How do teams in Formula 1 get their money back

Formula 1 has changed radically in recent years, and teams have had to adapt. Up until the early 2000s, teams were mainly owned by wealthy entrepreneurs. However, in recent years, even the historic teams have undergone transformations, as has happened in many other industries. McLaren, for example, is majority-owned by the Bahrain Mumtalakat Holding Company, which is linked to the royal family of the namesake state. Red Bull is 51% controlled by Thai billionaire Chalerm Yoovidhya, while the Saudi fund PIF holds 20% of Aston Martin, and there are rumors this share may increase in the coming years, not to mention the already lucrative sponsorship with Aramco.

The fact that Formula 1 has attracted billionaires and investors from all over the world means that it is also a sport that generates extremely high revenues. In 2024, F1 generated 3.4 billion dollars in revenue, a leap of over 189 million compared to 2023. But where does this revenue come from? 32.8% comes from media rights sold to television networks and media companies around the world, 29.3% from ‘race promotion fees’—that is, the money paid to Formula 1 by each organization that wants to host a race—while 18.6% comes from sponsorships by various brands, such as luxury brands, tech giants, and energy drink companies. The remaining income comes from merchandising, licensing, hospitality packages, and VIP experiences, all of which further enrich F1, making it one of the wealthiest sports in the world.

How do the teams earn money? 

The Constructors' Championship has a very high economic value, and every position in the standings significantly affects the finances of F1 teams, which from next season will be eleven with the entry of Cadillac. So, when we see teams fighting for eighth and ninth place in the Constructors' standings, we shouldn’t be surprised. For example, in 2024, 1.53 billion dollars were distributed among the teams: McLaren, which won the championship, earned 161 million dollars, while Ferrari received 151 million, and Red Bull 140 million dollars.

Looking at the bottom three teams in the standings, AlphaTauri earned 90 million dollars, Williams 79 million, and finally Sauber 69 million. The gap between first and last place is nearly 100 million dollars, enough to impact a team’s sporting and financial plans in the medium term. Although F1 tries to keep economic inequalities in check through the ‘cost cap’, which is around 135 million dollars per team to spend over a season, these costs can vary significantly due to race incidents, which, although spectacular, have a strong financial impact on mid- and lower-tier teams.

The Concorde Agreement

The ‘Concorde Agreement’ has governed Formula 1 for many years. First introduced in 1981, the contract between Formula 1, its governing body (the FIA) and the teams was created to resolve the various disputes that arise each year. Since then, it has evolved into a crucial document that regulates everything from revenue distribution to financial rewards for teams. The current contract, signed in 2020, introduced a cost cap and revised prize distribution to ensure that smaller teams receive a fairer share of revenues.

According to the 2020 agreement, among other provisions, Ferrari receives a historical bonus estimated between 5% and 10% of the total prize pool, as it is the only team to have competed in every F1 season since 1950. This particular clause, in effect until the end of 2025 before next year’s major overhaul, has sparked controversy, as many believe it provides an unfair advantage—considering that the Maranello team receives a guaranteed stream of extra income regardless of its standings position, thanks to the brand’s value.