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Sun 8 Apr 2007 12:00 AM

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The fast road to slow cash

Formula One may be the sport of millionaires, but as a business proposition, it looks decidedly shaky.

Two years ago I was lucky enough to be invited to the Monaco Grand Prix. As you would expect, it is something extra special: the glamour, the glitz and the glitter. The small matter of 22 cars racing around the streets of the principality at 200 miles per hour seemed to be incidental. If anything, the two-hour race on a Sunday afternoon was an unwanted distraction from three days of festivities.

Next Sunday, the Formula One circus comes to Bahrain, as I suspect many of those very same teams will be asking the very same question: is it really worth it?

As we report this week, Formula One may be the sport of millionaires, but as a business proposition, it looks decidedly shaky. Take Renault, which ran away with last year's world championship. Its total income was around the US$170 million mark. Good stuff. Until you work out the costs, which topped the US$180 million mark. No wonder two years ago, the last time it published figures, losses came in at US$13 million. And this from one of the very top teams.

As anyone in the sport will tell you, it has just got to big to be viable. Teams can expect no more than US$20 million a year from television income, and are forced to find the rest - at least US$130 million a year - themselves. Salaries for each team now average US$55 million a year. What other business do you know of where the top people are paid in excess of US$10 million a year.

I know that many teams have done their sums over and over again - and some, such as Jordan - decided there was no way forward. So they left the sport.

In Bahrain just eleven teams will line up, most of them consortiums quickly put together. Those at the lower end of the grid face a battle to just make it through this season, with race operations and testing costing US$60 million in the next six months.

The biggest problem is the top teams such as Ferrari and McLaren spend over U$100 million on research and testing each year - forcing all other teams into the same spending bracket.

Unless controls are placed on spending from the sport's governing body, a serious cash crisis is around the bend.

What is needed is for all the teams to agree a maximum amount they can spend each season on testing. Right now, McLaren is enjoying the benefits of a US30 million dollar a wind tunnel at its factory in Woking. Anyone who's been there is usually impressed with what they see. Unfortunately, that includes some of the smallest things in the sport, which are forced to spend the same amount, even though they have no hope of getting this money back. The same goes for driver's salaries and other expenditure. I suggest a maximum US20 million dollar per year spending on testing, and reducing the number of races per year by four. This would instantly bring down costs by 22% for each team it would also mean that the struggle for survival each year is over. And once again we can all start to admire amazing cars going at amazing speeds, rather than making amazing losses.

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