78 Xxxxxxxx | Xxxxxxxx Earnings | Drivers 79

Driver Predicted total career earnings

1 Lewis Hamilton $805.9m2 Fernando Alonso $475.9m3 Kimi Rikknen $404.2m4 Sebastian Vettel $249.5m5 Jenson Button $175.6m6 Felipe Massa $120.4m7 Mark Webber $69.6m8 Pastor Maldonado $39.1m9 Nico Rosberg $34.8m10 Sergio Prez $22.4m11 Adrian Sutil $10.3m12 Romain Grosjean $5.0m13 Giedo van der Garde $4.0m14 Charles Pic $2.0m15 Jules Bianchi $2.0m16 Nico Hlkenberg $1.9m17 Daniel Ricciardo $1.4m18 Max Chilton $1.0m19 Paul di Resta $1.0m20 Jean-ric Vergne $0.6m21 Esteban Gutirrez $0.5m22 Valtteri Bottas $0.5m

TOTAL $2,427.5m

Average $110.3m

2013 DRIVER VALUE INDEX: PREDICTED CAREER EARNINGS

Sour

ce: F

orm

ula M

oney

Top: Sebastian Vettel is ranked fourth in the earnings stakes Above: Jenson Button is just below him in fifth place

Above: Mercedes Lewis Hamilton is predicted to earn over $300m more in his career than the second ranked driver, Fernando Alonso

the race to richesFormula One drivers are some of the highest paid sports stars in the world, and the best stand to make hundreds

of millions of dollars during their careerWriter: Caroline Reid

Phot

ogra

phy:

2

013 D

aim

ler A

G

Phot

ogra

phy:

Get

ty Im

ages

/Red

Bul

l Con

tent

Poo

l

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

To many fans of the sport, Formula One drivers represent the archetype of the playboy lifestyle, with their on-track exploits driving an earning power to match their reputations. However, driver earnings can

be affected by a range factors. Skill is only a part of it, with marketing appeal, nationality and the luck of being in the right place at the right time all influencing their earning potential. Shedding light on the future earning power of F1s stars, research by F1 industry monitor Formula Money has revealed the expected career wealth of all 2013 competitors.

The Driver Value Index predicts that 2008 world champion Lewis Hamilton will become the highest

earning driver in the history of the sport by the time his career comes to a close. The 28-year-old Briton was paid an estimated $25 million in 2013 by Mercedes and the research shows that he is expected to make a staggering $805.9m over the course of his career.

This surpasses even the total earned by seven times world champion Michael Schumacher, who between 1991 and his retirement in 2012 earned $626.75m. This consisted of $439m in salary and a further $187.75m in personal endorsements, from companies such as German insurer DVAG, which graced the stars cap for a large part of his career.

The data was calculated by working out the average career length for all drivers who retired in the last decade

and then multiplying the current drivers estimated years remaining in the sport by their average annual earnings. The results were then weighted for world champion drivers and also for those who won their first race or point ahead of the average time.

As the youngest ever Formula One world champion, Lewis Hamilton has been a high earner from an early age. Should he win another championship his earning power will rise again and he potentially has more than a decade left in the sport.

Richer stillHowever, even Hamiltons predicted earnings wont make him the worlds richest sportsman. Forbes Magazine

80 Drivers | Earnings

calculates that Tiger Woods is the first sports star to make a billion dollars from career earnings and the golfer made $78m in the year ending June 2013. This is far more than the best-paid F1 driver Fernando Alonso on $43m in annual salary and sponsorship.

Alonso takes second place in the Driver Value Index with predicted career earnings of $475.9m. He currently earns the highest salary in the history of the sport, taking home $40m from Ferrari with an additional $3m coming from personal sponsors. Hes followed by his future team-mate Kimi Rikknen on predicted earnings of $404.2m and Sebastian Vettel on $249.5m, who has lost some of his power to command top salary by his determination to stay with Red Bulls top machinery rather than playing off rival teams in salary negotiations.

The other world champion on the grid, Jenson Button, comes in fifth with total career earnings of $175.6m less than a quarter of Hamiltons estimated haul. As Button only won the title in his 10th season and at the age of 30, he hypothetically has less time remaining in F1 to reap the additional financial benefits that a world title brings.

He won just one race prior to taking the F1 title in 2009 which, when combined with his age, explains his position in the ranking.

Some potential stars of the future, such as Nico Rosberg ($34.8m) and Sergio Prez ($22.4m) appear relatively far down the ranking. This is due to the fact that total career earnings for drivers close to the start of their careers have been projected using an average career length for a competitor of their standing. If drivers such as Rosberg and Prez win the title, then their earning potential will dramatically expand.

An uneven playing fieldOn average the drivers will earn $110.3m over their careers, confirming F1s place as one of the most lucrative sports for its competitors. However, half the drivers have predicted career earnings of $5m or less, demonstrating that the wealth in the sport is not distributed evenly.

With several of the drivers having to provide sponsorship to secure their place on the grid, it is a stark case of the haves and the have-nots.

Above: Fernando Alonso currently earns the most in the history of F1

THe ReSeARcH SHOWS THAT LeWIS HAMILTON IS exPecTeD

TO MAKe A STAGGeRING $805.9 MILLION OVeR THe

cOuRSe OF HIS cAReeR

METhoDoLoGy1. The total career earnings so far for all current drivers was calculated based on the estimates of driver salaries and personal sponsorship in the Formula Money databases. Only salaries and sponsorship earned while competing in F1 were included.

2. To estimate provisional future earnings for the current drivers the first step was to calculate the average annual earnings for each driver. Then all drivers who retired in the last decade were studied in order to calculate the average career length for race winners, podium finishers and everyone else. These average career lengths were applied to the current drivers depending on their performance status. The drivers estimated remaining years in the sport were then multiplied by their average annual earnings to arrive at a provisional estimation of future earnings for each. As a result, total earnings for drivers close to the start of their career have been projected using an average career length for a competitor of their ability. If such drivers race for longer then they have the potential to earn much more than our projections.

3. A weighting was then given to the earnings of world champions. By studying the earnings of champions who retired in the last decade, a weighting was calculated by comparing their salaries in the year they won the championship to those in the year they left the sport. The provisional future earnings for the existing world champions were then multiplied by the percentage increase this produced.

4. To weight the remaining drivers we calculated the average number of races it took the current grid to score their first F1 point. In cases where they had scored their first point ahead of the average, the drivers future earnings were weighted accordingly. To arrive at our final figures, the average number of races it took the current race-winners to score their first F1 victory was calculated. A weighting percentage was applied to correlate with the number of races ahead of the average that the driver in question won his first race.

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

52 Teams | Ferrari Ferrari | Teams 53

Writers: Christian Sylt and Caroline Reid

The secret to

Ferrarissuccess

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

Phot

ogra

phy:

Lun

din/

Sutt

on-i

mag

es.c

om

Ferrari is Formula Ones most successful team with 16 constructors championships. Its often had the best car as well as the best drivers because it has the biggest budget. There are a few goods reason for that

Formula One is awash with gossip and rumour. Theres constant talk that certain teams arent playing by the rules or that a blind eye has been turned to the

activities of others. Its usually nothing more than tittle-tattle but one story has stuck around on the grapevine far longer than the others. This is the tale that Ferrari has a veto over changes to the sports regulations and gets more prize money than other teams. Its still widely said that this is nothing more than an urban myth but in fact thats far from the truth.

In 2012 F1 came just weeks away from floating on the Singapore stock exchange and the brakes were only put on the process due to the unexpected crisis on European financial markets. Part of the preparations for flotation involved producing a 498-page prospectus for potential investors and

although this was never released to the public copies were soon in circulation within industry circles. It shed new light on the sport.

Preferential treatmentIf you have ever wondered whether Ferrari really does get paid more than any other team then the prospectus is the place to look. Ditto if you want to know whether F1s governing body, the Fdration Internationale de lAutomobile (FIA), has given Ferrari a veto over the sports regulations. In fact, the prospectus reveals that Ferraris influence stretches so far that it even has first refusal on supplying cars to race in the sports support series if the Porsche Supercup ever vacates this place. It may sound like biased behaviour but there is good reason for Ferraris preferential treatment.

54 Teams | Ferrari Ferrari | Teams 55

The big news comes on page 179 of the prospectus, which covers the terms of the teams contracts to race in F1. It states, In respect of Ferrari only, Ferrari may terminate if the regulatory safeguards agreed between the FIA and Ferrari do not allow Ferrari to veto any change to the regulations already announced or introduced (subject to certain exceptions).

It doesnt get much more blunt than that: if Ferrari doesnt like the regulations then it can change them and it is the only team in F1 that has this power. But theres more

the prospectus, and reports by financial analysts, also reveal that Ferrari gets more prize money than any other team.

