The Economics of Motorsports

Readers will find here not only the standard list of contents, but also several references to the mythical names of Formula One who inspired the author and who are still inspiring many Formula One lovers—names like Ayrton Senna, Alain Prost, Nigel Mansell, and Lewis Hamilton. After reading this introduction, you will realize that this book on the economics of Formula One is like driving on a hard track, with many statistics, debates, and models, as well as implications for being overtaken and for challenging those coming from behind.

In the previous chapter, I stated that cost means effort. I also noticed that we only make an effort if we expect to be rewarded. Formula One, therefore, needs the energy of thousands of people who invest their own multiple values. The tangible aspects of these values are inflows, identified as revenues. But when we discuss the revenues of Formula One, we have to distinguish between the revenues of the parent company of Formula One competitions and the revenues of Formula One teams. As a consequence, we will start by clarifying the revenues of the Formula One parent company, and then we will move on to the revenues of Formula One teams. This chapter will detail some important revenues for motorsports, such as advertising, sponsorship and prize money.

Everybody wants to—absolutely, relatively and/or symbolically—win in sports competitions (as in daily challenges). Formula One drivers are not exempted. However, winning in sports is the result of talent, starting conditions, training, effective budgets, and luck. Therefore, winning in Formula One is discussed here based on the various dimensions analysed in the existing literature. In this chapter, I also extend the discussion to drivers’ standings, independently of podium drivers. Additionally, competitive balance is also analysed because sports whose winners are easily predicted become boring and have serious problems of sustainability. Therefore, discussing the competitive balance of Formula One is a relevant initial step for understanding how Formula One has evolved since the early races of the 1950s.

The history of Formula One has seen many teams. As shown in the tables in this chapter, few of these teams have been able to participate in more than three hundred races. Therefore, it is worth discussing these low survival rates, as this chapter will do. By reviewing the literature, comparing the past with the present, and by re-analysing the data previously discussed, readers will recognize that the absence of points, the difficulty of finding generous sponsors for teams and drivers, the overly high fixed costs (mainly related to engines and fees, as discussed in the chapter titled ‘The Costs and Benefits of Formula One’), and the highly uneven distribution of prize money have contributed to the survival challenges faced by most Formula One teams.

Surviving is a daily task for all of us. We try to survive in a world full of diseases, viruses, and natural threats. We also try to survive in professionally competitive employment. And, obviously, we try to survive emotionally, independently of being a single man or woman or a lovely grandfather or grandmother with a full hand of lovely, noisy grandchildren. Formula One drivers also survive, professionally and physically. They try to survive in cars reaching more than two hundred miles per hour, in teams with many competitors, and under the pressure of the many millions of dollars invested by rarely patient powerful people. This chapter will discuss how Formula One’s drivers have been trying to survive in such a hard world.

It is difficult to find another sport which makes so many people travel so many kilometres around the world every year more than Formula One does. However, when focusing on three major dimensions of this sport—the number of races, drivers, and constructors since 1950—we realize that only a few countries have had the experience of hosting Formula One races, of being the birth countries of Formula One drivers, and of being the headquarters of Formula One constructors. In this chapter, we are going to explain this diversity by using (ordinary) least squares regressions and binary outcome models. We found a consistent determinant for a country falling in love with Formula One: the share of national income allocated to R&D expenses. Therefore, if you rule a country and you want to rank it as a major power in motorsports in the medium term, you should pay more attention to current R&D. Other dimensions have also been found to affect Formula One numbers around the world. Let’s check them.

As this book draws to its end, it is the moment to present and briefly discuss the descriptive statistics of the data previously used. We will start with a proper reflection on data availability concerning the universe of Formula One and the cautions which must be noted by any researcher intending to work with motorsports data. Employing tables of descriptive statistics, this chapter will also take the opportunity to review some of the impressive records of Formula One drivers, teams, and countries.

This chapter concludes the book with comments on its structure. The chapter also highlights the major weaknesses and strengths of the book, pointing to various challenges to be addressed by Formula One scientists, fans, and readers.