Performance based revenue allocation in Formula One

Abstract

Formula One is one of the most prestigious motor racing championships around the world. The participating teams share rights and advertising fees (Formula One Prize Money) partly based on their performance, but nowhere near evenly: the recipient of the highest award in 2019 (second in the previous year), Ferrari, received four times as much as the last Toro Rosso. It is reinforced by the sports literature that the balance of competition increases viewership and, thus, revenues. Popular teams like Ferrari and Mercedes, on their own, can count on serious sponsorship support. However, a significant part of other teams' budget comes from prize money, so it is not surprising that some teams towards the end of the rankings have faced bankruptcy in recent years. Formula One needs a sufficient car number. Otherwise, the number of exciting moments during the race is significantly reduced.