Money mattersPage 176 of the prospectus covers the teams financial benefits, which for most of them means a share of F1s prize fund. This is comprised of 47.5% of F1s profit, which is known in the trade as Earnings Before Interest, Taxes Depreciation and Amortisation (EBITDA). The top 10 teams in the standings share this but the prospectus reveals that Ferrari, McLaren and Red Bull Racing get an additional payment. This is because theyre what are known as Constructors Championship Bonus (CCB) teams The top three Teams determined primarily on Events won in the four seasons prior to 2012.

The prize for this success is that in addition to getting prize money for being in

the top ten, Ferrari, McLaren and Red Bull Racing share the greater of 7.5% of our Prize Fund EBITDA, and US$100 million (the CCB Fund). Ferrari is third in the ranking based on races won in the four seasons prior to 2012 and, according to page 176 of the prospectus, this sees the third Team receiving 30% of the CCB Fund (minimum US$30 million).

Page 176 of the prospectus and reports from financial analysts also reveal that in return for being F1s longest-standing team, Ferrari gets the greater of an amount which is capped at 5% of our Prize Fund EBITDA and US$62.2 million. This gives Ferrari a minimum of $92.2m and, in addition, it gets a cut in the prize fund comprised of 47.5% of F1s profits.

It means that before a single race begins, Ferrari gets guaranteed prize money of close to $100m. Putting this in perspective, its just a shade less than the annual budget of the backmarker team Marussia. Ferrari has earned it as its the only team thats competed every year since F1 began in 1950 and has won more titles than any of its

BEFORE A SIngLE RACE BEgInS, FERRARI

gETS gUARAnTEED PRIzE MOnEy OF CLOSE TO $100M

Phot

ogra

phy:

Lun

din/

Sutt

on-i

mag

es.c

om

Above and opposite: Fernando Alonso at the Spanish Grand Prix in 2013. Ferrari won on this occasion but such is the the legendary Italian teams influence in F1 it doesnt need race victories to guarantee a nice pile of prize money

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

56 Teams | Ferrari

rivals. That isnt the only reason for its preferential treatment.

Just rewardFerrari is also the only car manufacturer involved with F1 that directly signs its contract to race in the sport rather than using a subsidiary company to do so. This is crucial because if a manufacturer pulls out of F1 it can simply close down the company that runs the team meaning that it cant be pursued for damages. In contrast, if Ferrari were to breach its contract by pulling out of F1 the car company would be directly liable.

It gives F1 impressive security and Ferrari is well rewarded for doing so. But its benefits stretch way beyond receiving more cash and control than any other team in F1.

Page 177 of the prospectus reveals that the longest-standing team gets a right of first refusal to run an international motor sport series for its cars as a support event (ie, to be included in the track programme of an Event as a support event to the World Championship).

Ferraris chairman Luca di Montezemolo even has a say in shaping F1s future, as he sits on its remuneration and nomination committees. The former approves the policy for determining how much directors get paid and the latter recommends which directors should be re-appointed.

Team termsSo how do Ferraris non-financial benefits differ to those of the other teams? On page 178 the prospectus lists the general terms of F1s agreements with the teams and they cover eight key areas. The first relates to Ferrari, as it allows the team to use F1 footage in its Ferrari World theme park in Abu Dhabi as well as two additional parks. However, it also grants equivalent rights to any other Team which operates a theme park dedicated to that Team.

It moves on to cover race-specific benefits and states, Certain Teams have entitlements to the free transport of their race cars and some of their equipment and spare parts to and from the races outside Europe. It adds, Each Team shall be entitled to receive all requested passes to each Event and truck and motorhome space in the paddock at each Event. Likewise, each has the right to display its Team name above its garage entrance and its official Team emblem on its trucks admitted to a circuit and its motorhomes admitted to the paddock at each Event.

More interestingly, at the races, each team has the right to buy tickets to the Paddock Club corporate hospitality area and receive a rebate or commission of 10% on all Paddock Club admissions purchased and paid for by that Team or any of its exclusive team sponsors. Teams or their licensees also get access to sell their merchandise at each race and are entitled to a 10% discount on the fee charged for the rental of concession space.

The remaining two benefits apply to teams that are fortunate enough to win. Whenever a team gets on the podium it has the right to put on its website, for seven days following the grand Prix, a 15-second edit of its highlights from the race. Finally, any team which has won a grand Prix under its current chassis name has the right to put on its website for the seven days before the race a 30-second edit of its winning highlights.

Top dogFerrari has a unique status and the benefits under its Team Agreement reflect this. The perks on offer to its rivals are nowhere near as impressive and generally cover the basics that any team needs to compete.

Ferraris veto over the regulations is at the top of the list of its benefits and its here to stay until at least the end of 2020 as that is when the teams F1 agreements expire.

Although theres now no doubt about Ferrari having a veto, the next matter of great speculation is sure to be whether it has used it. The answer to that question isnt in the prospectus, so F1s rumour-mill wont run dry just yet.

Above: Ferrari doesnt just benefit financially from the preferential treatment it receives from the FIA it also gets to veto regulations it doesnt agree with

FERRARIS CHAIRMAn LUCA DI

MOnTEzEMOLO EvEn HAS A SAy In SHAPIng

F1S FUTURE

Phot

ogra

phy:

Dav

enpo

rt/S

utto

n-im

ages

.com

126 Future | F1 evolution F1 evolution | Future 127

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

racing into the future

In November 2011 Bernie Ecclestone signalled that significant change was on the horizon when he revealed to this author that he had been advised to float Formula One on the

Singapore stock exchange. The news was printed in the Daily Telegraph and it sent shock waves around the world of motorsport. Not only would it enable fans to buy shares in F1 but it would also mean it had to lift the lid on its finances and future plans as part of the mandatory disclosure process when floating any business. Although F1 hasnt yet listed on the stock market, it still plans to do so and the impact of its preparations has already been felt.

Once a company is floated, its directors

have to try to appease shareholders by constantly increasing revenue and profits. In the case of F1 this is largely governed by one factor the number of races on the calendar. Each race gives the business revenue from its hosting fee as well as trackside advertising and corporate hospitality during the event. The more races there are on the calendar, the more F1 can charge for television fees but there is a limit on this.

Increased race numbersGetting on to the F1 calendar is no mean feat as Ecclestone has committed to hosting no more than 20 races per year to limit the amount of time that teams are away from

home and to cut their travel costs. This limit can be exceeded with majority consent from Ferrari, McLaren and Red Bull Racing and it looks like 2014 will be the first time in F1s history that there will be more than 20 races. If the sport floats, its highly likely that the number will increase further and the waiting list is understood to include Argentina, Hong Kong, Poland, South Africa and even cash-strapped Greece.

The ones that get on the calendar will probably be street races as it costs less and takes less time to get them off the ground than building a circuit from scratch. They also show-off local landmarks and dont leave a white elephant of a venue when the race contract comes to an end.

Formula One has been evolving ever since it launched in 1950. We take a look at what it

still has ahead of itWriter: Christian Sylt

Opposite: F1 is increasingly moving into the pay-to-view TV market Above: Tata Communications, whose MD and CEO Vino Kumar is pictured here alongside Ecclestone, has signed a technology deal with F1, paving the way for live race streaming

eroding too much of the sponsors exposure, the prospectus adds that F1 is not permitted to contract to broadcast events by pay television only in a country with a significant audience if it would materially adversely affect audience reach in that country.

HD and 3D developmentsThe prospectus also reveals the technological developments in F1 TV production, which are on the horizon. It states, During the months outside the World Championship season, we work on refurbishing our equipment and systems and on further technological developments and enhancements. Some of the innovations we are developing include an HD on-board camera, a multi-channel format with different views of the track and an interactive 3D replay function.

More pay TV broadcastersPerhaps ironically, the races in future may not be seen by as many viewers as currently watch the sport. F1 is now the worlds most-watched annual sports series with over 500m TV viewers last year. Its built up such a strong position that Ecclestone is no longer focussing purely on maximising wide free-to-air coverage. Instead, hes signing deals with pay TV channels, which are prepared to outbid their free to air rivals in order to use F1 as a carrot to tempt viewers to sign up.

This trend kicked off in 2012 when Sky Sports took over from the BBC as the UKs broadcaster of all live races, qualifying and practice sessions. It was followed by similar deals in France, Italy and the Netherlands and there may be more to come. The draft flotation prospectus for Formula One reveals that it will explore additional pay television opportunities.

The higher TV fees filter down to the teams since their annual prize money payment comes to around 63% of F1s overall profits. The increase in revenue from TV fees therefore offsets a decline in the teams sponsorship rates, which may result from the lower audiences pay TV channels tend to have. To prevent this from

Online streaming of racesEven the way F1 is watched may change as its considering a radical shake-up of its broadcasting model, which would make races available live online at the same time as them being shown on television.

At the moment, the rights to broadcast races online lie with each of Formula Ones broadcasters and they have to ensure that the footage cannot be viewed outside their home country, as it could reduce TV viewing figures elsewhere.

However, the prospectus states that Formula One is considering removing the online entitlement from each broadcasting contract so that it could charge viewers to watch races live on its own website www.formula1.com.

