How F1 and its teams actually make money

Formula 1 is one the biggest sports in the world. It is the pioneer series in the world of auto racing. It is thus no surprise that the sport reported a revenue of over $3.6 million in 2024. While the ten existing teams spend over millions of dollars every season.

Moreover, star drivers like Lewis Hamilton and Max Verstappen earn hefty sums from their respective teams as part of multi-year mega deals and sponsorship contracts from various brands.

However, F1 is a complex sport with a whole host of areas. This has sparked curiosity amongst the ever-growing fanbase of the sport to understand how does Formula 1 actually make money?

How does Formula 1 make money?

The Formula One Group is owned by American giant Liberty Media. Liberty Media’s latest financial records over the sport’s annual revenue stood at $3.6 billion, an increase from $3.2 billion in 2023.

While the operating income for the season stood at $287 million, a marginal decline from $297 million the previous year.

F1’s various commercial avenues for revenue

1. Race Promotion Fees

Every race on the F1 calendar, barring the Las Vegas GP, pays a hefty fee to Formula 1 to host the Grand Prix. On an average this fee could be upwards of $50 million, giving F1 a stable income irrespective of the number of tickets sold by the race promoters, except Paddock Club revenue. This is believed to make around 29% of the sport’s revenue.

2. Media Rights

Every sport depends massively on broadcasting and media rights, and Formula 1 is no different. As per Kym Illman, media rights account for around $1.2 billion in revenue for the sport every year, including massive deals with broadcasting giants like Sky Sports and ESPN. Though, Formula 1 has also put its own hat in the ring with F1TV globally. Nevertheless, this figure is bound to grow as more and more fans tune in every race.

3. Sponsorships

Formula 1 is one of the best places for global brands to advertise, with around 18% of revenue depending on these deals. The tracks are full of billboards of various brands which spend big bucks to have their names.

Luxury giant LVMH recently signed a billion-dollar deal with the sport for the next decade. While Swiss watchmaker Tag Hauer dislodged Rolex to become F1’s official time keeper this year. The sport has other partners as well, including Emirates, DHL, and Aramco.

4. Other sources

The aforementioned segments cover the majority of sources for Formula 1. However, that’s not all. F1 receives significant sums from its other operations including Formula 2, Formula 3, and F1 Academy, helping boost the feeder championships.

Additionally the sport also earns substantial sums from Paddock Club hospitality from races.

How do F1 teams make money?

Formula 1 as a whole has various avenues for revenue, ensuring a stable income for the sport. On the other hand, F1 teams historically struggled to stay afloat, particularly small teams such as Marussia, or HRT.

Things have changed in recent years courtesy of the rise in popularity of the sport, allowing for a commercial boom in the paddock. F1 teams have now become much more financially sustainable.

Sources of income for F1 teams

1. FOM Payments

Formula One Management pays all teams annually. This serves as a major financial lifeline across the grid. There are different types of payments are made by F1 to the teams. The first payment C1 is the base payout for the entire grid, amounting to around $36 million.

The next payment is C2, or the prize money for the constructors’ standings. Teams finishing at the top of the standings will earn substantially more than backmarkers. McLaren reportedly earned $161 million in 2024 for winning the championship while last-placed Sauber received $69 million.

While Scuderia Ferrari continues to earn a heritage bonus for being the only team on the grid in every F1 season. This figure is believed to be 5% of the prize pool.

2. Sponsorships

Like Formula 1, all teams rely heavily on sponsors to keep their operations running. Every car on the grid is decked out with stickers, with many calling them ‘billboards on wheels.’

Top teams earn the most via such deals, Ferrari and Red Bull are both reported to be earning $100 million every year from HP and Oracle respectively. While Mercedes has a longstanding relationship with Petronas, worth around $75 million.

3. Driver-linked income

F1 is an expensive sport and sometimes drivers need to show that they can bring financial stability to a new team. The sport has often had pay drivers who brought in millions in sponsorship backing to get a seat on the grid, including the likes of Nikita Mazepin and Nicholas Latifi.

Even Sergio Perez had the backing of massive brands, helping him race in Formula 1. Nowadays, the sport has grown to a point where teams do not need to fully depend on sponsorship from drivers. However, historically this used to be a lifesaver for smaller teams.

4. Merchandize

Teams try to capitalize on their brand values as well as that of their drivers. Every team brings about special edition merchandize for several races each year to get an additional influx of revenue from fans. This is in addition to the normal merchandize line released every year.

Such products allow for extra income while increasing a sense of belonging with a team’s fanbase. This is particularly important for teams like Ferrari or drivers like Max Verstappen who enjoy an enormous global fanbase.

5. Money from any new team

The F1 grid is set to expand next season with the arrival of Cadillac. This will be the first time since 2016 when the grid will have eleven teams on the grid. However, this entry was not cheap.

As per reports, GM agreed to pay $45 million to each of the ten teams to get the greenlight for 2026. This payment of $450 million is known as the anti-dilution fee. A fee paid by a new entrant to compensate existing teams for diluting the prize pool.