Sponsors or prize money, why are teams suffering?

Some may argue, rightfully so, that when tobacco sponsorship was banned in Europe, Formula 1 lost its biggest sponsor support revenue stream. Sponsors still exist but when team such as Sauber, Caterham and Marussia complain about the current distribution of F1 prize money—generated by TV revenue and race sanctioning fees as well as F1 sponsor money and track-side advertising to name a few—it makes you wonder, where are the sponsors?

Just how much have the teams moved from big sponsor support to offset the costs of running their team to simply waiting for and even demanding more from F1’s revenue prize money? Why are we not seeing the teams bring in all-new, major sponsors? McLaren Lost Vodafone and have spent a year without a title sponsor which is a complete anathema for a team of such rich history.

I decided to ask my friend and NBC Sports broadcaster, Steve Matchett, about the sponsorship in his days at Benetton. Steve agreed that tobacco sponsorship was a massive impact on the sport when you consider just how influential Marlboro had been on driver development and team support. Losing that has been a major impact.

I’ve naively accused teams of being lazy about selling their teams and getting new sponsor from technology or global food brands. That was just a couch commando comment but to be honest, I am still intrigued by the issue so I asked our friend, Christian Sylt, at Formula Money about the issue:

“Sponsorship now comprises around 40% of a team’s budget with prize money at 32% and the remainder coming from team owners. The difference between the two has narrowed over the years as prize money has accelerated.”

If you consider that the F1 payout in 2008 was hovering around $248 million and now it is in the range of 63% or approximately $800 million, that’s a massive change in prize money distribution. It’s hard to blame Mr. Ecclestone for the financial debacle that some teams find themselves in however, you could argue that the majority of that $800m is going to top teams due to the points-payout equation or scale.

As Christian said, there is no doubt about a drought in sponsorship for F1 teams which some sources level at Formula One Management and their securing their own title sponsors leaving fewer options for teams. LG or Tata or even Emirates come to mind. These are sponsors that could be sponsoring teams instead of F1 directly. That said, several FOM sponsors also sponsor teams such as Allianz, Johnnie Walker and UBS.

This also ignores the fact that FOM have spent decades of bringing sponsors to teams so you have to be realistic about the accusations. In reality, the lack of sponsors could be ascribed to the cost of involvement.

The cost to be a sponsor in F1 is so massive these days that it scares most would-be participants. Whose fault is that? I can tell you who may not responsible—Mr. Ecclestone. The cost of running teams in F1 is down to the teams and the FIA due to regulation, specifications and the resources teams spend to participate in that formula. They’ve made F1 as expensive as it is. While F1 is an expensive sport, one wonders if the regulations—co-created and endorsed by teams and the FIA—are actually ramping costs rather than reducing them.

It’s a tough question and perhaps we will see sponsors return to the sport but right now, it seems that it has been easier to lobby F1 for more payout than it has been to actually woo sponsors and sell the teams as marketing vehicles for would-be sponsors.

F1 isn’t the only racing series to experience sponsor exodus but it has been a dry spell since tobacco left and unfortunately no industry has taken up the mantle of sponsoring F1 even though F1 has tried to make itself attractive by using hybrids, turbo engines and other elements that would woo certain industries.

I don’ want to be too heavy handed here as Christian’s assessment says that sponsor dollars is still quite large within the team but proportionally, the F1 prize money is massive. There is also the case for pay-drivers as well and in the case of Lotus F1 driver, Pastor Maldonado, that number is rumored to hover near $20 million from PDVSA backing.

Hat Tip: Steve Matchett and Formula Money

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