It says that F1 is in the initial stages of developing our digital media assets. The right to stream races online is typically licensed out to our broadcast partners around the world but we may consider changing our model and exploiting them independently in the future. As the exclusive rights holder to the World Championship, we have the benefit of controlling both our online platform and content, which gives us a wide range of opportunities to monetise

Phot

ogra

phy:

Tat

a Com

mun

icat

ions

SOME OF THE INNOVATIONS WE ARE DEVELOPING INCLUDE

AN INTERACTIVE 3D REPLAy FUNCTION

128 Future | F1 evolution F1 evolution | Future 129

Above: Jacques Villeneuve in his BMW Sauber in 2005. Ecclestone believes BMW will return to F1Below: Within F1 circles, Red Bull team principal Christian Horner is being touted as the man to replace Ecclestone

Above: Round 10 of the 2013 GP2 series. F1 is considering launching an American version to foster local talent

our rights, including through internal and third party solutions.

It adds, Well continue to enhance the digital experience over time for our fans by exploring new opportunities, including allowing access to premium digital content as well as adding additional language options to our website.

It wouldnt take a great deal of time to implement the plan because 56 out of F1s 63 broadcasting contracts expire before the end of 2015. Each contract typically has a duration of between three and five years. Competition law in the European Union stipulates that the contracts have to be limited to five years in countries where a race takes place and three years elsewhere.

The catalyst for the Formula One Group considering this new approach was its signing of a sponsorship deal with Tata Communications in February 2012. Tata became F1s official technology supplier and the deal paves the way for live online streaming of races to a similar standard as those broadcast on TV.

One of Tatas biggest strengths is that it has the largest network of undersea cables in the world. This allows it to transmit data at a far higher speed than by using satellites, as F1 previously relied on, and it also significantly increases capacity.

Tata plugged F1 into its network soon after the deal began and it now has fixed line connectivity at all Grands Prix. A trial of cable delivery took place at the 2013 Singapore Grand Prix when Tata sent a live video feed of one of the practice sessions via its global fibre ring back to F1s TV nerve centre in Kent.

Importantly, the cable network is always connected, unlike a satellite thats only on for several hours at a time, and it is bi-directional. This allows individuals to demand specific content and potentially interact with it in future. So online streaming of races may be just the first step.

Americas junior seriesOnline streaming should increase F1s reach and its planning other manoeuvres to drive popularity. One of the biggest untapped markets is the United States. The US Grand Prix returned to the calendar in 2012 after a five-year hiatus and another race is being considered in New Jersey. This has struggled to raise funding and F1s low profile in the US doesnt help with that. The prospectus reveals that F1 is considering launching an American version of F1s junior series GP2 or GP3 in order to foster local talent and interest.

This expansion has the working title of the Americas Series and, if given the green light, it will feature races in the United States, Canada and Brazil. The aim is to stimulate the development of grass roots motorsports in these countries and generate publicity for F1 so that it eventually attracts more local drivers.

According to the prospectus, F1 believes that it will eventually be able to develop its business in North and South America to a level comparable with that in its traditional European base.

More car manufacturersGreater presence in the US would make Formula One more appealing to local brands looking for national and international promotion. However, it also needs the right assets and when it comes to car manufacturers that means the best platform to showcase their technology.

In 2014 F1s regulations will force teams to switch from the current 2.4-litre V8 engines to more environmentally friendly 1.6-litre turbocharged V6s. The move levels

the playing field, as all manufacturers will have to start from scratch. The efficiency has already attracted Honda back to Formula One because it will become McLarens engine partner in 2015. It might not be the only one.

In May Ecclestone told this writer that he would be surprised if we dont see BMW again. BMW bought Switzerlands Sauber team in 2005 and spent an estimated 505m on its bid for F1 victory. It only won one race and BMW ended up selling the team back to its founder Peter Sauber.

Ecclestone added, I think they could come in. The amount of money that they spent was not significant in the grand scheme of things. It makes sense for them to return.

Life after EcclestoneEcclestones importance to F1 cannot be understated, particularly since he has no successor and turned 83 this year. In November 2012 the boss of the Australian Grand Prix revealed that he will step down when Ecclestone gives up the driving seat

and warned that it could trigger an exodus of top race managers.

Ron Walker, chairman of the Australian Grand Prix said, There will be a number of promoters who will retire when Bernie retires but I firmly believe the races will stay with the countries. Promoters have a very special relationship with Bernie. He is more of a friend than a business colleague and they are reaching the same age group. When Bernie retires then I will retire as well and a number of other long-standing promoters that have been friends of Bernies will do also.

Walker is a prominent Australian businessman who was Lord Mayor of Melbourne and chairman of the organising body for the 2006 Commonwealth Games in Melbourne. He adds, When Bernie goes Formula One will change. you wont recognise the sport after Bernie goes because he has done it in his own way, as unique as he can. It will be the end of an era. A lot of people say Bernie is the greatest sports promoter in history and he has formed close personal relationships with promoters over the years.

Its widely thought in F1 circles that Christian Horner, the boss of championship-winning team Red Bull Racing, will take over from Ecclestone.

Names from outside the sport have included Sainsburys chief executive Justin King and former Marks & Spencer boss Sir Stuart Rose.

The prospectus confirms that head hunting agency Egon Zehnder was hired to draft a short list of potential replacements for Ecclestone. It reportedly includes Richard Scudamore, chief executive of footballs Premier League, but no one from the list has been engaged.

F1 only has 313 staff and 10 senior management with no deputy or chief operating officer waiting to take over the wheel. In 2011 David Campbell, the former

European chief executive of entertainment group AEG, was hired to run Formula Ones corporate hospitality division. He was tipped as a successor for Ecclestone but left F1 after just over a year.

The business is too small to have a successor lurking in the ranks. The successor almost certainly has to come from externally, says a source close to Formula Ones largest shareholder, the private equity firm CVC. Any change presents probably the greatest threat to the future of Formula One, so thankfully, despite his age, Ecclestone shows no signs of slowing down.

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

Phot

ogra

phy:

Cap

ilita

n/Su

tton

-im

ages

.com

Phot

ogra

phy:

Kal

isz/

Sutt

on-i

mag

es.c

om

REGULATIONS WILL FORCE TEAMS TO

SWITCH FROM 2.4-LITRE V8 ENGINES TO 1.6-LITRE

TURBOCHARGED V6S

110 Future | Future of F1 teams Future of F1 teams | Future 111

Writer: Christian Sylt

RefuellingFormula One

Photography: Vladimir Rys/Red Bull Content Pool

Over the four years to 2011 the annual prize money payment banked by Formula Ones teams accelerated by $450.5m to $698.5m. It is expected that the 2012 total hit a record $751.8m so why are more of the teams now at risk than ever before?

Few sports are infused with as high-octane a mix of glitz, glamour and excitement as Formula One. The drivers are superstars who risk their lives

driving at over 200mph in some of the worlds most exotic destinations. For celebrities the pre-race grid is the place to see and be seen. It has driven F1 to become the worlds most-watched annual sports series, with over half a billion television viewers last year. It has also given it a powerful financial engine.

While growth of most major sports series stalled during the recent economic downturns, F1 accelerated. Its revenues increased by an average of 9.6% annually over the eight years to 2011 when they hit a record $1.5bn. F1s latest financial statements are for the year ending 31 December 2011 and they show that the revenue for the series comes from three main sources.

Organisers of the races pay a total of $512.1m in hosting fees with revenue from TV rights bringing in $488.9m. Advertising and sponsorship generates $223.6m and corporate hospitality is the biggest single provider of the remaining $287.7m. The increase in revenue has been largely fuelled

by escalator clauses in many of the contracts, which increase the amount paid by up to 10% annually. An additional boost has come from sponsorship this year alone luxury watch-maker Rolex and international airline Emirates have signed deals to become global partners of F1. The teams are the biggest beneficiaries of this good fortune.

Prize pay-outsF1s biggest single cost is the prize money payment of 63% of its operating profit to the top 10 teams. Yet despite this bumper haul, more teams are at risk of going under than at any other time in recent years. At the end of 2012 the Spanish outfit HRT became the first F1 team in three years to close its doors. Earlier this year McLarens team principal Martin Whitmarsh said he believes that seven of the 11 F1 teams are in such financial difficulty that they are in survival mode.

At the bottom of the grid, it came to light in October 2012 that the Marussia Formula One team, which is owned by a Russian sports car manufacturer, was in talks with potential investors. A deal has yet to happen and the teams chief executive Andy Webb recently confirmed that there are still

on-going discussions with a number of interested parties.

Marussias closest rival is Caterham, which has scored no points since joining in 2010. Its shareholders, including Malaysian airline entrepreneur Tony Fernandes, have F1s worst record for performance-per-investment which stands at an estimated $144.6m as of October 2013 according to industry monitor Formula Money.

Further up the rankings is Force India, which is co-owned by Vijay Mallya, chairman of the grounded airline Kingfisher, and Sahara, a beleaguered Indian conglomerate. Reports in early 2013 suggested that Sauber, Force Indias Swiss-based rival, was for sale. The need for new investment seemed to fade when Sauber signed sponsorship deals with three Russian companies in June, but it isnt clear how much money is being provided or how long it will plug the teams shortfall.

