The top rung of single-seater auto racing, the Formula One, or the FIA (Federation Internationale de l'Automobile) Formula One World Championship, is widely acknowledged as the most expensive sport in the world.

With a number of teams bankrupt and being bought out in the past, investments range from car and engine development, drivers, testing, apart from continuous spending on fuel, tyres and other team expenses. As the global economic climate worsens, big-ticket sponsorships have become even harder to come by. But how does it make money? The F1 industry generates over $4 billion a year. Commercial rights produce $1 billion annually, and its top teams have operating budgets in excess of $400 million.

According to research by Deloitte, the 18 Grand Prix in 2007 produced average revenues of $217 million. This is much higher than in other sports. Revenues per game in the NFL are an estimated $24 million, $8 million in the FA Premier League and $2 million in the MLB.

Owners

The Formula One Group is owned by Delta Topco, a company owned in turn by CVC Capital Partners, which has a 63.4 per cent stake. Mr Bernie Ecclestone, F1's ‘supremo', has a personal stake of 5.3 per cent, with his family trust owning 8.5 per cent and management and advisers making up the remaining minority shareholders.

Delta 3, F1's commercial rights' holder, receives all the revenue from fees TV stations pay to screen F1 as well as the fees paid by circuits and sponsors of the sport. According to Forbes , despite the 2009 recession, Delta 3's revenue rose 6.4 per cent to a record $1.1 billion with its operating profit more than doubling to $193.1 million. Around $450 million of Delta 3's revenue comes from fees paid by broadcasters with another $450 million from fees paid by GP promoters. The remainder comes from series sponsors, such as F1's official logistics partner DHL and financial services partner Allianz.

Building a brand new permanent circuit is expensive. The Buddh International Circuit cost an estimated $400 million. Other circuits, such as Australia's Albert Park, which are converted public roads, cost much less. Permanent circuits generate revenue all year round from leasing the track for private and other races. It is estimated that ticket receipts and other secondary spending currently represent only around 10 per cent of total revenue. And so, it is increasingly common for circuits to receive some amount of money from their governments, national or local.

Team owners

Some teams, such as Ferrari, come into the sport with manufacturer backing. But many have pulled out recently, citing indifferent performance. These include Honda, BMW and Toyota. Other teams get money from wealthy owners, such as Red Bull owner Mr Dietrich Mateschitz, or even Force India's, Mr Vijay Mallya and recently Sahara Group's Subrata Roy. Sponsorship is another crucial part of teams' revenues. The teams also receive money from Mr Ecclestone. It is estimated that around 50 per cent of revenues each year is shared with the teams.

Depending on a driver's status, he may be paid to race for a team or may even pay them to let him drive. Nowadays, it is more common for a driver to bring sponsors to a team that may directly or indirectly finance his place in the squad.

Sponsors

The F1 World Championship is the most widely watched sports event in the world, with 580 million unique viewers a year. And it is still expanding. In the last few years, there have been races in China, Turkey and West Asia for the first time. The Indian Grand Prix is the latest emerging market addition.

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