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I have been having a look at the future earnings of F1 from a atricle from James Allen (http://www.jamesallenonf1.com/2011/06/b ... a-1-teams/) and been calculating out how much the prise money potential earnings could mean that F1 teams actually become profitable in the future.
If in 2016 there is a potential earnings pos in the new Concorde Aggreement of $1,575B, and there is a potential for P1 in the Constructors title to be given $222M of that, Last year Red Bull got $87M in comparison. (http://www.formula1onlive.com/2011/04/f ... on-in.html)
I have worked out a table of what the potential, in theory prize money and it is looking as if to me, and from what James Allen has said, that all comumn 2B, Column 2A teams would have their budget more or less for 2011 in the 2016 prize money. I can now see why teams arent wanting too many changes in technichal regulations from now to potentially 2015 at the earliest.
I have also worked out the Logistical support fro the teams that are in Column 3 as they dont get any proze money, and i think will likley not get any in the new Concorde Aggreement starting in 2013, that is in its tentitave early stages of aggreement at present.
FInancially the sport is in good hands, and with futher cost controls, via the RRA, and teams diversifying between each other like Hispania buying the Williams rear end, and Force India buying the McLaren rear end and other alliances, the teams could start to actually pull a profit from the latter part of the decade.
Remember that Renault have their Historical payments on top of what they earnt, the 4 teams that shared a $100m pot in 2010 was Ferarri, McLaren, Renault and Williams. This is split 40% to Ferrari, then the other 60% was split 22.5% to McLaren, 20% to Renault and 17.5% to Williams. One reason that the team formerly owned by Renault isnt changing chassis name is due to the historical payments, whitch was worth another $20m last year to that team.
Heres the thing, When Renault change their name, they will loose those payments and the Renault RS27 power plant seemingly.
The team that would pick up the RS27 is rumored to be Williams, and the team that would pick up the Historical payment would either be Red Bull as they have now had 7 continious years of service to F1, Mercedes as they are a "historical" team in F1 terms, or belive it or not Toro Rosso have been mentioned. Id be partial to STR to get it as they have been arround since the early 80s as Minardi, Mercedes have been out of F1 for 55 years before returning in 2010, Red Bull have been arround for 7 continous years yes, but arround since 1997 as Stweart GP and Jaguar. Altho Force India could make a case too, but i feel that STR could be the team that would benifit most from $17.5m a year in funding.
Heres another thought, the P13 teams logistical support was shared between the P11 and P12 teams to a 50/50 split for 2011, so it is also in their intrest to keep the grid to 12 teams.
I think the column 3 teams should get more cash. Sure, they're never going to be competitive but having a good number of cars on the grid makes the race more watchable especially for those at trackside.
If you gave $10m to the three bottom teams it would make a huge difference to them and their ability to get closer to the midfield.
If you are more fortunate than others, build a larger table not a taller fence.
Well private teams like Sauber or Williams already have to be profitable otherwise they could not exist for such a long time because where else should the money come from? Well sponsoring is the important post there. That’s actually their product. The cars can’t be seen as sport devices but as advertising surface which is sold to customers. Actually the same is true to all the other teams such as Mercedes, Ferrari or RedBull. Just that they use the surface to advertise their own company. In that regards the Mercedes is currently a very bad surface to print your name on and the RedBull a very very good one. Especially because Redbull would even be good without their success because they promote a Drink and not a car. For them its more important to be “jung”, “cool” and “sporty” than being connected to be able to build good cars. Maybe you once can make a diagram how much the advertising surface of each cars cost and if it is worth the money. Like at the moment the money spent by Mercedes let them just look like idiots if they continue to build such a trucks.
So there are 2 main sources where money comes from.
You have the advertising source where the teams create exciting races which the fans want to watch and spent money for either by going to a GP or by watching TV. Later both the GP host and the TV stations pay money to Eccelstones companies who gives part of the money to the teams.
The second money source comes directly by advertising to the teams, which of course only works because of the entertaining quality the races have.
