The sport of Formula 1 is considered the pinnacle of motor racing. Although it does not have a large footprint in the United States (it has one race in Texas), it has races on every continent. But how does the sport make its $3 billion in revenue?
The revenue stream for the sport comes from three sources:
The first revenue stream is from race hosting fees. Circuits pay the sport to be able to host and run a race weekend. This is the largest source of income for the sport and is how Bernie Ecclestone has been able to get revenues (and profits) to skyrocket. Because emerging economies want to get their countries on the map, they are willing to pay as much as $80 million per race.
The second revenue stream comes from TV rights. Sky reportedly paid F1 over a billion Dollars for six years of exclusive coverage starting from 2019. Thanks to these gigantic figures, the TV viewing figures have dropped considerably as free to air TV can no longer afford these fees.
The third revenue stream is from long-term advertising deals. Heineken has agreed to pay $150 million for the next five years to promote the sport. In addition, there are trackside advertising deals that also contribute directly to F1 and not the circuits.
Now with the sale of F1 to Liberty Media, it remains to be seen what track they will take when it comes to marketing the sport.