F1’s revenues set to double in next five years

The revenue from Formula One’s commercial rights will reach more than $3bn annually by 2016, according to new research from F1 industry monitor Formula Money. This is a 105% increase on 2010’s total revenue of $1,587m.

The research, based on data contained in the new edition of the annual Formula Money report, predicts that revenues for the sport’s commercial rightsholder, the Formula One Group, will rise at a rate of 12.7% a year reaching $3,253m in five years’ time. Revenues are expected to hit $1,789m this year before passing the $2bn mark for the first time in 2012.

One of the key areas of expansion is expected to be race hosting fees, which brought in an estimated $568m in 2010. Most race contracts include an annual escalator and upcoming races in new markets such as Russia and India are expected to pay above the average rate. Formula Money predicts that the highest race hosting fee, which currently stands at $50m, will be more than $100m by the end of the decade. The Formula One Group’s other key sources of revenue include TV rights, trackside advertising, hospitality and sponsorship.

The revenue increase would be a boost not only for the Formula One Group but also for F1’s teams which receive 50% of the sport’s underlying profits as prize money. Formula Money predicts that in 2016 the total prize fund will come to $1,575m, with the winner of the constructors’ championship taking home a $222m reward. This amount is bigger than the entire annual budget of seven of the current 12 teams and compares to the $87m that Red Bull Racing received for winning the championship in 2010.

This could mean that prize money overtakes sponsorship as the biggest source of revenue for F1’s teams. Formula Money calculated that total team sponsorship and supplier deals came to $802m in 2010 as they fell for the fourth time in five years. However, early indications are that the sponsorship market is improving in 2011 as F1 accelerates away from the recession. At the start of the season the teams sponsorship total had already reached $887m, an increase of more than 10% on 2010.

Source: Formula Money