Well there might also be a third source. Some rich guys that just love to use their redundant money for motorsport. I guess those ones are a minority these days because even they might take some sort of profit out of the sport.
Im working on a better formula at present, where all comumn 3 teams get prize money, and if it was to ring true, it would have given Hispania just under $28m last year, and with the money they have gottn from TATA for Karthekeyans drive and Panda Security for their year long sponsorship of the team, it would give them a theoretical budget of $64.531m to spend, whitch is €44.120m whitch is up arround a €8m increase on 2010s budget.
I think that the Column 1 teams can take a small hit of arround 1.5% to 2% to their prize total id be willing to give the column 3 teams money. However the column 3 is there for a reason, make teams race for a proze, as if everyone got something you could well have a small team cruising arround just to make up the numbers, however ive had a look at some numbers and came up with a formula where there is a massive ammount of money increase for the smaller teams, arround $35.5m drop in money between P10 and P11. There is enough money for you for the next year to operate on a budget, but the loss of $35m will be felt, and also makes the smaller teams want to aspire to more.
ESPImperium wrote: and the team that would pick up the Historical payment would either be Red Bull as they have now had 7 continious years of service to F1, Mercedes as they are a "historical" team in F1 terms, or belive it or not Toro Rosso have been mentioned. Id be partial to STR to get it as they have been arround since the early 80s as Minardi, Mercedes have been out of F1 for 55 years before returning in 2010, Red Bull have been arround for 7 continous years yes, but arround since 1997 as Stweart GP and Jaguar. Altho Force India could make a case too, but i feel that STR could be the team that would benifit most from $17.5m a year in funding.
Probably for the same reason as Mercedes, altho they have been out of the sport less time, they havnt been in it for the past 10 years in my eyes. Mercedes could just get it as they have been in the last 10 years, but as mostly a engine only supplier.
Pre manufacturer pull out it seemingly was to be BMW that took over the Historical payments, then it was to be Toyota. When not if Renault are forced to change their chassis name, im sure that there will be someone that takes that $20m payment.
Ive worked out what the Historical payments would theoretically rise to from 2010 to 2016. and added them to my proposal table on this new chart:
I must be very dense (it's been said), but I still don't understand this:
assume the restricted budget so often discussed = 100 units of whatever currency.
Now assume that sponsors provide a successful team (McL, Ferrari, RBR, etc) with 150 units of sponsorship.
Are teams not allowed to spend the sponsorship money their success has earned them?
What happens to the "excess" sponsorship money?
Enzo Ferrari was a great man. But he was not a good man. -- Phil Hill
Excess (sponsorship/prize) money usually gets paid to Shareholders as is the case for McLaren and any other stock exchnage listed team, Williams are in the same boat here, and Mercedes are the same but are "preferencial" listed on the FTSE.
As for the other teams, the excess money that is generated is usually invested in facilities. Toro Rosso has just spent €20m to buy land arround their Faenza base, and now has 2 new buildings nearing completion. Theese have all been paid off and no long term debts are overhanging for theese buildings. One of the buildings is seemingly a new area for the race bays and a area for STR to finally produce and manufacture their own carbon parts. Im unsure if they will be able to manufacture their own tubs as of yet as STR and Hispania use the same company in Germany for this.
Team Lotus are spending roughly 60% of what they make on race activities, and 20% on facilities each year with the final 20% bing used for labour costs for staff. Team Lotus are constantly adding to their facilities, and are investing arround €28m a year at Hingham. However once Hingham gets to the point they are starting to be stifled by the ammount of space, they will move, and not invest in Hingham one year and spend €28m on a new facility. McLaren did this about a decade back now, they spent a bit more on the McLaren Technology Centre than they should have, suffered a small slump in performance from 2001 to 2004 and come 2005 they back to buisness. The MTC cost a reported £120m, and if any team wishes to follow that blue print it will cost more now, altho it has been said it can be done on the "cheap" now for arround about €50m to €70m.
Any excess money from one year is usually spent on facilities, as better facilities usually mean a better race car whitch is advantagous.
