Peter Thiel pays kids to drop out of college and start companies.
Elon Musk publicly mocks MBAs.
It becomes almost politically correct to take shots at the current education system.
Yet –
96 out of the 100 CEOS of the top 100 Fortune companies have college degrees. 3 out of the other 4 also went to college, though dropping out afterwards to pursue startup opportunities.
62 out of the 100 CEOs of the top 100 Fortune companies have advanced degrees.
9 have doctorate degrees, including PHD, JD, and MD.
44 have MBA degrees.
9 have M.S. degrees.
💡
An education is still one of the most valuable investment for ordinary people.
Sharing my learnings about the core skills on how to run life like a company in the Me Inc. Newsletter. Topics covered: Copywriting, Finance, Technology, and Productivity. Read my why here or join directly👇. No spams. Ever. – Michael
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Including accounting and finance, all business-related majors witness a total of 32 CEOs out of 100. Engineering related majors, including all kinds of engineering disciplines, on the other hand, have a total of 23 CEOs, second most after business. Economics, surprisingly, is the second single most popular major after business, more than accounting or any single type of engineering majors.
If you are interested in learning about detailed backgrounds of the Top 100 CEOs, you can read it from my other post, which also includes an interactive chart.
Sharing my learnings about the core skills on how to run life like a company in the Me Inc. Newsletter. Topics covered: Copywriting, Finance, Technology, and Productivity. Read my why here or join directly👇. No spams. Ever. – Michael
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MBA was originally created to train engineers on business skills in order to prepare them for managerial positions. Originally, it wasn’t as glamorous; a business degree was ranked behind medicine, law, and engineering as well. The CEO of Blackstone, Stephen A. Schwarzman, an iconic business figure and a Harvard Business School alum, said that the reason he went to HBS was that he failed to get into HLS. Today, that situation is long gone, and business degrees are some of the most competitive in terms of admissions.
Six out of ten CEOs of the top ten Fortune 500 companies hold an MBA. Warren Buffett, though not holding an MBA, studied economics at Columbia Business School, so I’d count it as half an MBA too. Three out of those six got their MBAs from the so-called M7 Schools: Andy Jassy, CEO of Amazon, went to Harvard Business School; Sundar Pichai, CEO of Alphabet, went to Wharton; and Darren Woods, CEO of Exxon Mobil, went to Kellogg School of Management at Northwestern University. Tim Cook, CEO of Apple, studied at Duke University’s Fuqua School of Business, a top-notch business school regularly considered T15.
The other two business schools appeared on this list is University of Tulsa’s Collin School of Business, and Boston University’s Questrom School of Business. The former was attended by Douglas McMillon, CEO of Walmart, while the latter by Karen Lynch, CEO of CVS Health.
It’s often hard to quantify the role MBA played in these CEOs career paths. How do we know if, without these fancy degrees, they would still be able to climb all the way to the top? However there should be no denying that MBAs played some role in their career, as evident in the fact that Sundar Pichai’s first job after MBA was with Mckinsey, a top destination for MBA graduates.
Sharing my learnings about the core skills on how to run life like a company in the Me Inc. Newsletter. Topics covered: Copywriting, Finance, Technology, and Productivity. Read my why here or join directly👇. No spams. Ever. – Michael
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Embarking on the high-speed circuits of Formula 1 (F1) requires more than just skilled drivers and cutting-edge technology; it demands substantial financial investments to keep the wheels turning. In the intricate world of F1, where teams compete at the pinnacle of motorsport excellence, understanding the financial intricacies becomes as crucial as mastering the racetrack. From legendary teams with historic ties to automotive giants to emerging forces backed by individual investors, join me on a journey through the financial engines that power the captivating world of Formula 1.
Formula One Teams: The Cash Burning Machine
Please note: all data is from 2019 and/or before. Some teams may have switched hands, are no longer in Formula 1, or have used new names. However the conclusion, in my opinion, will stay the same as the competitive balance among all teams will not change.
