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How the F1 pie is shared

Formula 1 does not like to talk about money. The sport is wallowing in greenbacks but it is not considered good form to discuss such things. Joe Saward writes. Graphic: The evolution of the F1 car(1950-2012)

india Updated: Oct 24, 2012 01:45 IST
Joe Saward

Formula 1 does not like to talk about money. The sport is wallowing in greenbacks but it is not considered good form to discuss such things.

"A gentleman should not talk about money nor about last night," said Bernie Ecclestone recently when asked about the financial terms of his new deal with Singapore.

It is a rare thing to find someone who has made a vast fortune and who is not ostentatious about his wealth. There is all too often the need to show off, which subsequent generations learn to avoid. Bernie has all the trappings, of course, and he spends his life talking about money, but he does not like doing it in public…

And yet, for those who are on the outside, their noses pressed up against the window of F1, part of the lure of the sport is the money. What we do not know when we watch a race is how much the victory is worth. There is no answer to that. The secret of F1 prize money is that a win can be worth $10 million or it can be worth nothing, but explaining how that works is not an easy thing to do. It does not help that the numbers change each year, because the prize money is based on the revenues generated by the Formula One group.

What we do know for a fact - thanks to company returns - is that in 2011, the 12 F1 teams had a prize fund that was worth in the region of $700 million, divided between the top 10 teams. How this is divided up is hidden away in a confidential document called the Concorde Agreement. Some details of this have leaked over the years, but who knows which version of the document is right.

Scuderia Ferrari is the sport's oldest team and it enjoys the highest profile and the biggest fan base. It has used these factors over the years to negotiate more money out of the sport. The current deal gives the Italian team a two-and-a-half per cent share off the top of the total prize fund. There are some who call that an unfair advantage because, based on 2011 figures, that gave Ferrari $17.5 million more than the others.

The Two Funds
The current structure rewards both attendance and results. This is achieved by dividing the fund in half, creating two funds: known as Column 1 and Column 2. Based on the figure of $700 million, minus the Ferrari money, the fund is worth $682.5 million. Thus each Column has a fund worth $341.25 million. Column 1 pays out equal shares to the top 10 teams in the World Championship, if they have been in the top 10 for two of the last three seasons. If only nine teams qualify for Column 1 status, then the fund is divided by nine. This year, there are 10 teams included and they thus pick up $34.2 million apiece.

Column 2 is more complicated and divides the fund on the basis of performance, with the champions getting 19 per cent and the other nine teams picking up 16, 13 11, 10, nine, seven, six, five and four per cent respectively.

Thus, one can calculate that in 2011, the champions, Red Bull Racing, would have picked up nearly $65 million from Column 2, plus $34.5 million from Column 1, giving the team prize money of nearly $100 million. One might work out that the team scored 650 points and thus one might argue that a point is worth around $150,000 and thus a victory is worth nearly $4 million, but the figures are constantly changing.

Finishing second is quite an achievement, but when you do the sums, you can work out that McLaren made $88.6 million, so the difference between first and second place was a whopping $11.4 million. Because of its special status, Ferrari actually earned more prize money last year than McLaren, despite finishing behind its longtime rival - the Italians getting $17.5 million, plus $34.5 million plus $43.8 million, giving a total of $95.8 million. The key is that it is all about the final result, rather than about the individual race wins.

With fourth place worth $71.5m; fifth $68.1m; sixth $64.7; seventh $57.8; eighth $54.4; ninth $51m and 10th $47.6 milllion, one can work out that jumping from third to first in a year is worth more than $20 million in additional prize money. The leap from third to fourth is $6.8m; fourth and fifth $3.4m; fifth and sixth $3.4m; sixth and seventh $6.9m; seventh and eighth $3.4m; eighth and ninth $3.5m; and ninth and 10th $3.4m.

Tenth place in the Constructors' right now is dependent on a 12th place. If Narain Karthikeyan was to finish 11th in his HRT this weekend, that would be worth something like $12 million to the team.

Not bad for one afternoon's work.

Graphic: The evolution of the F1 car(1950-2012)