As F1 prepares to meet and discuss the potential cost reduction concepts that will be handled by the new Strategy Group, I thought it might be interesting to look at the overall costs of F1 and how they’ve changed over the years.

In 1985, F1 teams were spending between $15-30 million for the season. Technically as a privateer, McLaren were spending approximately $15M and Renault pressing $30M for their program. Engines cost $120,000 each and a transmission would put you back $25,000. The tires were $500 each and the salary expense for the crew at a race was $14,500 for the week.

Things have changed and by a factor of 90% over the last 30 years. It’s been suggested that some teams spend between $250-300M per year on their program while the privateers, if you will, are in the range of $80-150M. If you’ve been going to the races for that long, it might be interesting to look at some old ticket stubs to see what you were paying back then. My hunch would be something around a 250% increase in ticket prices since 1985-ish. I recall prices around $85 back in those days and $300 now.

Those percentages are all relative of course and they account for a host of things such as inflation and economic factors but the reality is, F1 has gotten expensive for teams and fans alike. That’s why I feel the Circuit of the Americas is actually a good deal for general admission at $169 for three days or racing. Have a few extra bucks? Sure, step up but you can see F1 for $170 and that’s a 98% increase from the 1980’s instead of 250%.

Having walked the circuit the last two years and watched the racing from different angles, I enjoy turn 9 and the esses the most. Turn 1 is really fun to watch but you really get to see the cars in full flight through the esses and into turn 9. A parking lot pass is $60 and if you like to camp, its only $400 for the weekend.

As for the teams, exotic materials, technical regulations and personnel have all added to make F1’s meteoric rise in costs untenable for some teams and there are suggestions that adding two teams to the grid in 2015 may actually keep us at 10 teams total.

It’s a balancing act when pricing your product and the danger of not having a product that produces the racing fans want means empty seats and TV’s switched off. There is also the case of venues in countries that have no appetite for F1 but the US isn’t one of them according to the attendance figures from COTA for the last two years.

That balancing act was certainly being tested until the Bahrain Grand Prix and if the rest of the season can produce those kinds of races, F1 may have dodged a bullet. Having said that, Noah racing where the season is a series of on-track battles between teammates only is not going to keep the barbarians at the gate amused for long.

An F1 fan since 1972, NC has spent over 25 years in the technology industry focusing on technology integration, AV systems integration, digital media strategies, technology planning, consulting, speaking, presenting, sales, content strategy, marketing and brand building.
  • jiji the cat

    i remember my ticket for adelaide in 94 was $385. My ticket for Melbourne in 2013 was just over $500. roughly $115 in 10 years. not bad i guess. still bloody expensive non the less.

    Seeing as we are talking expenses, there has been a rumour growing that Matesich (spelling ), Bernie, and Monte are having talks with CVC ( or whomever the rights holder is), in buying them out. Wonder what that would cost?

  • It’s all relative. In 2002, the biggest spender in F1 was Toyota with a €500 million budget. In 2013, Red Bull had the biggest budget at €230 million. I guess it’s very possible that the Toyota number included the costs for their engine program, but then Red Bull also pay for their engine and while it’s probably a lot cheaper for them than it was for Toyota, I doubt that the difference is €270 million, particularly not once we add inflation to the mix.

    My working hypothesis is the following: It’s not that the costs have skyrocketed, rather the budgets have. Had F1 generated as much cash in the 1980s, you can be sure that the money would have been spent and the costs would hence have been much higher.
    The most important factor is not the overall costs, but the budget delta between the haves and the have-nots. After the tobacco money wasn’t welcome anymore, it has become very difficult for the back markers to attract potent sponsors. That’s also why all attempts to cut costs are bound to fail as it’s not the costs that are the problem. Costs are always relative.

    Either we accept that in this day and age, only fewer teams can accumulate large sums of sponsor money and we reduce the grid while compensating it with three cars per team, or F1 has to seriously rethink their TV-money allocation. Like giving everybody exactly the same share, no matter where they ended up in the constructors championship.