Ferrari
The Ferrari Formula 1 team is a subsidiary of Ferrari the manufacturer, and the team’s financial data is consolidated with Ferrari’s financial statements. Ferrari is a publicly listed company on the New York Stock Exchange. Being the oldest and most supported team in F1, Ferrari has the highest investment in the sport. In 2018, Ferrari’s budget for the team was $410 million. The team’s main sources of income include:
FOM Rev Share: Due to Ferrari being one of the most prominent teams in F1, it receives the highest revenue share amongst all teams, reaching $190 million, regardless of its position each season.
Sponsorship Income: Ferrari has sponsorship agreements with mega brands such as Philip Morris (parent company of Marlboro), earning $160 million in a year.
Brand Licensing: Ferrari’s brand has a significant global impact, generating about $40 million annually through brand licensing deals.
Technology and Services: Ferrari, having top-notch automotive technology, earns around $20 million annually by providing these technologies and services to other teams.
Mercedes-AMG Petronas
Mercedes-AMG Petronas has two main entities: the team operating and managing company (Mercedes-Benz Grand Prix Ltd.) and the power unit supplier (Mercedes AMG High-Performance Powertrains Ltd.). The team company is 60% owned by Daimler AG, 30% by team principal Toto Wolff, and 10% by Niki Lauda.
FOM Rev Share: Mercedes-AMG Petronas receives $175 million from FOM’s revenue share.
Sponsorship: With excellent F1 results, the team gets additional income, including $150 million from sponsors like Petronas.
Technology and Services: similar to Ferrari, the Mercedes F1 team also generates income from the provision of power units to other F1 teams such as Racing Point and Williams. Additionally, the company engages in the design, development, and manufacturing of power units for other racing events under the Daimler Group, such as the Mercedes team in the Formula E electric racing series, and contributes to the research and development of power systems for the parent company’s road cars.
Daimler Group Support: Daimler supports the team financially and provides a loan of £73 million.
Renault (Now Alpine)
Renault Team is controlled by the French Renault Group, and as of the end of 2018, they had a loan of £110 million from the Renault Group. The team’s total budget was $190 million in 2018.
FOM Revenue Share: Renault receives $60 million from FOM.
Sponsorship Income: Additional income comes from sponsors like Infiniti, contributing $40 million.
Renault Group Support: The Renault Group provides the remaining $90 million to cover the budget gap.
Red Bull Racing
Red Bull Racing team is owned by the Austrian company Red Bull GmbH. The legal entity of the Red Bull Racing team is Red Bull Technology Ltd. (Team Company), which wholely owns a subsidiary dedicated to the management and operation of the team, known as Red Bull Racing Ltd. (Operations Company).The Team Company possesses all research and development (R&D) resources, focusing on the team’s technical aspects, with approximately 800 employees. In contrast, the Operations Company, responsible for managerial tasks, has a much smaller workforce of around 50 employees. Leveraging the ownership of both the Red Bull Racing and Scuderia AlphaTauri F1 teams, Red Bull is permitted to provide technical services to the smaller team within the confines of F1 regulations, aiming to reduce overall costs.Furthermore, the Team Company utilizes its R&D achievements from F1 to offer technical services to external entities while predominantly concentrating on developments related to F1 racing.
FOM Revenue Share: Red Bull Racing receives $150 million from FOM’s rev share.
Sponsorship Income: Additional income includes $100 million from sponsors like TAG Heuer.
Red Bull Group Support: The Red Bull Group provides a loan of $68 million for operational turnover.
Haas F1 Team
Haas F1 Team operates with a different model, as it predominantly buys power units from Ferrari and chassis from Dallara. The team’s owner, Gene Haas, directly supports the team.
FOM Revenue Share: Haas F1 Team receives $55 million from FOM’s revenue share.
Sponsorship Income: Additional income includes $15 million from sponsors.
