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Formula One: The Business Sport

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Virtually all Formula One fans love the sport for its competition. A proof of this is the television audience rates in the 2010s: in Brazil, at least, the number of viewers was falling year after year during the Turbo Era, which marked the dominance of Sebastian Vettel, while it began to increase at record levels when it started a certain balance between Mercedes, Ferrari, and Red Bull. However, fans get so emotional from the cars’ disputes that they forget about a definitive factor in Formula One: money.

I decided to do this article because of an unpleasant episode that happened to a friend of mine. In a Whatsapp group, she talked to a professor and, to reinforce her point of view, included a weblink to an article on the Motorsport website signed by Adam Cooper, which reported on the investments of Sebastian Vettel in Aston Martin. Behold, a man appears and then laughs at her comment, finding it absurd that someone says that a four-time champion buys a place in a team, even if the facts show just that. My friend responded well, arguing that Vettel was not indeed acting as a four-time champion (look at his accidents and results, which in no way resemble his champion days). But the man kept making fun of (and still questioned the journalistic quality of Cooper, an experienced and respected journalist in the area), ignoring a simple question: Why would anyone invest in a team in which they could not participate?

This story proved that the mentioned guy does not know Formula One well, but many fans also do not realize the sport’s financial character. It is no wonder that many journalists try to sell sensationalist headlines based on creating controversies about money instead of informing fans about the role of money in Formula One. As we propose to inform and raise awareness, here is the true face of world motorsport’s top category.

 

1- Expensive sport, investors rule

 

Anyone who accesses the Formula One website notes that there is a part reserved for partners, in other words, the sponsors. As Paulo Mourão well defined in his book The Economics of Motorsports: The Case of Formula One (2017), the costs of running each race are around millions of euros, as there are high material and human demands. Everything costs money in Formula One: the structures of the track and the paddock, the cars’ engineering, the physical preparation of the drivers, transport, the salary of the employees, among other components of the category. Many sectors benefit from this process (hospitality, fuel, tourism, etc.). As you may know, money does not grow on trees, so resources are needed to make all of this possible. Therefore, the sponsoring companies invest in the category for this purpose (other than Formula One revenues, such as selling tickets and consumables, taxes, transmission agreements, contribution rates for teams and organizers).

 

Bernie Ecclestone (the former owner of Formula One) and Chase Carey (the current CEO of Fórmula One). [1]

 

As well explained in the article Understand the Esteban Ocon Case (2019), the high costs of Formula One make it difficult for drivers who do not have significant financial support to cover the team’s expenses. Unfortunately, the sports media fails to teach the public that this is an intrinsic characteristic of the category. However, the following logic can explain it: the press vehicles are usually sponsored and avoid demolishing investments in general. Sensationalism ends up being a profitable business, as it holds more people’s attention and helps disseminate the materials. In other words: it is easier to label drivers and teams than to show that everything in Formula One is related to money.

 

2- The case of Sebastian Vettel

 

It is not uncommon to see drivers expanding their area of expertise. We had the cases of Jack Brabham, Jackie Stewart, and Emerson Fittipaldi as team owners; Niki Lauda was a shareholder and adviser to Mercedes, Alain Prost became an ambassador for Renault, among others. More recently, we had Lawrence Stroll, father of Lance, as a majority partner at Racing Point, and Nico Rosberg as the manager of Robert Kubica (although he quit the role months later). But the case of Sebastian Vettel has peculiarities that are fundamental to understanding the situation.

 

Fired from Ferrari, Vettel invested in Aston Martin. The event did not generate much controversy (if it were with other driver…) [2]

 

To start, except for Jack Brabham, all the drivers mentioned above (Fittipaldi, Prost, Roberg, and Stewart) entered the business world when they were no longer on the tracks. Sebastian Vettel is a member of the current grid and found himself on the edge of a precipice when Ferrari fired him. After all, as explained in the article The Dismissal of Sebastian Vettel, they were losing money and credibility with the German driver’s constant accidents. It is important to remember that the teams receive payments for their results, which are better when their drivers have consistent performances. It was useless to have won four titles with Red Bull in the early 2010s; nowadays, he was wasting good chances to score points with Ferrari. But Vettel did not give up and was willing to do anything to continue in Formula One, so he looked for an opportunity to invest in a team: he would make money as a driver and shareholder.

However, it could not be any team but one with great potential and real chances of triumph. Nobody wondered why Vettel did not buy Williams shares as Toto Wolff did? Or Haas? To realize why he got so interested in Racing Point, look at its growth in 2020. And unlike Wolff, who was thinking about marketing gains, Vettel wants to clean up his image and bring a glorious new chapter to his athletic career.

 

3- Conclusion

 

Even if the fans do not realize it, sport is a business. That is not the only case of Formula One (Brazilians will remember Neymar’s transfer from Santos to Barcelona, known as Neymargate). Sometimes the press does not instruct the fans properly because as much are people lay on the subject, it increases the chances of believing in sensationalist headlines and feeding a certain fanaticism through controversies. Therefore, many fans still do not realize that business is a much more significant component of Formula One than the competition itself.

 

The case of Neymar is one more proof of the inherent relation between money and sports. [3]

 

So, if you think that Sebastian Vettel does not need to buy seats because he was victorious in the past (even though this is, indeed, the current situation) or that Nico Rosberg managed Robert Kubica for charity, know that you are analyzing the case in a shallow way. And there is no point in laughing or trying to disqualify the other based on sex or age. Both sides must inform themselves to have a reasonable debate.

Bibliography

About Brazilian television audience rates

About the article itself

 

Note: Some sources consulted for this articles are present in the thesis “A Fórmula 1 no Brasil: Uma análise sobre a transmissão televisiva no país” (2020), that will be published by Faculdade Cásper Líbero (I gave sources for the author during the elaboration of the thesis and she gave me resources for my publication). I am clarifying his point so that there will be no accusations of plagiarism.

 

Photos

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