    • BTW, here are the 2013 budget and employee numbers according to AMuS (only the actual F1 teams without engine programs for Ferrari and Mercedes):

      Red Bull: 600 employees, €230 million budget
      Ferrari: 700 employees, €220 million budget
      Mercedes: 550 employees, €185 million budget
      McLaren: 560 employees, €170 million budget
      Lotus: 550 employees, €160 million budget
      Williams: 500 employees, €110 million budget
      Toro Rosso: 320 employees, €110 million budget
      Sauber: 300 employees, €90 million budget
      Force India: 320 employees, €85 million budget
      Caterham: 310 employees, €80 million budget
      Marussia: 180 employees, €72 million budget

    • Dividing money equally doesn’t sit well with me. Just participating isn’t enough to earn what Merc, Red Bull or Macca make. That’s a built-in success penalty for top players.

      • I agree, as in your on showing via racing, success should be reward, not a penalty, that others strive for.

        However, there must be some incentivization from the leading teams if not the owners, to encourage the sport’s health. Whether it’s customer cars, technical partnerships between the haves/have-nots, or a slush fund a la NFL to promote sufficient participants, some oversight measure that looks to the sports health rather than individual and oftentimes-conflicting needs will only benefit.

        Those measures must be regulated by a consortium or impartial entity, which admittedly is a big ask.

      • Personally, I’m still agnostic on the matter. I don’t have strong convictions either way. I agree that success should be rewarded, but that is happening anyway, through sponsorship money, presence in the media, merchandize, etc.
        The way TV money is divided only increases this divide. Should Petrov’s pass on Pic in 2012 really have been worth 20 million?

        Again, I’m not necessarily advocating for an equal divide, but if it’s the goal to have many and healthy F1 teams, that would be the most obvious thing to do.
        The argument can go both ways. On the one hand, you could argue that the top teams create the biggest buzz, hence they deserve the biggest slice of the TV pie. On the other hand, you could argue that without a full field, nobody would be interested n F1 and hence the back markers are just as crucial and deserve the same piece of the TV money.

        I’m fine with either. I could live with an F1 where we only have 8 teams with three cars each or maybe only 6 teams with four cars each. We would lose some color and variety, but the racing would probably improve.
        At the same time, I wouldn’t have any problems with splitting up the TV money equally in order to keep the variety in F1.
        I guess customer chassis/parts could work as well. I mean Ferrari started out as a privateer team that ran Alfa Romeo cars. Whatever the solution may be, I do however think that it needs to function on its own, without impartial supervisors or anything like that. That kind of thing is bound to fail.

        • Understand Tom, however I might argue that sponsorship money isn’t really adding up to success. I think I read the other day that Red Bull have spent $1.2b but it’s hard to say that has paid off in a multiple of 10% to 20% ROI. Success should be rewarded. It is the basis of overachievement and it propels us to even better. If RBR got the same as Marussia for just playing the game, I can assure you they wouldn’t be int he series. It’s why Newey is paid more than others because he’s worth it and has worked his arse off to achieve it. :)

  • I don’t know how he accomplished it, but Bernie somehow convincing the teams to bargain w/ CVC individually rather than an entity was perhaps his biggest coup. CVC purchasing F1 via loan, then immediately secured massive dividends… I’m sure a team collective would have battled how the investors were IMO lining their pockets while saddling the sport w/ massive debt. Unfortunate, and to me more the fault of the teams than CVC.

    I don’t know whether CVC cares about sport in F1; it’s an investment entity concerned about its financiers’ mass wellbeing. It was incumbent upon the teams to question the purchase and either organize a group to place binding measures on CVC’s autonomy. The teams failed to do so, and now must basically take the scraps CVC gives them.

    Reality sucks; although I advocate and would welcome increased revenue sharing amongst the teams, a collective bargaining agreement between the teams and the rights holders, that’s never going to happen w/o a FOTA like entity including all teams; I guess the have’s don’t want to share what their individual sponsorship deals bring. And, I wouldn’t hold my breath on CVC magically re-allocating a higher revenue % from TV rights to the teams, nor create a “slush fund” for helping those foundering.

    Time for the individual teams to investigate alternative revenue streams; they must fend for themselves. As there are precious few willing to contribute the $100 million Marlboro supposedly gives Ferrari, what other assets could a team monetize? Does anyone have a team’s merchandizing model?

    Perhaps selling alternate services, such as exclusive access into a season. A documentary of Sauber, filmed/funded by ESPN, I’d watch. Or, one filmed by the team and sold to broadcasters I’d purchase. Who knows if CVC terms have claim on this.

    It’s a sad state. I believe in competition, even competition between the teams and the owners, but the playing field’s rules are so tipped against the teams, I just don’t see how anyone can “profit” from F1 except via association and exposure. IMO, the teams carry some blame for the funding issues before them.