Owner’s Support: The remaining $60 million is provided by Gene Haas.
Racing Point F1 Team (Now Aston Martin)
Racing Point F1 Team, formerly Force India, faced financial difficulties in 2018, leading to Lawrence Stroll acquiring the team. Lawrence Stroll, a successful investor in fashion companies, provides direct financial support.
FOM Revenue Share: Racing Point F1 Team receives $70 million from FOM’s revenue share.
Sponsorship Income: Additional income includes $25 million from sponsors.
Owner’s Support: Lawrence Stroll directly covers the remaining $25 million budget gap.
Williams Racing Team
The core entity of the Williams Racing team is Williams Grand Prix Holdings PLC (Main Company), which comprises two branches: Williams Grand Prix Engineering Limited (Team Company) and Williams Advanced Engineering Limited (Technology Company). The main company is publicly listed on the Frankfurt Stock Exchange. Williams Racing, through its participation in the F1 World Championship, accumulates experience in technology and engineering research and development, and offers services to external clients for profits.Williams Racing has consistently maintained independent operations, being a steadfast advocate for FOM’s initiative to limit technical investments across F1 teams. In the year 2018, the team had a budgetary expenditure of approximately $150 million, with revenues roughly matching the expenditure.
FOM Revenue Share: Williams Racing receives $75 million from FOM.
Sponsorship and Technology Income: Additional income includes $75 million from sponsors and technology services.
Sharing my learnings about the core skills on how to run life like a company in the Me Inc. Newsletter. Topics covered: Copywriting, Finance, Technology, and Productivity. Read my why here or join directly👇. No spams. Ever. – Michael
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AlphaTauri
AlphaTauri, like Red Bull Racing, is part of the Red Bull Group. The team has a budget of about $150 million.
ROM Revenue Share: AlphaTauri receives $55 million from FOM’s revenue share.
Sponsorship Income: Additional income includes $30 million from sponsors.
Red Bull Group Support: The remaining $45 million is provided by the Red Bull Group.
Alfa Romeo
The Alfa Romeo Racing Orlen team, based in Switzerland, is one of the smaller teams in Formula 1 and is affiliated with an investment institution in Switzerland. The team has an annual budget of approximately $135 million.
FOM Revenue Share: The team receives $45 million from FOM’s revenue share.
Sponsorship and Services Income: Additional income includes $40 million from sponsors and sponsored drivers paying to drive for the team.
Services provided to third parties: Around $35 million.
Parent Company Support: The remaining $15 million is covered by the parent company.
McLaren F1 Team
The McLaren team is a historic Formula 1 team that has been competing in the F1 World Championship since 1966. The McLaren team is one of the three business lines of the McLaren Group, the other two being McLaren Automotive and McLaren Applied Technologies. McLaren Group generates 84% of its revenue from the automotive business, with only 11% coming from the F1 team. The McLaren team has an annual budget of approximately $220 million; the parent company, the McLaren Group, covers around half of the team’s budgetary gap.
FOM Revenue Share: McLaren F1 Team receives $80 million from FOM’s revenue share.
Sponsorship Income: Additional income includes $30 million from sponsors.
McLaren Group Support: The remaining $110 million is provided by the McLaren Group.
Team
Annual operating Income (million, USD)
Annual budget (million, USD)
Staff number
Annual parent company support/budgetary gap (million, USD)
Mercedes-AMG Petronas
325
400
950
75
Haas F1 Team
70
130
250
60
McLaren F1 Team
110
220
760
110
Alfa Romeo
85
135
400
15
Red Bull Racing
250
310
860
60
Renault
100
190
625
90
Ferrari
410
410
950
0
AlphaTauri
105
150
460
45
Williams Racing Team
150
150
630
0
Racing Point F1 Team
95
120
405
25
Formula 1: A Fair Game?
