Analysis: How sponsorship keeps F1 teams afloat

These numbers have, though, increased exponentially since 2017, when Liberty acquired F1’s commercial rights, subsequently striking the global ‘Drive to Survive’ Netflix deal, which brought F1 not only to new audiences but also, crucially, alerted US brands to the sport. Statistics show that the number of purely US brands to have struck deals with F1 teams has risen 50% from 100 deals to more than 150 since 2020.

However, such increases are not unique to US-based brands: Sauber, which just five years ago battled to muster a sponsor portfolio of 10 companies, today brags two linked sponsors (Alfa Romeo and Orlen) plus no fewer than 41 official partners and six (primarily technology) suppliers. Aston Martin, too, has two partners in its team title: Cognizant (naming) and Aramco (strategic). 

True, F1 was the first global sport to return to competition during the Covid pandemic and was thus immensely attractive to technology and information data companies with nowhere else to spend advertising budgets, but the bottom line is that teams managed to retain their support once (semi-)normality returned. 

Equally true, some agreements were worth a mere five or 10 million dollars back then but have since escalated to bigger deals. Oracle’s latest title partnership with Red Bull Racing now runs to eight times that! From small acorns…

While such large numbers apply to the top three teams – Red Bull, Ferrari and Mercedes – the last-named pulls $100m (£84.7m) via its Petronas agreement while Alpine’s income from BWT for a title and (shocking) pink livery deal amounts to just a third that. McLaren’s F1 CEO, Zak Brown, believes the market has never been more buoyant despite a tightening global economy.

“We're in the best state I've ever seen [F1] in because of how hot the sport now is. I think it’s also because the sport is now more ‘famous’ and fan focused,” Brown told Autocar during the US Grand Prix, where his team’s hospitality unit was packed to the rafters throughout race weekend.

“You could say it’s more corporate friendly because of how Liberty have positioned the sport versus Bernie [Ecclestone], who did an awesome job getting it to where it is,” added the former middling racer who cut his first sponsorship deal to fund his own career before switching focus to full-time motorsport marketing 30 years ago.

Apart from Netflix, Brown credits Liberty’s pro-active attitude to sustainability, which stands marketeers in good stead when approaching prospects for F1’s boom times.

“I think there was a risk [companies would turn on F1] but I think the sport has collectively jumped on it,” Brown said. “If we were seen as big emissions violators, the corporate world would leave, saying, ‘It’s just not sustainable’. However, between hybrids and the biofuels coming [in 2026] we're seen as leaders in sustainability, not just doing less bad. The sport is headed in that direction.”

Brown does, though, add a twist: “Even though the economy's rough, we're not feeling it here in Formula 1. I say ‘yet’ and I'm surprised we've not seen it yet….”

His McLaren predecessor, Ron Dennis, once opined that due to the length of contracts – usually three years with options – and various mutual obligation clauses, F1 was usually last into a recession but also last out as companies need to be confident about their immediate futures before committing large sums for extended contractual spells. Could the current economic situation mean a crunch is looming for F1?

If crypto markets are any guide, stormy waters seem to lie ahead: eight of F1’s 10 teams enjoy support from one or other of the crypto categories - which range from coins to exchanges - and already there is talk of Mercedes partner FTX breaching its covenants. Alpine sponsor Binance was linked to a buy-out of exchange but that has gone cold – causing ripples in the industry. Ferrari partner Velas lost 40% of its value in a year.

However, team bosses are confident about F1’s commercial future despite such headwinds: Enforced reductions in spend under the FIA’s $145m (£122.8m) budget cap, increased prize monies and sponsorship bonanzas - even without the cryptos - enable the teams to generate sufficient revenues to be profitable with no need to rely on the largesse of billionaire owners, as was previously the case.