Over the past year Mercedes has offloaded 40% of its team to motorsport entrepreneur Toto Wolff and triple F1 champion Niki Lauda. Wolff came from Williams, which is F1s third most successful team by championships won, but has fallen from grace over the past decade. An estimated 33% of Williams revenue

112 Future | Future of F1 teams Future of F1 teams | Future 113

comes from a sponsorship deal with Venezuelan oil company PDVSA, which is understood to have been endorsed by the countrys late president Hugo Chavez. It raises the question of how long that revenue stream will last.

The sale of a stake in Mercedes is not the only deal thats been done recently. In May this author revealed that property developer Andrew Ruhan had taken a 2% stake in the Lotus F1 team. The following month the team distributed a press release trumpeting that it has new part-owners as of today but in fact this was not the case. It claimed that investment group Infinity Racing had bought a 35% stake in Lotus but several weeks after the press release had been written, Gerard Lopez, the founder of Genii Capital, the investment fund which majority owns the team, revealed the shares had yet to change hands.

The state of Lotus finances finally became clear over summer when I also revealed that the team had made a net loss

of 56.8m in the year to 31 December 2012. It was followed by claims from Lotus lead driver Kimi Rikknen that his pay cheque was late and he promptly switched to Ferrari for 2014.

That leaves just Ferrari, McLaren and Red Bull. There is good reason why these three are secure and it partly explains why their rivals are at risk. F1 operates by the precise opposite principles of major US sports leagues, which offer badly performing teams the first choice in the post-season draft. The purpose of this is to even out the field, but in F1 the top performers get the highest financial rewards. This cements their power because winning F1 races is so closely connected to having a high budget.

At one end of the spectrum, Red Bull received around $87m in prize money for winning the championship in 2012, and HRT got nearly nine times less for finishing last. The 63% prize money payment is comprised of three elements. The first is a 47.5% share of F1s operating profits, which is divided into two with half going to the top 10 equally and the other half split between them depending on their position in the standings.

However, in addition, Ferrari, McLaren and Red Bull Racing share a dedicated annual prize fund of at least $100m. This is because they are what are known as Constructors Championship Bonus (CCB)

teams the top three based on races won in the four seasons prior to 2012. As the only team which has been in F1 since the series started in 1950, Ferrari also gets its own further annual prize payment of at least $62.2 million.

This puts the lower ranking teams at a financial disadvantage although the income, which is split equally between the top 10 teams, gave each of them $28m last year, which alone is far from insignificant. The reason it isnt enough is that the teams have a business model that is unusual, to say the least.

Not for profitMost companies want to make a profit first and foremost, but not F1 teams. They are generally run to break even, meaning that they make neither a profit nor loss. This involves the team bosses spending whatever is available and they do it in pursuit of victory. The theory is that it is better to win on track and make no profit, rather than make money and finish low down the standings.

Spending all the money available to them means that it is hard for teams to build up cash reserves, and it also makes it tough for them to scale down during an economic downturn. Even F1s chief executive Bernie Ecclestone has acknowledged the problem, and conceded at the end of September, We

are talking about two vulnerable teams at the moment.

The upshot is that sponsors gravitate to Ferrari, McLaren and Red Bull because there is more chance they will win races due to having the biggest budgets. At the end of 2012 luxury car manufacturer Infiniti became Red Bulls title partner, and since then parcel service UPS has inked a deal with Ferrari. They are the exceptions.

F1s sponsorship prices reflect its status as the worlds most-watched annual sports series, with the average cost of a deal being around $3.7m annually. It means that during a boom period F1 attracts the most well-known brands, but when they cut marketing budgets during a downturn they are put off by the high cost. Major brands such as Rolex and Emirates are now signing deals to become official partners of F1, rather than team sponsors, because it offers lower risk.

Brands lose exposure if the cars of the team they sponsor crash or are slow and are therefore not covered on TV as much as their rivals. In contrast, sponsors of F1 itself get huge billboards at the tracks, which give guaranteed exposure. They are usually located on corners where cameras follow the most exciting racing moves and no other billboards are present. Logistics firm

Above: The financial cards are stacked against teams like Caterham that rank lower down the standings Opposite: Advertising and sponsorship is one of F1s three main revenue sources. Here DHL branding is painted onto the track

TEAMS ARE RUN TO BREAK EVEN. BOSSES SPEND WHATEVER IS

AVAILABLE IN PURSUIT OF VICTORY

BRANDS SIGN DEALS TO BECOME PARTNERS OF F1, RATHER THAN

TEAM SPONSORS, AS IT OFFERS LOWER RISK

Photography: Davenport/Sutton-images.com

DHL even gets access to specific drivers through its sponsorship of F1 as it presents an annual award to whoever gets the fastest lap. It explains why DHL moved from being a team partner to sponsoring F1 in 2004, a deal which it extended for several years earlier this year.

It is a good sign that companies of that size are making substantial investments, says Zak Brown, chief executive of leading motorsport sponsorship agency Just Marketing. I dont think you can look at many other sports and see companies of that stature making those levels of long- term investment.

He adds, In the pit lane everyone is a competitor. The more competitors the more anxiety there is. Who would want to be in a competitive pitch against Bernie? As he points out, the teams cant do without the financial support.

It takes a lot of money to make these cars

go round and budgets are not getting smaller. Therefore there is a greater thirst and those that dont get sponsorship find it difficult. Brown explains, Motorsport, unlike a lot of other sports, has a greater thirst for sponsorship and has a bigger revenue model based on that. There is probably never enough money to go around so everybody feels like they are doing great.

Because the smaller teams cant depend on sponsorship or prize money they increasingly have to resort to hiring drivers who pay to race, which has led to criticism that it dilutes the quality of the field.

Rich get richerIt is all down to F1s decision to give the top performers the richest rewards, which may sound a dreadful idea because it means that the same teams are the most likely to win. However, in fact it secures the sports future.

Except for Ferrari, McLaren and Red Bull, the majority of F1s teams have changed names over the past five years alone so havent built up as much goodwill with fans. F1 has not been damaged by their changing identities and this is largely thanks to the performance of its most well-known names. So, ironically, if F1s revolving door keeps on turning, that is not necessarily a bad thing.

Phot

ogra

phy:

Cha

rles

Coa

tes/

LAT

Phot

ogra

phic

114 Teams | Eco engines Eco engines | Teams 115

Phot

ogra

phy:

D

aim

ler

F1 goes green

In May 2013 the world of Formula One was caught by surprise with the announcement that in 2015 Honda will return to the sport, replacing Mercedes as the engine supplier to

the McLaren team. Hondas previous involvement with F1 was as a team owner but it threw in the towel in 2009. The team was sold to its management after the Japanese manufacturer had only managed to win one race, despite spending an estimated $1.5bn over five years.

It was an ignominious end to Hondas F1 foray and many observers believed it would be a long time before it returned. However, theres good reason for it coming back sooner than expected.

Formula One has never been environmentally friendly. Lining up at every race are over 20 cars powered by V8 engines revving to 18,000rpm. Fuel consumption is around the 4mpg mark, which is less than 10% of the fuel economy of a typical road car. Each race is around 190 miles on average and there were 19 this year. It all adds up and the net result is that F1

engines are far from green. However, the sports governing body, the Fdration Internationale de lAutomobile (FIA), is trying to steer them in that direction. Indeed, its betting F1s future on it.

High stakesA huge amount of money is at risk. In 2011 Mercedes spent 116.4m on its F1 engine division. The engines material costs are believed to make up at most only 10% of the total amount invested in them, with the remainder being spent on development.

The engine is a put under such stress that it needs to be bolted to the carbon fibre body and have the transmission and rear suspension fixed to it in turn. It therefore has to be extremely strong but also as light and compact as possible. Adding to the complication, the engine needs to be mounted in as low a position as possible to help lower the cars centre of gravity and to enable the height of rear bodywork to be minimised, which in turn reduces drag.

Maintaining the balance between engine strength and weight at the same

The 2014 season will see the biggest change to Formula Ones engine regulations for nearly a decade. The

impact has already been feltWriter: Christian Sylt

116 Teams | Eco engines Eco engines | Teams 117

Opposite: McLarens current engine is a Mercedes 2.4-litre V8 revving to about 18,000rpm Top: In 2011 Mercedes spent 116.4 million developing and honing its Formula One enginesBottom left: At present F1 car fuel consumption is about 4mpg thats set to improve by 30% next year Bottom right: Bernie Ecclestone is concerned the new engines will sound too different from the old ones

time as optimising its location in the car is ultimately why F1 engines are so expensive to produce.

The bulk of development work is done during the year before the cars are launched, so the 2014 engines are already well in development even though the 2013 season has only just come to a close. Its the end of an era.

The current 2.4-litre V8 engines, which have been standard since 2006, will next

year be replaced by more environmentally friendly 1.6 litre turbocharged V6s. Theyll be the most efficient engines that the sport has ever seen and this was the driving force behind Hondas decision to return to F1.