Similar to the North American professional sports leagues, the Formula 1 “league”, known as FOM (Formula One Management), is responsible for consolidating certain rights, including broadcasting rights, league sponsors, and the sale of event promotion rights, to maximize bargaining power in commercial negotiations. After obtaining revenue, FOM retains a portion of the income and distributes the remainder among all the teams. In contrast to the uniformity of North American professional sports leagues, the income among F1 teams is tied to their performance, i.e. the better the positions, the more revenues shared. The significant disparity in capital behind different teams leads to a highly uneven playing field, impacting the overall spectacle of the F1 event.
Due to the nature of F1 as a series of “touring races,” without a concept of home or away games, the majority of F1 teams rely predominantly on sponsorship as their primary source of income after the revenue received from FOM. The willingness of sponsors to support a team is directly linked to the team’s performance in the F1 World Championship. The team’s success or failure is also proportional to the consistent investment made over the years, further reinforcing the phenomenon of the “strong getting stronger.”
In the early days of motorsports, the vehicles used were similar to regular cars in people’s daily lives and did not undergo specific development; the main distinction was the more “enthusiastic” driving by racers. Through motorsports, individuals unleashed their imagination and creativity, continually innovating and iterating superior vehicle technologies. Many technologies found in consumer cars originated from the hands of racing engineers, gradually maturing and being applied in broader fields. Consequently, it became logical for automotive manufacturers to engage in motorsports, turning the racetrack into a manufacturer’s “lab.”
For a team to excel in motorsports, all resources needed revolve around the variables of “driver” and “race car.” Like other professional athletes, drivers require years of rigorous training and considerable luck for the opportunity to step onto the F1 stage. Looking solely at the race car, achieving a perfect vehicle demands top-notch engine, aerodynamic design, computational capabilities, and equipment, among various technological factors. FIA (Fédération Internationale de l’Automobile) establishes highly detailed technical regulations for F1 events, requiring each team to design and construct their own race cars within the specified technical framework.
Companies like Mercedes, Ferrari, and Renault, being manufacturers themselves, possess comprehensive R&D capabilities, allowing them to invest in all technological aspects, from engines to chassis and aerodynamics. Other teams lacking the capability for engine development rely on engines provided by external manufacturers.
Especially evident when the Haas F1 Team initially joined Formula 1, in order to quickly compete with other teams, Haas entered into a comprehensive collaboration with Scuderia Ferrari to the fullest extent allowed by technical regulations. They used Ferrari engines and also learned and adopted various vehicle technologies from the Ferrari team. This level of collaboration is unthinkable in other professional sports leagues; different NBA teams cannot cooperate on the competitive level, as it would affect the fairness of the competition.
The presence of racing vehicles is both the most captivating aspect of motorsports and a paradoxical point affecting the quality of the on-the-track product. In all sports events, the closer the competitive levels of the opposing sides, the higher the excitement of the competition. Leagues need to prohibit any behavior that undermines fairness, such as the use of drugs or other means. Yet, detecting whether a race car uses “enhancements” is exponentially more challenging and time-consuming compared to the extensive efforts required for athlete drug testing. This is one of the recent reasons why some F1 teams not using Ferrari engines collectively protested against Ferrari, demanding public disclosure of the results of an FIA investigation into whether Ferrari engines violated testing regulations.
The difference in interests among F1 teams is a well-known fact. Typically, in professional sports leagues, competition among participating teams is restricted to the field, with cooperation limited off the field. In other words, teams cannot collaborate on the competitive level; otherwise, it violates the fundamental spirit of competitive sports. However, from business aspects, cooperation is maximized to reduce competition between teams, ensuring each team has a monopoly and uniqueness within a certain region. Each team relinquishes a portion of its equity to the league, which is responsible for collectively developing these commercial rights, enhancing the negotiating advantage of the league as a whole when dealing with other business entities.
