Sportonomics: Formula One's Average Team Value Increases Dramatically...and it's Not Slowing Down Anytime Soon

After a recent study, the average value of a Formula One team has increased by a substantial amount. In today's sportonomics analysis, we will discuss how Formula One reached a new high in valuation and viewership and break down the numbers of it all along with what it means for the future.

In a recent study by Forbes, the average value of a Formula One team has increased by a substantial 276% since 2019 to a now U.S $1.88 billion. The top teams by values are Ferrari and Mercedes with U.S $3.9 billion and US$3.8 billion, respectively. The rise in the teams’ valuation aligns with their estimated revenues for 2023 which dwarf the rest of the grid, with Mercedes expected to earn around U.S $20 million more than Ferrari at U.S $700 million. Red Bull, with a valuation of U.S $2.6 billion and McLaren, with a valuation of U.S $2.2 billion have estimated 2023 revenues of $510 million and $490 million respectively. The other teams estimated to be worth more than U.S $1 billion are Aston Martin at $1.375 billion, Alpine at $1.4 billion, and AlphaTauri at $1.25 billion. Looking towards the back end, Alfa Romeo has an estimated valuation of $900 million while Haas and Williams gain the crown of lowest on the list with $780 million and $725 million respectively. Still, they are worth around three quarters of $1 billion. Unlike Forbes, a recent study by Sportico found Ferrari to be valued at U.S $3.13 billion, demonstrating the difficulty of correctly calculating the true value of a FormulaOne team. 

Formula One's rapid ascent makes sense. Let’s take a look at why. 

Formula One F1 - Mexico City Grand Prix - Autodromo Hermanos Rodriguez, Mexico City, Mexico - October 29, 2022 Alfa Romeo's Valtteri Bottas during practice REUTERS/Henry Romero

In 2021, Alfa Romeo declined an offer from Andretti Autosport for a majority stake worth around $350 million. Just 15 months later, Audi invested $650 million for a stake that will, over time, grow to 75%, almost doubling that initial offer. The offers demonstrate the speedy increase in value of FormulaOne as a business. Additionally, Forbes reports that Red Bull turned down an offer for AlphaTauri worth more than $1 billion. This offer corroborates Michael Andretti’s recent comments that every team is reluctant to sell. FormulaOne is only going to get bigger, and everyone knows it too. Looking at the recent Alpine Deal where RedBird Capital Partners and Otro Capital purchased a 24% stake in the team, valuing the French team at U.S $900 million. The terms of that deal were finalized eight months ago and Forbes believes the team can now fetch around $1.4 billion. 

If we take a look back, we will see the tremendous growth in valuation of Formula One even more apparently. In 2018, the average team revenue was only estimated to be around U.S $220 million. Today, only three teams are expected to generate a lower revenue. Estimates for 2023 team revenue in Formula One is nearly U.S $600 million according to Forbes. Teams can also benefit from this increased revenue even more than before thanks to the budget cap which is set at U.S $135 million for 2023. What’s more, Formula One teams are now profitable, a drastic contrast from previous over expenditure. The top Formula One teams could easily make more than $400 million per season on their chase to number one. Thanks to the income that teams at the back of the grid receive from Formula One’s central revenue, they only need around U.S $50 million in sponsorship revenue to cover the cost cap.

Lewis Hamilton has taken a snipe at Red Bull ahead of this Sunday's F1 Hungarian Grand Prix PA

Maximizing sponsorship is a large part of Formula One’s success. Sure, we see it on the patches of company ads on the drivers’ jacket, but let’s go deeper. Smaller teams make around 65% of their income from the central fund i’ve just mentioned. For the big teams, it is around 60%. Surprisingly, most sponsorship deals are actually undervalued due to the rapidly increasing value of the Formula One teams. This rings especially true with the big teams. Red Bull signed a five-year, $300 million deal with Oracle (a computer software company) before the start of the 2022 season, while Petronas (an energy group) signed an extension to their $75 million (per year) contract with Mercedes last year. The contract will kick in starting 2026. The more recent sponsorship deals were signed by the smaller teams like Haas and Alfa Romeo. Haas agreed to a five-year and $20 million per year deal with Moneygram (financial services company) and Alfa Romeo will be sponsored by Stake (gambling platform) on a three year $94.7 million deal. Going forward, the expectation is that, once the majority of these deals are up for renewal, the money required to title sponsor a Formula One team will increase. Renewal on most deals will likely come around the 2024 or 2025 seasons. 

The increased valuations of the teams can be attributed to Formula One’s global audience growth, with an impressive average of 70 million people watching each race in 2022. Thanks to this, global media rights are expected to reach higher than U.S $1 billion this year and possibly reaching $1.4 billion by 2029 according to a report by Seaport Research Partners. Viewership in the US grew 36% year-over-year, with an average of 1.2 million viewers per race in 2022. This unprecedented growth in the US is huge for Formula One as the US is their main target market at this time. ESPN even valued Formula One’s US media rights at around U.S $83 million per year between 2023 and 2025. 

The overall revenue will also benefit from the increased involvement of Live Nation Entertainment, which Liberty Media owns a 31% stake in. For the Las Vegas Grand Prix, Live Nation will be directly involved. As such, the Las Vegas Grand Prix is expected to generate around U.S $500 million in ticketing and hospitality-related revenue alone.

Formula One is not slowing down anytime soon.