At the announcement Takanobu Ito, the chief executive of Honda Motor Company, said, The new F1 regulations with their significant environmental focus will inspire even greater development of our own advanced technologies, and this is central to our participation in F1.

He added, We have the greatest respect for the FIAs decision to introduce these new regulations that are both highly challenging but also attractive to manufacturers that pursue environmental technologies.

The rev limit of the new engines will be reduced to 15,000rpm but thats just the start. Theyll also comprise a greatly

enhanced version of the current recovery systems, which convert energy created under braking into a boost on acceleration.

Out with the oldThe systems in use at the moment only derive power from the rear axle, giving a boost of 70bhp for seven seconds a lap. However, next year the devices will also be driven by heat from the exhaust, giving a 161bhp boost for 33.3 seconds a lap. The emphasis on energy recovery reflects the increasing popularity of hybrid vehicles, and the idea behind the new rules is to align F1 more closely with the direction the motor industry is taking. Even fuel economy has been improved.

Next year a 30% increase in efficiency will see cars being limited to using 100kg (around 140 litres) of fuel per race. So, just

as manufacturers of road cars constantly strive to produce models that do more miles per gallon, from next year F1 engineers will be chasing as much power as possible from a given amount of fuel.

Manufacturers are in talks about how to communicate the fuel usage to television viewers, but they may face an even bigger challenge engaging spectators at the track.

Different soundThe changes to the regulations were first announced in December 2010 and originally the replacement was due to be a four-cylinder, 1.6-litre turbocharged engine. It faced immediate criticism over fears that it would sound so different to the current engines that fewer fans would visit the races. F1s distinctive sound is one of its unique selling points, and the sports boss

Bernie Ecclestone was so concerned about losing it that he said he may have to sue the FIA. He believed the decision to introduce the new engines breached his contract with the governing body, and he wasnt the only one who voiced concerns.

In June 2011 F1s race organisers took the historic step of forming a union the Formula One Promoters Association and promptly threatened to switch to the rival US IndyCar series if the engine sound changes in 2014. The following month the FIA improved the specification to the turbocharged V6s, and although the promoters were pacified, Ecclestone still has concerns.

However, he says, The engines are fixed now, like it or not. We have got what we have got, so we have to keep our fingers crossed. The wait will soon be over.

Phot

ogra

phy:

D

aim

ler

Phot

ogra

phy:

D

aim

ler

Phot

ogra

phy:

D

aim

ler

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

THE CUrrENT 2.4-LITrE V8 ENgINES WILL NExT yEAr BE rEPLACED By MOrE EFFICIENT 1.6L TUrBOCHArgED V6S

158 Lifestyle | Hospitality Hospitality | Lifestyle 159

Writer: Caroline Reid

Phot

ogra

phy:

Lun

din/

Sutt

on-i

mag

es.c

om

Entertainment

fast lanein theFormula One is one of the

worlds wealthiest sports so it needs an incredibly discreet

and high-level environment to entertain its investors. Thats

exactly what it has got

It may seem like the biggest decisions in Formula One are made on track, but in fact the most powerful people in the sport are found behind the scenes in what is known as the

paddock. It officially consists of five different zones: the garages, the pitlane, the starting grid, the transporters and the motorhomes. Passes with different degrees of privilege are required to gain access to each area and around 500 people can get into all of them.

Six times more passholders have access to just the motorhomes area and, as well as being Formula Ones nerve centre, this is where celebrities smooch with teams to get

as close to the action as possible. The motorhomes are equally glamorous.

The first F1 transporter was used in the 1970s when Formula One boss Bernie Ecclestones Brabham team converted a hotel companys training vehicle and painted it in the red stripes of its most prominent sponsor, drinks brand Martini. Brabham also added its own plush hospitality unit another F1 first, which started a trend that endures to this day.

Motorhomes are used for all the European races, but at long haul events the teams are still located in permanent offices at the circuits just like in the bad old days. The teams use their motorhomes to seduce sponsors in an even more intimate environment than F1s hospitality area, the Paddock Club. Behind their closed doors million dollar deals are done.

Pecking orderMotorhomes are positioned according to the teams performance in the previous year. Ecclestones two-floored motorhome with its blacked-out windows heads the paddock and lines up with the transporter trucks that face the motorhomes at most European races. The transporters back up to the pit garage rear doors and the oblong tarmac space between the motorhomes

160 Lifestyle | Hospitality Hospitality | Lifestyle 161

and transporters is the main paddock area. F1 Group executive Pasquale Lattunedu is in charge of the paddock.

The grandest of all the motorhomes is Red Bulls aptly named Energy Station. Red Bull owns two F1 teams, Red Bull Racing and Scuderia Toro Rosso. Towering over its peers, the Energy Station takes up the teams entire allocation of spaces. The first three-storey unit, it was unveiled at the beginning of 2005 and looks more like a car showroom than a motorhome.

Mobile mansionThe 210 ton, six-metre-high and 14-metre-long steel and glass curved structure has a 200-person capacity with offices, bathrooms, two bars, two terraces and a chillout area. Each driver has their own

room trimmed with red leather and frivolous frills, such as a shower with controllable mood lighting.

The entire structure even has a hydraulically operated roof, which shuts the upper terrace in the event of rain. It doesnt even cut back in the cramped confines of the Monaco Grand Prix.

The structure sits on a series of huge polystyrene floating platforms and houses the front terraces, dining and chillout areas as well as an upper deck with a swimming pool, second kitchen and DJ booth. All of that is built outside Monaco, in the weeks running up to the race. It is then pulled round to the harbour where its installed alongside the regular F1 paddock.

When it is up and running, two electricians and two technicians are on duty, while catering involves five chefs. In fact, despite being classed as a motorhome, the Energy Station requires nine trucks to transport it as well as upwards of 40 staff to erect it over two days. It started a trend McLarens motorhome is also three storeys and is known as the Brand Center.

This is more sleek than Red Bulls motorhome, with polished slate floors and

an abundance of brushed steel 14 trucks are needed just to move it around and it takes 23 technicians three days to erect it and two to take down. There are even 16 staff in the catering team, which serves over 400 people at the most popular races.

The Brand Center is a fitting home not just for McLaren but also the teams title partner Vodafone, which occupies the top floor. Below it, there are executive offices on the second floor with the ground floor used for entertaining.

Club classIn addition to having their own entertainment areas, the teams also get an allocation of passes for F1s overall corporate hospitality area, the Paddock Club. This is a tented structure adorned with fresh flowers and turf that is flown in from England before being rolled out on site. It attracts a suitably high level of clientle including film stars, politicians, pop groups, models and sports stars.

The Paddock Club is split into three distinct areas, with levels of luxury akin to a deluxe hotel. The Village is a group of marquees surrounding a central open

Above: Entertainment is laid on for teams and guests in the opulent Red Bull Energy Station, a three-storey motorhome

ThE RED BuLL MOTORhOME hAS

BARS, TERRACES, ChILL-OuT AREAS, SWIMMInG POOL AnD A DJ BOOTh

and afford panoramic views of the pits and circuit. It is the roof of this structure which often features prominently in views of the track filmed with helicopter cameras.

The Paddock Club keeps F1s wheels turning as the teams give their passes to sponsors, which in turn use them to indulge their own clients in the opulent surroundings. Keeping sponsors sweet increases the chance they will renew their deals, and the teams themselves also give passes to brands that are not yet involved with F1 in order to tempt them to sign up.

garden, each with its own patio seating area and buffet tent. Separate marquees house the champagne bar and various entertainments are found in the garden.

Every Paddock Club pass includes access to a gourmet banquet, and also a masseur, beautician and hairdresser. A caricaturist and card-trick artist are on hand to provide light relief. Paddock Clubbers can take a guided tour of the pits before the Grand Prix and have access to the support race paddock. Team personnel are also on-hand to talk the guests through the weekends developments.

The Pit BuildingThe second area to the Paddock Club, the Pit Building Lounges, offers a unique chance to support the drivers. They are a collection of individual lounges usually located directly above the pit lane with a privileged view of the main straight and the pit lane. When the drivers enter the pits, the more passionate Paddock Clubbers can lean over the guard rails and cheer them on.

The Pit Building Terrace is a collection of suites above the pits. They are often one storey higher than the Pit Building Lounges

Tickets are on offer to the public but at a cost of around $4,000 each, theyre out of reach for most.

Theyre not expensive for the sake of it. Setting up the Paddock Club at a typical Grand Prix requires transporting by road, air or ship 16km of cables, 77,000 pieces of cutlery, 40,000 glasses, 30,000 plates, 20 tons of ice, 90,000 litres of water, 5,500 magnums of champagne, 10,000 cut flowers, 3,000 flowering plants and 200 tons of tent material.

hundreds of workers are involved at each race, including catering staff, electricians, security, entertainers, therapists and florists. Security, construction, logistics and catering tend to be handled by the same contractors throughout the season, meaning the teams and sponsors know what they will get at any race, no matter where in the world it is held. As a global brand, F1 couldnt do without it.

