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Balancing The Books - Formula One

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Compared to other sports and the challenges they have had to face Formula One looks to be in a stronger financial position than ever due to everyone sacrificing.

This season the Formula One teams are operating on a reduced budget of $145 million plus knowing that the prize money is also down by a whopping 45% teams need to perform. I think last year was a real eye opener for the teams and the sport in general with lost revenue due to cancelled races resulting in less advertising and commercial business being obtained.

The sport had to streamline it's costs as this is a business for everyone involved and at the end of the day have to answer to shareholders. The teams are making more profit than ever though as before there were no caps in place and they were spending 100's of millions each season. Knowing they have a cap they have to stick to has changed the way they operate and they are sustainable businesses today making profit.

The Formula One Group decided to keep the current engines in place for this season and 2022 as that made financial sense being the biggest spend item on the teams shopping list. Everything ahs a price tag these days and even thought eh teams manufacture most of the components themselves they are still crafted by teams of engineers back at the factory.

Williams sold their team to an investment firm which now thinking back was a steal for the Dorilton Capital Group. The smart move is they didn't change the name and makes more sense now. Every year certain teams get rewarded by the FIA (historical bonus) for being involved in Formula One and Williams is one of the beneficiaries. This was in the region of $30 million with Ferrari getting quite a bit more.

The teams also signed a deal with F1 that any revenue over $650 Million would then be split with 20% going to the teams as an added incentive. Last year that didn't work out too well as F1 lost money. This year and last year with lock downs though wont happen hopefully again and the rest of the world can move forward.

What has been in the press recently is drivers salaries and many actually look underpaid considering only a few make the big dollars. Lewis Hamilton is up there with $22 million and not earning the proposed $40 million he was after last seasons fiasco.

The truth is many are not in his league and there are only a handful of drivers earning serious money. For what they do risking their lives some actually are quite cheap. 4 drivers including George Russel earn $730.800 per season which is not a fortune if you compare that to other sports. Lando Norris is on a reported $4 million salary with Sainz on $7 million. Verstappen is on $18 million, but then he is challenging for the world title and deserves that reward. What hit home was these are not huge salaries for what they are doing and would have expected everyone to be earning at least $1 million per month. The lowest is Tsunoda on just over $300 000 per year which is what some footballers earn in one week.

I think the sport has changed for the good over the last 2 seasons as even the drivers have had to understand the value of money. It is a shame other sports like football still haven't quite grasped what a decent salary is and until they have proper budget caps enforced in the various leagues nothing will change. Sport has to change with the economic climate and seeing how Formula One is thriving maybe every sport should take a leaf out of their book.