Formula One is possibly one of the most expensive, if not the most expensive sports to participate in. This has led to many to complain about the cost crisis currently underway within the sport. Smaller teams including Caterham and Marussia have struggled with the later team folding at the end of the 2014 season.
This turmoil led to a situation this past fall where there were only eighteen cars on the track in Austin at the United Sates Grand Prix. Two teams, Caterham, and the now defunct Marussia could not afford to enter the race. This comes on the heels of the 2012 collapse of HRT.
It also raises questions of how level the playing field is in Formula One. The top team in terms of spending and performance, Red Bull Racing, spent £177m ($270m) or £8.8m ($13.5m) per race. This is in contrast to Marussia the eleventh ranked team, spent less than half of that total, leaving them at a large disadvantage. Such a disadvantage made it difficult to compete and helped to hasten their eventual collapse.
The collapse of some of the constructors had been predicted before though. Max Mosley warned on teams collapsing years ago and it looks like some of the teams in Formula One could be heading towards a dark conclusion.
Why is Formula One So Expensive?
To understand why teams are struggling it is important to know what makes F1 racing so expensive. To start car costs somewhere in the neighborhood of £1.7m ($2.6m), and each team needs two of them. Each driver is allowed and usually goes through eight engines. Usually engines amount to about 10% of an annual team budget. Then there are the costs of operating the team. This includes salaries for a couple hundred people from promotional staff, to drivers, to pit workers. It also includes the cost of transporting two cars, spare parts, engines, tires, and staff around the world to the various Formula One events.
Attendance Problems
In recent years Formula One has faced attendance problems at some of its marquee events. Events in Abu Dhabi and India have struggled in the 2014 season to draw in spectators. And five years ago the Montreal Grand Prix did not go ahead at all for a lack of an overall sponsor. These attendance issues compound the problems for many teams. It decreases the value to corporations realised from sponsoring the teams in races as lower attendance means a smaller audience views the sponsorship ads.
Does Management Care?
There is little doubt Formula One has become too expensive, not only for teams but also for patrons. The reality is F1 racing is a niche sport, and as a niche sport it is important to keep the competitive field as broad as possible in order to keep patrons in the seats. At this point many fans have rightly concluded management is unfazed by the prospect of a 2015 season where there are only 18 cars on the grid. Their actions seem to indicate a preference for fewer teams, while patrons reducing their attendance indicate a preference for a more competitive field.