KEEPInG SPOnSORS SWEET In ThE F1

PADDOCK InCREASES ThE ChAnCE ThEyLL REnEW ThEIR DEALS

Top left: The Marussia team motorhome is relatively modest compared with some others Top right: The sleekest F1 motorhome on the circuit has to be McLarens three-storey construction Bottom left: Bernie Ecclestone started the trend for plush hospitality motorhomes in the 1970s Bottom right: Inside the spacious Williams F1 motorhome; each driver has their own luxurious office

Photography: Sutton-images.com

Photography: Sutton-images.com

Phot

ogra

phy:

Dav

enpo

rt/S

utto

n-im

ages

.com

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

82 Drivers | Pay drivers Pay drivers | Drivers 83

Pay as you go

Theres a stigma attached to pay drivers, but they have once more become a significant presence in the sport. Is it time to re-evaluate

their contribution to F1?

Mention the words F1 driver and the image that they conjure up to many people is of a man who has it all, courted by leading teams who are willing to lavish millions of dollars on him so he can indulge his love of the high life as he jets around the world enjoying the ultimate luxuries. But for

many drivers on the grid in 2013 it is a different story. Rather than focusing on spending their wages they will instead be scraping together every last penny to support a career at the tail end of the grid. However, it isnt so long ago that it looked like pay drivers had been banished to the sports history books. So how did this aspect of F1 go into reverse?

Back in the formative years of F1, it was normal to see privately wealthy drivers behind the steering wheel. There was no real sponsorship in those days and drivers were often amateurs who required another source of income to fund their racing around the world. After F1 became more

Writer: Caroline Reid

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

84 Drivers | Pay drivers Pay drivers | Drivers 85

commercialised in the late 1960s the scene shifted, but some of the slower outfits would still look to drivers who could bring the best sponsorship package with them to the team. By the 1990s, pay drivers had become figures of fun. They were epitomised by Japans Taki Inoue, a cult figure who never scored a point and once got run over by the medical car, and rich kids like Pedro Diniz, the handsome son of a Brazilian supermarket magnate who brought with him seemingly infinite cash from brands stocked in the family shops.

Corporate growthBy the mid 2000s it looked like pay drivers were becoming a thing of the past. As F1s global fanbase boomed, interest in the sport grew in the corporate world, and at one stage there was only one team on the grid, Williams, that was not owned by either a car manufacturer or a billionaire.

Then came the global economic crisis. En masse, the car manufacturers exited the sport and were replaced in 2010 by new smaller teams who were often either not willing or not able to pay big money to their drivers. As spending by team owners plummeted from $1.6bn in 2008 to $611m in 2010, teams were forced to look for new sources of funding to stay in the sport.

The driver line-up is now one of stark financial contrasts. According to Formula Money estimates, a total of $129.65m was spent on driver salaries during the 2012 season, but a massive 84% of that ended up in the pockets of just six drivers Fernando Alonso, Lewis Hamilton, Sebastian Vettel, Felipe Massa, Michael Schumacher and Jenson Button. Alonso is also the best paid driver of all time, with a record annual salary of $40m from Ferrari.

At the back of the grid it was a very different story as several drivers chose to forego salaries and instead bring cash or sponsorship to their teams in exchange for their seats. Still more were paid a token salary to race as their home sponsors decorated their teams cars. Formula Money calculates that in 2012 there were four unsalaried F1 drivers and 11 drivers who were paid less than $1m. All but one of these 15 drivers competed for the majority the season. This contrasts sharply with 2009 when there were no unsalaried drivers and only eight drivers were paid less than $1m, five of them racing for less than half of the season.

As a result the average driver salary fell from its 2008 high of $7.8m to $5.2m in 2012, and some talented drivers found it difficult to get a seat if they didnt have the budget to match their results. In the words of Spains Jaime Alguersuari, who lost his drive in F1 for the 2013 season, F1 has become an auction.

Yet the nature of the new breed of pay drivers was in some ways very different to their predecessors. The pay drivers of the 1990s had been largely well below the

SEVERAL DRIVERS AT THE BAck oF THE gRID

BRIng SPonSoRSHIP oR cASH In ExcHAngE

FoR THEIR SEATS

standard of drivers at the leading teams. But now even drivers who might previously have secured a seat on their own merit were being chosen on the quality of their backers.

When Williams dropped promising nico Hlkenberg in exchange for well-backed Venezuelan Pastor Maldonado in 2011, many F1 fans saw it as a sign of the sport heading in the wrong direction. Although Maldonado was gP2 champion in 2010, he had achieved this after running for a lengthy four years in the series with an estimated $3m of personal sponsorship behind him, which gave him a distinct advantage over his rivals. What was more, his Venezuelan backers were contributing an estimated $50m to the team in the form of sponsorship from state oil company PDVSA and Venezuela Tourism.

Williams was keen to avoid the stigma of the pay driver label with then team chairman Adam Parr stating that he felt it was repulsive and irrelevant. He added, We have never sat a driver in our car who we did not think was ready for F1, deserved to be in F1 and was capable of delivering. The guy has just won the gP2 championship with a rookie team, winning more races than anyone else. The mere fact that we have to talk about this is absurd.

It echoed the sentiments of the Renault team when they too had been confronted with accusations of valuing cash over talent. When the team signed inexperienced Russian Vitaly Petrov in 2010 it was quick to emphasise that his contribution was more than just monetary. Team principal ric Boullier stressed that we actually had drivers who could have brought twice the amount Vitaly is bringing with him while owner gerard Lopez claimed that although Petrov was not a paying driver in his mind, he admitted that the sponsors that he brought or that came have been very good sponsors.

Maldonado makes itAt first it looked like Maldonados detractors were right because he scored only one point in his first season and developed a reputation for crashing out. But then in 2012 everything changed. At the Spanish grand Prix, Maldonado sailed to a commanding victory, Williams first since 2004. It seemed that finally the pay drivers had been vindicated.

Maldonado wasnt the only one to impress. Although Mexicos Sergio Prez was widely accepted as a star of the future when he joined F1 in 2011, even he brought his Sauber team a stack of cash from Mexico. His backers, including telecoms giant Telmex and cuervo Tequila, brought the Swiss team an estimated $42m in 2011 and $49m in 2012. This didnt stop him from being seen as one of the best young drivers on the grid and securing a sought-after seat with McLaren for 2013.

However, to many the pay driver label

still automatically equates to a young driver with little talent and a big wallet, and it is a phrase that teams are quick to deny. It can encourage a public perception that the team is desperate for cash to the extent that it is willing to sacrifice sporting prowess to scrape together a few million dollars more.

Reality vs rumourThe reality is not quite so clear cut. If a team has no chance of making it off the back of the grid, it doesnt need to worry about how talented its drivers are, but higher up the grid a few points or podiums brought in by a talented driver can mean millions of dollars more in prize money and sponsorship. A balance between sponsorship and talent has to be found.

This is the reason that many of the new breed of pay drivers come with impressive cVs. Their financial backing serves to make them more attractive than their similarly qualified rivals, and its not difficult to see

why they are snapped up by teams looking to fill a hole in their budget.

The main problem that F1 faces with the return of the pay driver is that if even talented drivers have to bring sponsors to get a foothold in the sport, there is a very real chance that a star talent will fail to break into F1 if he doesnt have the budget to match his skill.

But for the drivers that do make it onto the grid they get to showcase their talents in front of F1s power brokers and to become salaried stars themselves later in their career. And despite lingering memories of wealthy failures, its certainly not impossible for a pay driver to make it to the very top of the podium.

After all, seven-times world champion Michael Schumacher paid the Jordan team $150,000 for his first drive back in 1991. He made that back in salary and endorsements more than 4,000 times over in the following two decades.

Previous page: Renault was accused of signing Vitaly Petrov more for his sponsors than his talent Above: Taki Inoue was a cult figure in the 1990s who never scored a point on the race track

Above: Promising driver Sergio Prez brought an estimated $42m of sponsorship to the Sauber team when he was signed in 2011Below: Williams was vindicated for signing Pastor Maldonado when he decisively won the Spanish Grand Prix in 2012

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

Phot

ogra

phy:

Lun

din/

Sutt

on-i

mag

es.c

om

Photography: Sutton-images.com

Rich list | Lifestyle 131

richlist

The

F1 is a rich mans game and its not even the multi-millionaire drivers

who are raking it in the most

Whoever wins on track at any given race, one thing is certain: Bernie Ecclestone is the real victor in Formula One. The 83-year-old Formula One boss is the richest man in the sport that he transformed into a global phenomenon, with a

fortune worth more than 6bn.The true extent of Ecclestones fortune was revealed in a German

court case in 2011. F1s former chairman, German banker Gerhard Gribkowsky, was on trial accused of taking a 29.5m bribe to undervalue F1 when it was sold to investment firm CVC in 2006. Ecclestone admitted making the payment but denied it was a bribe. He told the court instead that he had been blackmailed by Gribkowsky who had threatened to make false allegations about Ecclestones family trust to the taxman. This, Ecclestone said, could have left his family with a tax bill of a massive 2bn.

