonuses, that deal could net him $140million over the three years… not including endorsements.

But that means the top-ten highest-paid sport stars are from outside F1 – a mixture of golfers, tennis players, American Football stars and, right at the top, footballer Cristiano Ronaldo, making $88million, including a $56million salary.

So, yes, if you want a former world champion driving your F1 car, you’ll pay a lot – but not as much as if you want a top footie striker or American footballer on your team.

Who’d have guessed it? Depending on your benchmarks, it turns out that the cost of running an F1 team with star drivers is actually quite reasonable in global sporting terms.

Indeed, by some measures it actually looks, well, not exactly cheap … but less extortionate than other sports.

Shall we have a whip-round to buy an F1 team?