The founder FOM, Bernie Ecclestone, initially adopted a strategy of “divide and conquer” when it came to teams. To attract Ferrari’s long-term participation in F1 Grand Prix races, Ecclestone established special bonuses for Ferrari, ensuring they received a bonus just for participating. The revenue-sharing system of FOM created a situation where the strong became stronger in terms of competition; Ferrari’s substantial resource advantage resulted in income several times that of other smaller teams, and the absence of a cost cap allowed Ferrari the opportunity to invest several times more resources each season to seize more race prizes.
To ensure the sustainable development of F1 in both competition and business aspects, FOM introduced a spending limit similar to the salary cap in North American professional sports leagues, starting in 2021, known as the Cost Cap. For instance, leagues like the NBA and NFL set a cap on the total salary that each team can spend on players to ensure on-court/on-field competitive balance. FOM plans to limit the spending each team can make on race cars per season, without restricting areas such as driver salaries and marketing spending.
Naturally, this rule was welcomed by non-manufacturer teams and resisted by manufacturer teams, particularly Ferrari. Setting limitations on spending for manufacturer teams may restrict the role of F1 as an experimental lab for automotive technology development. The fact that F1 serves as a hub for top-tier racing technology worldwide could be threatened. If FOM manages to gather 10 manufacturer teams for competition and another 10 non-manufacturer teams, with the primary distinction being the spending limit or the production of engines, it may lead to other contradictions such as insufficient spending or the existence of a promotion/relegation mechanism. The variable of having a race car makes ensuring the competitive balance in motorsports much more challenging compared to other major professional sports leagues that primarily rely on athlete performance.
Sharing my learnings about the core skills on how to run life like a company in the Me Inc. Newsletter. Topics covered: Copywriting, Finance, Technology, and Productivity. Read my why here or join directly👇. No spams. Ever. – Michael
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Formula One is one of the three major international sporting events in the world. Just like these spectacular racing machineries, the business operations of the races are just as sophisticated.
The governing body of the Formula One is the Fédération Internationale de l’Automobile (FIA). In addition to Formula One racing, FIA is responsible for managing other international racing events such as rallies, endurance races, and karting competitions. FIA delegates the commercial and operational rights of the Formula One World Championship to Formula One Management (FOM). In other word, FOM is responsible for the event and commercial operations of the Formula One World Championship, while FIA oversees event management and arbitration.
FOM early on identified that many cities were willing to invest substantial costs in hosting the events to gain significant exposure. FOM then sells the hosting rights to cities, demanding top-notch racing circuits in addition to substantial hosting fees. Cities are also required to provide various resources and services for event support. FOM, on the other hand, still retains the broadcast rights for the events and produces live broadcast feed worldwide. FOM also retains commercial rights for the Formula One World Championship, providing exposure for sponsors on billboards around the racetracks.
The prominence of Formula One as a premier racing event can partially be attributed to the participation of top-tier racing teams. Some teams, e.g. Ferrari, have been longstanding participants since the inception of F1, while others have come and gone.
FIA: The Guardian of Formula One Racing
Established in 1904, 46 years before the birth of the Formula One World Championship, FIA is the organization overseeing the automotive industry and racing sports. With representation from 227 racing associations and automotive organizations in 132 countries, including the American Automobile Association (AAA), FIA wields significant influence.
FIA plays a crucial role in governing both the automotive industry and racing sports, setting it apart from other racing management bodies. The organization’s impact extends to consumers and automotive manufacturers, exemplified by initiatives like the EU’s new car safety assessment system, a benchmark for passenger vehicle safety. In the realm of racing events, FIA collaborates with member units in each country, ensuring governance and rating of racing events. FIA also partners with event organizers to safeguard competition standards.
Despite the Formula One World Championship generating billions of dollars in revenue annually, FIA’s income is relatively modest. With two subsidiaries – FIA France and FIA Switzerland – handling related income and personnel costs, FIA’s total annual income is approximately $65 million, and its largest expense is around $25 million, covering personnel costs, travel, and hospitality.