Assuming a tax rate of 40%, this means that the Ecclestone family trust contains assets worth a huge 5bn. Over half of this is from the sale of stakes in F1 with the rest believed to come from Ecclestones wide range of other investments, including Asian shopping centres and a hotel in the Swiss resort of Gstaad.

Ecclestone still owns 5.3% of F1, with another 8.5% in the hands of his trust. The value of these stakes together is worth 940m. Other assets bring the total family wealth to 6.2bn. This puts Ecclestone way ahead of Red Bull energy drink founder and team owner Dietrich Mateschitz, who is worth a mere 4.8bn.

The Formula One Rich List shows why F1 has a reputation as a sport for the super rich. Even the poorest person on the list team boss Frank Williams is worth 130m.

There are six British personalities on the list, plus three Malaysians, two Italians, two Americans and one person each from Austria, France, Australia, India, Luxembourg, Spain and Finland. No women make it onto the list in their own right and 16 of the 20 men are over 50 years old.

Ecclestone is not the oldest person on the list. That honour goes to 86-year-old Red McCombs, the Texan owner of the United States Grand Prix venue Circuit of the Americas. The youngest person is double world champion Fernando Alonso, who at the age of just 32 has made 170m from F1.

There are nine team owners on the list, four people involved in the running of the sport, five circuit owners or managers and only two drivers. It may come as a surprise that some of the sports biggest stars do not appear, but the wealth in the sport is largely concentrated on the behind-the-scenes power brokers. However, in the next few years, more drivers may join the list.

Lewis Hamilton might not be one of the 20 richest people in F1 at the moment, but he looks set to join the elite by the time his Mercedes contract ends in 2015. Hamilton is currently worth an estimated 89m, falling 40m short of the 130m needed to scrape onto the bottom of the rich list. However he will be paid 60m by Mercedes over the three years of his contract, which will boost him into the top 20.

Unlike his previous team, McLaren, Mercedes also gives the 2007 world champion more freedom to sign up personal sponsors, which could add up to 7m a year onto his earnings. Mercedes is also known to pay its drivers a million dollar (700,000) bonus if they win a race.

As a result, Hamilton can be expected to end his Mercedes contract at the age of 30 with a net worth of 177m. This would put him 16th on the F1 Rich List (compiled by Formula Money), ahead of rivals Fernando Alonso and Kimi Raikkonen and just behind Lotus owner, tech tycoon Gerard Lopez.

Together the 20 men on the list are worth 20.7bn. The list only includes people who have an active current role in Formula One. If the list included former team owners and drivers and people with an indirect role in the sport, then the value of the top 20 would be higher still.

Writer: Caroline Reid

BERNIE ECCLESTONE is not only the richest person in Formula One, he is also the most powerful. A former car salesman, hes controlled the commercial side of the sport since the early 1980s when he invented the Concorde Agreement, the legal document that binds the teams to turn up for every Grand Prix. This was the pint-sized billionaires masterstroke as it made F1 more attractive to TV stations that didnt want to pay to show races that didnt include the big names.

By the late 1990s Formula One had become a global phenomenon and Ecclestone sold off a series of stakes in the sport to financial institutions. He currently owns just 5.3% of the F1 Group, with another 8.5% held by his family trust Bambino, but he is still very much the driving

force behind the sport and nothing happens without his say-so.

Unlike many billionaires he doesnt have an extravagant lifestyle. He lives in an apartment above his Knightsbridge office and has the milkman deliver direct to his door. He has a private jet, but uses it mostly for work, and is known to go round his home switching off lights in empty rooms to save on electricity.

However, his socialite daughters, Tamara and Petra, more than make up for his lack of extravagance. Tamara owns a 200,000 handbag collection and a 1m crystal bathtub while Petra bought a 52m 14-bedroom Los Angeles mansion in 2011, despite already owning a six-storey 56m house in London.

FormuLa one Group chieF executiveNATIONALITy / British

Bernie Ecclestone

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

6,150m

RED BULL energy drink founder Dietrich Mateschitz is such a big fan of F1 that he owns not just one team, but two. The sports-mad Austrian founded Red Bull in 1984 based on local energy drinks he discovered on a business trip to Thailand. Over the following three decades he has turned it into one of the worlds most famous beverages.

He first got involved in F1 as a sponsor of Austrian driver Gerhard Berger in the late 1980s then in 2004 he bought Jaguars F1 team, which he renamed Red Bull Racing, with the aim of turning it into a championship

winner. Six years later his dream came true when Vettel took the world championship.

Mateschitz also owns Laucala, an island in Fiji, and a large collection of vintage planes, which are displayed at Red Bulls state of the art Hangar-7 complex in Austria. But his main love is sport and he has driven Red Bull to invest in four football teams and a hockey club as well as the former home of the Austrian Grand Prix, which he has renamed the Red Bull Ring. In 2012, Red Bull hit the headlines as the main sponsor of Felix Baumgartners record-breaking leap from space.

ALTHOUGH HE is one of the richest people in F1, John Paul DeJoria is a relative newcomer to the sport and is little known within the paddock. The Austin, Texas resident invested in the citys new Circuit of the Americas, pumping in the funding needed to get construction finished in time for its first race in November 2012.

DeJoria made his fortune as the founder of Patron Tequila, House of Blues nightclubs and the luxury

shampoo range Paul Mitchell. It hasnt always been easy for him, though, as he grew up in foster care and at one stage had to sleep in his car because he couldnt afford rent.

His first experience of F1 came in 1995 when he visited the Monaco Grand Prix with his wife Eloise and her good friend Cher. He was hooked from that moment on. His daughter, Alexis, is a top-level dragster racer.

Dietrich Mateschitz

John Paul DeJoria

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

Phot

ogra

phy:

Get

tty/

Cir

cuit

of th

e Am

eric

as

owner oF red BuLL racinG and toro rossoNATIONALITy / Austrian

4,755m

2,680m134 Lifestyle | Rich list

co-owner oF circuit oF the americasNATIONALITy/ American

ALTHOUGH HE was born in Malaysia, Ong Beng Seng known as OBS in F1 circles made his name in Singapore. He owns large property interests in the country, which made him the perfect businessman to fund the Singapore Grand Prix when it came onto the calendar in 2008. He owns three of the citys top hotels and Grand Prix weekend is one of the busiest times of the year. Its great promotion for his assets.

In the five years that its been on the calendar Singapore has already become known as one of the top races in F1 and has frequently been compared to Monaco. Ongs contacts and know-how have made this possible.

F1 brings 80,000 people each year to Singapore. They stay in Ongs hotels, eat in his restaurants and shop in his luxury goods stores. Plus the race is great advertising for Singapore as the city street circuit gets beamed to half a billion viewers around the world.

Ong isnt a one-man show. His wife Christina is an oil heiress who owns a stake in Mulberry handbags. Their other assets include Singapores Ferrari dealership and the Hard Rock Hotel in Bali.

Despite his F1 interest, Ong is known locally for his poor driving skills and once drove his Volvo into the middle of a roundabout on a busy Singapore junction.

THE SON of Malaysias former prime minister Mokhzani Mahathir is one of the richest and most influential men in the country. Hes best known in F1 as the chairman of Sepang International Circuit, the home of the Malaysian Grand Prix. Sepang joined the calendar in 1999 and despite early criticism from fans that the circuit was boring it remains a fixture 14 years later.

He started his business career with Shell as a petroleum engineer. His experience led him to set up Kencana Petroleum, the source of most of his wealth. When Kencana merged with another Malaysian oil company, SapuraCrest, in 2011 it became Malaysias largest oil and gas provider and propelled Mahathir into the league of the super-rich.

He admits he is hooked on fast cars and is a keen amateur racing driver. He owns a string of Porsche dealerships and is the owner of one of only two Bugatti Veyrons in Malaysia. He doesnt spend all his money on cars and is a keen philanthropist. He also owns a hospital group, which sends doctors to Malaysian villages to provide free treatment and medicine to local people.

TExAN BILLIONAIRE Billy Joe Red McCombs is a late-comer to Formula One, first getting involved as an investor in the new United States Grand Prix venue, Circuit of the Americas, at the age of 83. McCombs made his fortune through the Red McCombs Automotive Group chain of car dealerships, which he set up in the 1950s. At its peak he owned 55 dealerships across America. He then founded the Clear Channel Communications advertising and entertainment group in 1972. Clear Channel went on to become one of the worlds biggest media companies with a string of radio stations, billboards and live events and McCombs cashed out his interest in 2006.

Hes a big sports fan and in 1972 bought the San Antonio Spurs basketball team, which he guided into the top NBA league before he sold the team in 1985. He later spent 150m on the American football team, the Minnesota Vikings, which he sold in 2005, and owns a horse racing stud farm in Kentucky.

In 2010 he turned to F1 by becoming a major shareholder in Circuit of the Americas in Austin, Texas. The 250m circuit has since been hailed as one of the best venues on the calendar.