However, some teams that dont spend the excess one year sometimes hold it back for the next or future season. Before they were bought by Malya, Force India did the same from 2004 to 2007, they got to the middle of the season and saw it wasnt worth it, so saved for a future battle. Over this period they reportedly saved €45m, whitch got spent middle of 2007 trying to develop the Spyker F8-VII. One of the reasons that Force India kept the F8-VII in 2008 and just modified it for the rules and developed it. Not to mention the way the books were after Kolles left.
Any surplus is spent in various ways. Generally there is 2 ways, Facility upgrade or save for a rainy day.
However, some sponsors just dont supply money, many also supply non-cash support. The best example of this is Total or Shell, Total spend €12m on Red Bull, €15m on Renault and €8m on Team Lotus in cash, but all get €8m non cash support. This will be in new race fuels and oils from sister (Subsiduary) company ELF. Red Bull and Renault will get the same spec fuel as as each other, Team Lotus id recon will be a step behind. That would translate into about 0.015 of a second a lap time. Shell supply Ferrari with €30m cash and €12m non cash support each season, and follow the same route as Total. Petronas are the biggest sponsor for Oils and Lubricants in F1 with €35m cash and €15m non cash support for Mercedes. However Mobil 1 supply the other Mercedes teams, same €10m technichal support, but McLaren get about 4 times more money than Force India, McLaren get about €16m from Mobil 1 in cash each season.
Under the previous tyre manufacturer Bridgestone, each team got €10m support from them, with the bottom 3 teams getting €10m sponsor money from them, regaurdless of posistion, with the top teams getting more as for every posistion up from P9 from the 12 teams that started in the 2010 Bahrain GP getting €1.25m more than the team below them. with the Constrctors Champions betting €22.5m that season from Bridgestone. Pirelli run a diffrent model, the team pay them €4.5m and they all get €6m technichal support as there is only 4 embedded engineers for Pirelli in each team, from the 9 under Bridgestone.
Currently there is one team with a massive uphill battle in F1 and that is Virgin, they need to spend more than what they can afford to catch Team Lotus, they need to up their second estimate budget from €68m to arround €85m to €105m for the next 2 years to get into where they want to be. Their first estimate was €45m. Hispania will get there, i have no doubt they will catch Team Lotus as they are showing signs that next year they will have closed that gap on their small Budget.
Teams are now realising the spend and burn tactics of pre 2009 arnt working now, they have to spend wisley, and spend in a manner that they can update their facilities as the same time of updating their car, as better facilities usually mean a better car. Its about being ficsally responsable, and the old gaurd in F1 has now bee found wanting in this era of a cost controled F1 formula.
Teams currently break even for the season, some make a small profit generally, in the future this will become most will make a profit, some will will be even for the year.
As a sport, F1 is the only big money sport in the world that breaks even or makes a profit. The Premiership in England is £1.5B in debt, La Liga in Spain is £658m in debt, Seria A in Italy is £436m in debt. So compaired to Football, F1 is in great financial health.
The only area for F1 teams to work on is the length of time they have to pay suppliers. The best is Hispania at only 38 days on average, the worst teams are Red Bull (98 days), Force India (128 Days) and Team Lotus (128 Days). Generally, on average, teams pay their suppliers within 72 days.
Again compaired to football, some teams sell a player, and only get £8m of a transfer fee up front with £4m in 6 months and another £4m after 12 months and even then, a £22m transfer fee could have another £3m after 50 or 60 apperances for the club that the player has gone to and another £3m after 10 or 20 International apperances. So in theory, it could be as much as 3 years before a team gets all £22m.
However, one thing in Football that is totally discusting is that the Addidas tootball at the 2010 South African World Cup cost an amazing €38.8m to develop, Hispania spent €36.4m for the 2010 season.
HRT arent at the mercy of a lawsuit should somthing go wrong. And with a million balls being made, Addidas have alot more to lose than HRT finishing last
That is also true. Addidas have less exposure to the bailiffs than Hispania. And have a proven track record over many decades, Hispania simply dont have any herritage, and will be a long long time till they even come close.