FIA’s revenue comes from membership fees and registration fees from racing events. The Formula One World Championship, though the most prominent event under FIA’s governance, contributes only a fraction of its income. From 1995 to 2001, FIA received $10 million worth of license fees annually from FOM, and an additional $15.5 million worth of registration, management, and super license fees from teams and racers. In contrast, FOM’s revenue reached $1.6 billion each year during the same period. In 2001, FIA agreed to award the operational and business rights of the Formula One World Championship to FOM for the next 100 years.
Formula One Racing: A Touring Event
Formula One races, like any racing events, fundamentally operate similar to circuses. The promoters set up temporary structures and arrange staff at a specific racetrack to present an event to the audience. The “performers” – the racing teams – arrive at the designated location at the specified time according to the promoter’s schedule to participate in a specific event. This is in stark contrast to another type of sporting event – league sports, characterized by a home and away team in each event.
Another significant characteristic of racing events is the non-exclusivity of races. Traditionally, a team can participate in different racing events in a year, and a race can have different teams in different years. This led to varying quality in the early years of Formula One, with some years witnessing cancellations due to insufficient participating teams. If promoters have already signed broadcasting contracts with TV stations or sponsorship deals with brands, this may trigger breach-of-contract clauses, causing significant damage to promoters. Bernie Ecclestone, the founder of FOM, saw an opportunity to solve this problem by implementing a series of changes to the business operations of the race. The advent of FOM resulted in a manifold increase in the commercial value of Formula One.
Who owns Formula One?
Bernie Ecclestone, the founder of Formula One Management (FOM), was once a racer and team owner. His exceptional business acumen led him to realize that binding teams through contracts to participate in F1 races could significantly enhance the event’s appeal to television stations and sponsors.
Bernie Ecclestone – The Business Wizard of Racing
Born in 1930 in the United Kingdom, Bernie Ecclestone entered the automotive field after World War II, transitioning from managing a motorcycle parts business to activities related to car mechanics. From 1949 to 1951, he participated in multiple local races, only achieving mediocre results. After several racing accidents and injuries, Bernie decided to retire as a racer and focus on his business endeavors.
After a successful business career, Bernie re-entered the racing domain in 1957, becoming a team manager by investing in a few cars to participate in F1 races. In 1972, Bernie acquired the F1 team Brabham for $120,000, officially becoming a team owner.
During his tenure as manager of F1 teams, Bernie played a pivotal role in establishing the Formula One Constructors Association (FOCA) in 1978. FOCA represented the interests of all non-automaker teams, including Williams and McLaren. In contrast, automakers like Ferrari and Sauber were represented as Manufacturers. In 1978, Bernie became the head of FOCA, advocating for the interests of non-manufacturer teams in the world of racing.From its inception, FOCA had disagreements with FIA regarding the management of F1 events, leading to several events being affected or even canceled. In 1981, a major crisis occurred when the tire sponsor, Goodyear, threatened to completely withdraw from F1 racing, posing a potentially devastating blow to F1’s commercial value. Bernie, representing FOCA, convened all teams and FIA representatives to negotiate at the FIA office in Place de la Concorde, Paris. After 13 hours of negotiations, an agreement was reached and signed, known as the First Concorde Agreement.
Since the beginning of Formula One racing, there has been a distinction between manufacturer teams and non-manufacturer teams. Manufacturer teams could invest more resources in developing new cars and technologies as well as marketing and promotion. Therefore, factory teams also have larger fan bases; the importance of the Ferrari team to F1 is undeniable. FIA heavily favored manufacturer teams in profit distribution, which was a major dissatisfaction for FOCA, representing non-manufacturer teams.
The First Concorde Agreement in 1981 marked a historical shift in power from FIA to the teams. From that point onward, FOCA became responsible for the largest revenue source of F1 events – the sale and distribution of television broadcasting rights. FOCA then delegated this right to FOM (then known as Formula One Promotions and Administration), a company founded by Bernie himself. The Concorde Agreement also tied the income distribution of each team to their participation in F1 events, providing stable broadcast products for television networks.