SON OF the legendary Saudi arms trader Akram Ojjeh, Mansour Ojjeh owns 25% of the McLaren team through his TAG Group. Ojjeh became hooked on F1 after visiting the 1978 Monaco Grand Prix as a guest of the Williams team. He led his fathers company TAG into F1 first as a sponsor of Williams and then as an owner of McLaren.

In 1985 TAG bought Swiss watchmaker Heuer, creating TAG Heuer, and the brand became a prominent feature in F1, sponsoring McLaren and the on-screen timing features.

Under Ojjehs expert guidance, TAG Heuer sales rocketed as he modernised the watchs image by using well-known sports stars in its advertising campaigns, and in 1999 he sold the company to Frances LVMH for 500m.

Hes a regular at F1 races and is often pictured hanging out with his high profile friends, such as Michael Douglas and Catherine Zeta Jones. Ojjehs other assets include Farnborough airport and Kogo, one of the worlds largest private yachts.

Ong Beng Seng

Mokhzani Mahathir

Red McCombs

Mansour Ojjeh

Phot

ogra

phy:

Sut

ton-

imag

es.

promoter oF the sinGapore Grand prix NATIONALITy / Malaysian

chairman oF sepanG internationaL circuit NATIONALITy / Malaysian

co-owner oF circuit oF the americas NATIONALITy / American

co-owner oF mcLaren NATIONALITy / French/Saudi Arabian

1,070m 870m 655m940m

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

Photography: Sutton-images.com

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

Photography: Getty

136 Lifestyle | Rich list Rich list | Lifestyle 137

MALAySIAN AIRLINE tycoon Tony Fernandes has one of the fastest growing fortunes in F1. Educated at British private school Epsom College, he worked as an accountant at Virgin Atlantic before being promoted to financial controller at Virgin Records. He returned to Malaysia in 1989 to run Warner Music in the country, but the airline industry remained his big love.

After seeing EasyJet founder Sir Stelios Haji-Ioannou on TV in 2001 he was inspired and bought the Malaysian governments stake in struggling AirAsia for just one ringgit (20p). Its now worth 1.8bn. Fernandes made the airline a success by making it the cheapest option to fly in Malaysia, a country where he estimates only 6% of people have flown on

a plane. A ticket gets passengers just the flight all luggage is charged for and blankets and pillows can be bought onboard along with meals. Hes since launched another four airlines and also Tune Group, which has given him the opportunity to branch out into hotels, banking and telecoms.

Hes a big sports fan and tried to buy West Ham before Bernie Ecclestone sold him 66% of Queens Park Rangers in 2011 for a rumoured 35m. QPR has not performed as well as he hoped and was relegated from the Premiership at the end of the 2012/13 season.

His F1 team is also performing below expectations. In its first three seasons in F1 it finished in lowly 10th place in the championship every year.

Tony Fernandes

Phot

ogra

phy:

Sut

ton-

imag

es.c

om

owner oF caterham NATIONALITy / Malaysian

470m

FORMER LORD Mayor of Melbourne Ron Walker brought the city onto the calendar as the new home of the Australian Grand Prix in 1996 and has been a well-known figure in F1 ever since. Walker made his first millions in the 1970s when Brooke Barmer, the chemicals company he set up, was sold for 8m and hes featured on lists of Australias richest men since the mid-1980s.

After his success in the chemicals industry he turned to property and took advantage of a building boom in Melbourne. One of his biggest deals was developing the citys Crown Casino, the largest casino complex in the Southern Hemisphere. He also made money from

investments in Fairfax Media, the publisher of some of Australias biggest newspapers, and in the mining and telecoms industries.

But sport was always his real love. Before turning to F1, he led Melbournes unsuccessful bid to host the 1996 Olympics and was the chairman of the committee that brought the 2006 Commonwealth Games to the city, personally lobbying voters in 71 countries to secure the bid. Hes still heavily involved in the Grand Prix although has had to slow down in recent years. In 2010 he underwent brain surgery following a fall while cycling in Melbournes Botanical Gardens.

Ron Walkerchairman oF austraLian Grand prix corporation NATIONALITy / Australian

550m

Phot

ogra

phy:

Sut

ton-

imag

es.c

omRich list | Lifestyle 139

A FORMER boyfriend of the Duchess of york, Paddy McNally made his name in Formula One as the founder of the Paddock Club, the sports luxury hospitality business. When he began his work three decades ago, hospitality in F1 usually meant being served a warm beer and a packet of crisps. However, McNallys relentless attention to detail saw F1 hospitality become the global standard in sport.

Today F1s organisers transport 40,000 glasses, 30,000 plates, 10,000 cut flowers, 5,500 magnums of champagne, and 200 tonnes of tent material to each race. McNally also oversaw F1s trackside advertising operations and transformed it from blocks of scruffy, randomly sized hoardings to neat rows of banners, optimised for TV, which cost sponsors millions of dollars per race.

McNally sold his company Allsport to F1s new owners CVC in 2006 and although he has since retired from the day-to-day running of the business he still owns a 1% stake in Formula One, worth around 60m.

He spends much of his time in the Swiss ski resort of Verbier, but recently restored Georgian mansion Buckland House in Oxfordshire, despite opposition from local cricketers who he banned from playing on the front lawn.

Paddy McNallypaddock cLuB Founder NATIONALITy / British

460m

THERE IS a saying in motorsport that the best way to become a millionaire in Formula One is to start as a billionaire. Flamboyant Force India owner Vijay Mallya knows the feeling. He has a wide range of business interests spanning breweries, airlines and engineering, and has also served as an MP in his home country, but recently times have been tough. Once one of a select group of Indian billionaires, Mallya has seen his fortune plummet in recent months as his Kingfisher Airlines was grounded.

The son of industrialist Vittal Mallya he was always destined for a business

career. Mallya took over as chairman of his fathers company United Breweries Group in 1984 and set about turning the struggling brewery around. By 2007 United had become one of the worlds biggest brewers.

In 2007 he teamed up with Dutch internet entrepreneur Michiel Mol to buy Force India for 80m from supercar manufacturer Spyker and has been an enthusiastic member of the F1 circus ever since.

He is a great self-promoter, involved in a wide range of projects. His Kingfisher brand has its own swimsuit calendar, which was the subject of an Indian reality TV show.

He owns more than 40 houses around the world, including a Scottish castle and a South African game lodge, plus a tropical island, a stud farm and a vast collection of classic cars, the highlight of which is a Rolls Royce garbage truck that used to belong to a maharajah. He spent 1.2m at auction acquiring the belongings of Mahatma Gandhi. His private yacht, the Indian Empress, is one of the largest in the world at 95 metres.

Vijay Mallya450m

owner and team principaL oF Force indiaNATIONALITy/ Indian

Phot

ogra

phy:

Moy

/Sut

ton-

imag

es.c

om

Phot

ogra

phy:

2

013 S

ahar

a For

ce In

dia F

orm

ula O

ne T

eam

140 Lifestyle | Rich list Rich list | Lifestyle 141

THE ONLy surviving son of the late great Enzo Ferrari, Piero Ferrari has a 10% stake in the car company and is a keen follower of the F1 team. Pieros mother was Enzos mistress, Lina Lardi, and his father didnt publicly acknowledge him until the death of his wife Laura in 1978.

Piero had already been working incognito at Ferrari for several years by then. He inherited from his father a love of engineering and worked on the road car division of the car company before taking a job overseeing the racing department in the mid 1970s.

When Enzo died in 1988, Piero was his only heir and he was elected as vice chairman of Ferrari. He also has other business interests including a stake in car design firm Pininfarina and is president of the Piaggio Aero private jet company.

Through his role at Piaggio he commissioned a one-off Ferrari-branded small plane, which reflects the design of the companys cars and is one of the most powerful aircraft of its type.

He lives in his fathers old home in Modena and is a big supporter of his achievements.

THE yOUNGER son of an Italian aristocrat, Luca di Montezemolo flirted with being a rally driver before he got a job as Enzo Ferraris assistant in 1973. A year later he was appointed team principal of Ferraris F1 team and under his guidance it won world championships with Niki Lauda in 1975 and 1977.

Ferraris new owner, Fiat, was impressed. Di Montezemolo was appointed as the car manufacturers head of external relations in 1977 and at the age of 30 was the youngest senior manager in the history of the company.

He worked for various parts of the Fiat empire, including jobs as head of drinks company Cinzano and running the first Italian Americas Cup yachting entrant. He also masterminded the Italia 90 World Cup tournament.

But fast cars were still a big draw and in 1991 di Montezemolo was appointed president of Ferrari, which had been struggling since Enzos death in 1988. He not only brought it back into the black but he also spearheaded its return to F1 success by signing Michael Schumacher who would go on to win five world championships.

Piero Ferrari

Luca di Montezemolo

Ferrari owner NATIONALITy / Italian

Ferrari chairman NATIONALITy / Italian

270m290mPh

otog

raph

y: L

undi

n/Su

tton

-im

ages

.com

/Get

ty

Phot