Revenue earned by Formula One has reached a whopping $16.2 billion over the past 15 years.
Let us have a look into how this was achieved.
Formula One is run by the billionaire Bernie Ecclestone, nicknamed the F1 Supremo, and he is the mastermind behind the successful commercialisation of the race.
The revenue comes from several sources: sales of vending and concession stands at tracks which brought in $33.9 million in 2013, the latest year for which accounts are available and disclosed, $34.1m from selling cars and parts to its teams, and $87.8m from F1’s corporate hospitality Paddock Club.
Other revenue streams are $259m from selling trackside advertising at each race and sponsorship of the series like DHL and Rolex which are both official F1 partners.
The two remaining sources of F1 revenue are the biggest – fees from hosting and broadcasting races.
They each bring in roughly the same amount and in 2013, it came to a combined $1.3bn.
Hence, the total revenue in 2013 was $1.7bn and it is a world away from F1’s performance 15 years earlier.
In 1999, the operating company of the series was Formula One Administration and company records show that it had a revenue of just $341.5m.
Interest in the series has exploded since then as car manufacturers piled in and Ecclestone added new races in Asia and the Middle East.
It has fuelled F1’s rise to become the world’s most-watched annual sports series and last year it had 425m television viewers.
In the 1980s, F1 races ran as ad hoc, almost amateur, events as each team made separate deals with each event promoter and television coverage was weak since races could be cancelled at the last moment if there were not enough cars to fill the grid.
Mr Ecclestone’s master stroke came in 1981 when he convinced the teams to sign a contract, known as the Concorde Agreement, which committed them to attend every race.
It meant that F1 could offer guaranteed coverage to TV networks and Ecclestone’s company Formula One Promotions and Administration (FOPA) negotiated the deals in return for a share of the proceeds.
In 1995, he took a salary of $90m from FOPA, which made him the world’s highest-paid executive.
Since then, Ecclestone has built up a fortune of around $4bn from selling stakes in the sport.
He has not just remained in the driving seat but has personally negotiated all of the key deals which have shaped modern-day F1.
Other large deals that Ecclestone has signed are contracts to host races.
The largest is the contract for the Australian Grand Prix which began in 1985 and has been held at its current home in Melbourne since 1996.
Two years back the contract was extended until 2020 and it is expected to generate a total of $712m for F1 over the 24 years of the deal.
This contract has the value of $674.8m which F1 is due to receive from the British Grand Prix contract.
Ecclestone appointed Britain’s Silverstone track the permanent venue for the race in 1987 and it has a deal to stay there until 2026 making it F1’s longest-running Grand Prix contract.
And the latest new addition was a Grand Prix in Russia which has an estimated annual price tag of $44m.
Ecclestone negotiated the deal with Russia’s president Vladimir Putin.
Most global sports have senior managers who are each responsible for securing and signing new deals in sectors such as sponsorship, television and corporate hospitality.
F1 is the exception.
Ecclestone is directly in charge of bringing in new business across all of F1’s major revenue streams.
The sport has no chief marketing officer, no press officer and not even a deputy chief executive or successor for Ecclestone who reached the age of 85.
There’s money to be spent and money to be made in F1. For worldwide brands and companies it is a perfect platform for global marketing.
And here I would like to add that the importance of organising F1 comes into play in promoting the tourism and hospitality (hotels) industries in Bahrain.
There are humongous and uncountable benefits that our national economy will earn in many sectors and industries, like the entertainment sector, shopping malls, local trades and merchandise.
The kingdom will attract huge numbers of Formula One lovers and followers, whether they are from GCC countries, other neighbouring countries or the entire world.
It is expected that hotel occupancy in the kingdom will increase tremendously during this period especially five-star hotels compared with the normal periods.
The author is a Bahrain-based management and technology expert
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