Austrian Grand Prix Commences Tomorrow: Unveiling the Path to Multimillion-Dollar Earnings for F1 Teams and Drivers

Austrian Grand Prix Starts Tomorrow: Here's How F1 Teams and Drivers Make Millions. Formula 1's $2.5 billion in revenue is driven by record attendance and global viewership. Formula 1 will be held in Austria this weekend, the birthplace of Red Bull Racing, for the Austrian Grand Prix. The training sessions commenced on Friday, and the quick races will take place on Saturday. The race will officially kick off on Sunday at 9 a.m. EDT.

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Key TakeAway

• The Austrian Grand Prix, a prominent event in the Formula 1 calendar, commences on Sunday, July 2, 2023, at 9 a.m. EDT.
• In the year 2022, Formula 1 amassed a substantial sum of $2.57 billion in revenue, propelled by unprecedented attendance and an expanded global audience, as stated in a financial report issued by Liberty Media, the owner of F1.
• Formula 1 teams primarily generate income through various means, including F1 prize funds, sponsorships, and collaborations with automobile manufacturers.
• To promote fairness and restrict excessive expenditures among teams, F1 introduced budgetary limitations in 2021. For the year 2023, each team is subject to a cap of $135 million.

How Formula 1 Generates Money

Formula 1 raked in a total of $2.57 billion in 2022, propelled by unprecedented attendance and expanded global viewership, as outlined in a financial report published by Liberty Media (FWONK), the owner of F1. In June 2022, F1 extended their agreement with ESPN until 2025, in a contract expected to yield $75 to $90 million annually for U.S. media rights, according to the Sports Business Journal.

The sport's popularity could experience further growth, as renowned personalities Ryan Reynolds, Rob McElhenney, and Michael B. Jordan have invested their capital into the F1 team Alpine. This notable investment amounts to a substantial $218 million, as announced in June 2023.

Formula 1 Racing stands as a billion-dollar establishment, and financial resources are necessary to participate and sustain involvement in the sport. Max Verstappen from Red Bull Racing will attract significant attention following his triumphant streak of three consecutive wins in his previous race, placing him 70 points ahead of his teammate Sergio Perez. However, in order to even join the season, drivers must pay substantial fees amounting to more than $1 million. The cumulative cost of these fees is considerable.

Compensation Aligned with Performance

So how do F1 teams generate revenue? Fundamentally, team funding is contingent upon their performance throughout the season. However, as teams with larger budgets have historically outperformed those with smaller budgets, Formula 1 introduced budgetary limitations in 2021 to promote fairness and restrain excessive team spending.

Initially set at $145 million, the spending cap was subsequently reduced to $135 million for the 2023 season. Historically, Ferrari, Mercedes, and Red Bull have been the teams with the highest budgets. The roster of F1 teams competing in 2023 includes Alfa Romeo, Alpine, AlphaTauri, Aston Martin, Ferrari, Haas, McLaren, Mercedes, Red Bull, and Williams.

Capital Injections and Collaborations

F1 teams also generate income through collaborations with car manufacturers and sponsorships. As an illustration, in 2019, Daimler, the parent company of Mercedes, invested $80 million in the team to provide support in the Constructors Championship. Car manufacturers perceive F1 as a promotional tool, anticipating that successful teams will enhance the desirability of their automobiles.

However, sponsorships represent the primary source of revenue for F1 teams. Between 2010 and 2018, F1 sponsors contributed a staggering $17.8 billion, with Ferrari's share amounting to 11.8%.

Drivers

Each F1 team is comprised of two pilots who receive compensation from their respective teams. Pilot salaries do not fall under the team budget cap. Pilots are remunerated with a base salary, receive performance-based bonuses tied to their track achievements, and also obtain income from sponsorships and endorsements. As of 2023, F1 pilot salaries vary from $1 million to a substantial $55 million.

Max Verstappen, representing Red Bull, claimed the title of the highest-paid F1 pilot for the year, having clinched the F1 drivers' championship in 2022. Verstappen amassed a total of $60 million from F1 in 2022, with a salary of $40 million and $20 million in bonuses. Lewis Hamilton, a seven-time World Champion, secured the second position, earning a $55 million salary from Mercedes.