Since 1980, Bernie gradually reduced his involvement in team management and focused more on FOM’s operations. In 1988, Bernie sold the Brabham team for over $5 million and devoted himself full-time to the commercial development of FOM and the Formula One World Championship.
Sharing my learnings about the core skills on how to run life like a company in the Me Inc. Newsletter. Topics covered: Copywriting, Finance, Technology, and Productivity. Read my why here or join directly👇. No spams. Ever. – Michael
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Ownership of the Formula One World Championship – Still Unsettled?
The ownership of F1 has always been a major dispute and to a certain extent, remains unresolved among teams, FIA, and FOM till this day. The intellectual property of F1 is essentially the collectivity of a series of legal contracts, primarily the Concorde Agreement, stipulating the rights, responsibilities, benefits, and decision-making authority of all parties. The signatories of the Concorde Agreement are FIA and individual teams, with each team signing as a separate entity. Through this agreement, all teams transferred ownership of all rights related to the presentation of F1 events on and off the track to FIA. FIA, through its FIA Business Agreement with FOM regarding F1 events, authorizes FOM to operate events and exploit commercial rights of F1, making it the commercial rights holder. Subsequently, FOM signs the Team Commercial Agreement with each team, outlining the income distribution mechanism for each team in F1 events. By signing the Concorde Agreement, FOM (rather than FIA) becomes the center of F1 events, gaining rights for television broadcasting, sponsorship development, event promotion, event operations, and the responsibility of balancing the interests of all teams.
Decision-Making Authority in the Formula One World Championship
F1 events involve numerous stakeholders, their interests often in direct conflict with each other, posing significant challenges for organizational structure and decision-making mechanisms. Any minor change request from any party has the potential to trigger opposition from multiple sides, escalating into a political struggle that affects the operation and commercial development of F1 events.
The Concorde Agreement clearly defines two important decision-making bodies for F1 events:
Formula One Commission (F1 Commission) and
Formula One Technical Working Group (F1 Technical Working Group).
The F1 Commission is the decision-making organization for all rule formulations in the F1 World Championship, encompassing almost all matters related to F1 events, except for the F1 event safety section governed by the FIA World Motor Sport Council. The members of the F1 Commission include:
One official representative from each team
Representatives from the organizers of European F1 Grand Prix races
Representatives from the organizers of non-European F1 Grand Prix races
Sponsor representatives
The FIA President or their official representative
The Chairman of the F1 Commission
The executive entity of the F1 Commission is responsible for the day-to-day decisions of the F1 World Championship. This small group of people include:
FIA President
2 team representatives
Chairman of the F1 Commission (Bernie Ecclestone himself)
The F1 Technical Working Group is responsible for drafting and modifying any technical specifications related to the F1 World Championship. The F1 Technical Working Group consists of 7 members, including 6 representatives from F1 teams and 1 representative from the FIA technical team. Only the F1 Commission has the ultimate decision-making power to approve or reject the proposed technical specification modifications by the F1 Technical Working Group.
Although FOM’s official role is the commercial rights holder of F1 events, its president – Bernie – embedded his power into every aspect of the event, far beyond what “business” typically entails. During his 40 years or so as the president of FOM, Bernie had a profound impact on Formula One, for beyond its business and operations aspects, laying the foundation to the sports’ modern-day business.
Understanding Formula One Management and its business model
In 2017, the American media conglomerate Liberty Media acquired F1 Management, and the company’s assets were subsequently listed on NASDAQ, allowing financial data to be presented to the public.
