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Why Do Ferrari Get More Prize Money In F1?

The iconic red cars of Ferrari are synonymous with F1 racing. A season of F1 just wouldn’t be the same without the Ferraris and their passionate fans, the Tifosi. In fact, the sport’s commercial agreements encourage Ferrari’s participation, by giving Ferrari more prize money.

Ferrari get more prize money in F1 because they have been part of the F1 World Championship since the very first season in 1950. Ferrari is also the most successful team in the sport’s history. They receive an additional $35 million annually, over and above all the other prize money they are paid.

There is so much history with Ferrari and F1. There is also a lot of the commercial arrangement that has changed recently with the new commercial rights holder in charge. Let’s have a look at more of the details to better understand why Ferrari gets extra cash, just for taking part.

How Much Do Ferrari Make From F1?

It is estimated that Ferrari’s F1 team receives approximately $500 million per year in total from F1. This fuels what they spend each year to stay competitive. The prize money (and other payments from F1) make up a big chunk of that revenue, but sponsorships are still a larger amount.

The profit that Ferrari makes from F1 is not published by the team themselves, but a lot of the numbers can be pieced together from other sources. To further complicate things, Ferrari has varied interests within F1, such as selling their engines to other teams on the grid, alongside running their own two cars.

It appears likely that the Ferrari F1 team broke even or made a modest profit in 2021. This is gauged on other top teams such as Mercedes and Red Bull apparently ending with similar financial outcomes. Even for the top teams in F1, the value in the sport is visibility and branding, rather than simply a source of direct income.

Prize Money Payouts

The amount of prize money, or money paid by the F1 holding company, that each team gets is complicated. There are a few different categories that each team receives money for. There is a base payment from the sport’s profits to each team, simply for participating. Then, as expected, some money is awarded based on the position each team finished in the championship.

However, there is also a Constructors’ Championship bonus fund, which makes larger payments to those teams who have finished within the top 3 of the constructors’ rankings over the previous years. This is usually focused on Red Bull, Mercedes, and Ferrari.

Over and above this, Ferrari gets an additional legacy payment – currently an extra $35 million per year. This is the clearest indication that Ferrari is treated differently to other teams, mainly due to its longevity and success in the sport. However, politically, it has also been very involved with the sport’s management over the years and has leveraged its position of influence.

Why Do Ferrari Get More Prize Money In F1?

Ferrari get more prize money in F1 because they are the only team that has competed in the F1 World Championship every year since it was formed in 1950. On top of that, they are the most successful team in the championship, with 31 world titles (combining constructors’ and drivers’).

Ferrari also proclaimed in 2020 that they were the first team to have completed 1000 Grands Prix. This certainly is impressive and does highlight their longevity in the sport. However, Ferrari’s preferential treatment goes further than just being the longest-running team in the championship. They have historically been intertwined with the political running of the sport.

Under Bernie Ecclestone’s management (from 1978 until 2017), there were several controversies and flashpoints of disagreement between F1 management and the various teams. Despite this, it was generally accepted that the sport could not afford to lose Ferrari. Therefore, some concessions were made to ensure that it was in Ferrari’s interest to keep racing.

Under the more transparent current ownership by Liberty Media, the approach to the sport’s marketing and governance has changed significantly. However, Ferrari has still managed to maintain some of their special treatment.

The Concorde Agreement

The Concorde Agreement is essentially the commercial agreement between the teams and the Formula 1 rights holder. It is the agreement that the teams sign to commit to taking part in the championship. The first Concorde Agreement was signed in 1981 at the FIA offices on the Place de la Concorde in Paris, giving the agreement its name.

A new Concorde Agreement is typically signed every 5 years or so. As one can imagine, there are often some contentious issues that delay the signing. Historically, the Concorde Agreement was seen as the means of Formula One Management (FOM) trying to wrangle the teams into accepting as little money as would keep them racing.

However, the sale of the sport’s commercial rights to Liberty Media in 2017 saw a shift in attitude towards the division of the sport’s proceeds. The focus seems squarely placed ongrowing the size of the pie, and then slicing the pie up more equitably between teams. This aims to ensure that the sport and the individual teams are more financially sustainable.

The current version of the agreement was signed in August 2020 and is in place for the years 2021-2025. Although the agreement is not published, it is understood that the intention is now aimed at increasing the competitiveness among teams to provide closer racing and a more entertaining show.

Do Ferrari Still Get The Same Amount They Used To?

Ferrari do not still get the same amount they used to. Their unique annual bonus is now less than it used to be. Ferrari still receive a legacy payment, and they are the only team that still do. In the Concorde Agreement signed in 2020, this payment was significantly reduced.

What Other Perks Do Ferrari Get In F1?

Another unique perk that Ferrari has in F1 is their veto. Ferrari are entitled to prevent a potential change to the technical or sporting regulations of the sport that may require Ferrari to alter its car. This perk is carefully protected as it is a vital part of the Ferrari agreement conditions.

This veto was negotiated by Enzo Ferrari at a time when his team was the only one running a V12 engine, whereas the other teams were running V10s. Ferrari at the time was also the only complete constructor and engine manufacturer. Mr. Ferrari did not want to run the risk that the V12 engine his team had developed could be outlawed by a regulation change forcing all teams to run V10s.

Once the veto was agreed and written in, it was and has been carefully protected since then. After the current Concorde Agreement was signed, Ferrari’s team principal was publicly quoted as saying that keeping the veto was “essential” to their negotiations in the agreement.

Final Thoughts

Ferrari get more prize money in F1 because they are the only team to have competed in every F1 World Championship and are the most successful team in the sport. F1 has always wanted to ensure Ferrari keep racing in the series, and so agreed to extra privileges and payments.