It is not new news that formula 1 is a very expensive sport. From designing the car to maintaining the team, everything requires significant capital. How does a Formula 1 Team able to afford to be part of such an expensive sport? Sponsorship is a crucial aspect of Formula 1 that helps teams and drivers secure the funds they need to compete at the highest level. In this article, we will discuss how teams and drivers secure sponsorships and the benefits and challenges associated with these partnerships.
It was not so long ago that Formula 1 had to work very hard to respond to critics. Money was an issue. The noise of V8s made it seem like it was all about burning fuel. All this meant that sponsors had no interest in a sport that was suffering from declining ratings and an unprecedented absence from social media. Now, a few years later, the premier class in motorsport is in a much better position. With the introduction of the budget cap, unlimited money is no longer spent. The hybrid era has brought about a battle in sustainability. Tapping into a new audience – let's call it the Netflix effect – has spawned a deluge of new sponsors. It even seems that Formula 1 is currently reaping the benefits of the initiatives that have been deployed in recent years to make the sport attractive again.
Sponsorships
Securing Sponsorships in Formula 1 is a complex process that involves a lot of negotiations and deals. Teams and drivers usually target companies that share similar values or target audiences. For example, a team that wants to appeal to younger audiences might target tech or lifestyle brands, while a team that wants to promote its environmental credentials might seek out partnerships with green energy companies.
Who are the title sponsors for each team?
Team Name | Title Sponsor | Years | $$$ |
Alfa Romeo | Stake | 3 year deal | AUS$ 140 million |
Alpine | BWT | Multiple Years | |
Alpha Tauri | Alpha Tauri | Multiple Years | |
Aston Martin | Cognizant | Multiple Years | |
Ferrari | AWS | Multiple Years | |
Haas | Money Gram | 3 year deal | USD$ 20 million per year |
McLaren | OKX | Multiple Years | |
Mercedes | Petronas | 4 year deal | USD$ 75 million per year |
Red Bull | Oracle | 4 year deal | USD$ 75 million per year |
Williams | Bremont | Multiple Years | |
Partners
Partners are companies or institutions that provide materials or services to a team. For example, Shell has been a permanent partner of Ferrari for many years. The Anglo-Dutch oil company not only supplies the fuel and oil, but also helps improve those products. In return, the Shell logo is given a prominent place on the scarlet cars, the team clothing, the website, et cetera. Another example is the collaboration between Red Bull and Siemens. The German technology company supplies the computer software that Red Bull's designers use to develop the cars. In many cases, these types of partner deals are basically done 'unpaid': the partner receives publicity in exchange for its products or services.
Aston Martin uses Cognizant to improve the IT infrastructure, Mercedes wants to do more in Augmented Reality with TeamViewer, while Red Bull is taking steps in the field of artificial intelligence with Oracle. Data is so important in Formula 1 that the technology behind it has become an important theme where teams can make a difference.
Red Bull team boss Christian Horner says: “The data and the way we handle it, that is vitally important. We generate so much and it affects everything we do: our strategy for the race, the development of the car, the way we analyze our drivers and also how we select our drivers. Formula 1 has evolved and the days of the tobacco companies are numbered. In addition, there are even fewer OEMs involved in the sport. Formula 1 is at the forefront of technology, we have the very best, and it's great to see these collaborations taking off now. Oracle is one of the largest companies in that regard.”
Pay Driver
A separate phenomenon in sponsorship is the pay driver. Some teams have so little budget that they sign a driver who is backed by a major sponsor. Sometimes these are less good drivers who would not end up in Formula 1 at all without financial support, but sometimes they are also starting talents who could use some support. The money that this driver brings is actually 'bought a seat'. With the sponsor money, the team can then pay the driver a salary and the rest is used to fund the team's coffers. Brazilian driver Felipe Nasr, for example, was supported for many years by Banco da Brasil. The sponsorship amount was so interesting for the ailing Sauber that they were happy to offer him a seat in exchange for the name of the bank on the car.
Prize Money
As with any other sport, Formula 1 is of course about honor, but at the end of the season a big check is a nice bonus. The organization Formula One Management distributes a large pot of money at the end of each season. This is done via a complicated and partly secret distribution key that consists of three parts: prize money, starting money and historical value.
Prize money comes in two categories: half of the total prize pool is divided equally among the teams that have finished in the top ten in two of the last three seasons. The other half is divided according to the final ranking of the last season, with the number 1 receiving 19% and the number 10 receiving 4%. This year there are only ten teams, so that means everyone gets money, but you can imagine that if there are 11, 12 or even 13 stables participating, the battle at the back is quite fierce.
Formula 1 Prize Money 2020 Distribution Table
Racing Teams | Column 1 | Column 2 | Bonus | Total |
Ferrari | $35 Million | $56 Million | $114 million | $205 Million |
Mercedes | $35 Million | $66 Million | $76 million | $177 million |
McLaren | $35 Million | $46 Million | $71 million | $152 million |
Red Bull Racing | $35 Million | $32 Million | $33 million | $100 million |
Renault | $35 Million | $38 Million | N/A | $73 million |
Haas | $35 Million | $35 Million | N/A | $70 million |
Williams | $35 Million | $15 Million | N/A | $60 million |
Racing Point | $35 Million | $24 Million | N/A | $59 million |
Sauber | $35 Million | $21 Million | N/A | $56 million |
Toro Rosso | $35 Million | $17 Million | N/A | $52 million |
The first column in the table represents the equal share of CVC. The second column is all about how the Formula one team finished their season on the points table. Bonuses will be awarded to shareholder teams. Which leaves smaller teams at a massive disadvantage.
Conclusion
In conclusion, sponsorship is a crucial aspect of Formula 1 that helps teams and drivers secure the funds they need to compete at the highest level. Securing sponsorships can provide significant benefits, including exposure to a large and engaged audience, access to exclusive events, and opportunities for branding and marketing. Sponsorship remains an important source of funding for teams and drivers, and a key part of the Formula 1 ecosystem. Prize money is also a big part of providing funding for the team and its future.
Comments