FOM functions as the de facto “league office” of the Formula One World Championship. The company collects certain aspects of commercial development rights, i.e. broadcasting rights, etc., from all teams for central development, and the remaining rights are developed independently by the teams. The portions developed by FOM will then be distributed to each team through a profit-sharing mechanism. FOM is also responsible for the event presentation aspect of the F1 World Championship, including showcasing the events to both live and TV audiences. Through event technical support, global broadcast production, and worldwide transportation, FOM ensures that the F1 World Championship is perfectly presented across the world. Additionally, FOM exclusively handles the promotion and commercial development of the F2 and F3 races.
FOM’s primary sources of income are threefold: promotion rights sales, broadcast rights sales, and advertising and sponsorship sales.
Promotion Rights
Hosting an F1 race can bring global attention to a city, similar to how the World Cup or the Olympics does every four years. Promotion rights contributed to 30% of FOM’s total revenue in 2019. FOM signs contracts with hosting cities for 3 to 7 years, and the local promoters are typically circuit owners, local or national automobile associations, professional event organizers, or cities. Promoters, after paying the fees, gain rights to ticket revenue from F1 Grand Prix races, and some promoters also acquire income rights from catering, hospitality suites, or local sponsorship sales.
Broadcast Rights
Broadcast rights income constituted 38% of FOM’s total revenue in 2019. FOM sells these rights to television or other media platforms and collects licensing fees.
Advertising and Sponsorship Sales
Advertising and sponsorship income accounted for 15% of FOM’s total revenue in 2019. FOM holds the rights of sales for trackside advertising spaces and title sponsorship rights for all F1 Grand Prix. Advertisers and sponsors can also sign broader sponsorship contracts with FOM, such as global partnerships or official partnerships, gaining recognition all year long.
Other Revenue Streams
The above three major sources of income make up 83% of the total revenue. FOM generates the remaining 17% of income through the development of the following rights:
Paddock Club memberships (Paddock Club is a high-end corporate hospitality suite during events)
Event logistics and transportation
Promotion and commercial development of F2 and F3 events
Television broadcasting or post-production
Digital and social media
F1TV streaming platform
In 2019, FOM generated over $2 billion in revenue through the aforementioned income sources. Even though the sport encountered extreme challenges during the pandemic, it has since recovered and gone on to break historical viewership and attendance records.
How Does FOM Transport All Teams from One F1 Grand Prix to Another?
The successful organization of each F1 Grand Prix relies on the sophisticated collaboration between FOM and the hosting city. In general, FOM is responsible for managing the circuit, the surroundings and the transportation of all teams, broadcasting equipment, and other related equipment to the host city. To accomplish such a massive transportation feat across 22 cities in 9 months on 5 continents, meticulous planning is required.
FOM transports all teams and the necessary equipment for event presentation between different Grand Prix cities through land, air, and sea. All team headquarters are located in Europe, and Grand Prix races in continental Europe are typically transported by road. The equipment of the teams is categorized into two types based on their importance, with the most crucial equipment including the car chassis, tires, engines, wings, computing equipment, and servers. The second-level equipment primarily consists of various tools.
All tool-related equipment is packed into five identical sets, with the same set sent to each station for the first four Grand Prix races. Later, three sets of equipment will be sent back to the team headquarters in Europe. The equipment dispatched from the Malaysian Grand Prix (now discontinued) goes directly to the Brazilian Grand Prix, and the equipment from Japan goes to Abu Dhabi. The equipment for Russia, Austria, and Canada is directly shipped from the European headquarters. All equipment is transported by sea.
Each season, FOM airships over 660 tons and ships over 500 tons of equipment, covering a total flying distance of over 130,000 kilometers. Each team carries 30-50 tons of equipment to each Grand Prix race. Additionally, all meals for team members and FOM staff are prepared in advance, with even service personnel traveling together. Their comprehensive logistics and service coordination capabilities are considered the best in global sporting events. FOM does not bear all logistics costs alone but uses its top-tier global exposure to sign sponsorship contracts with DHL, which provides some logistic services as part of its sponsorship investment, further showcasing FOM’s astute business strategies.