The Root of F1 Riches: Surviving with Sponsorships
Written by Caitlyn Gordon, Edited by Ishani Aziz
The Formula One brand is among the wealthiest and most extravagant in the world of sport. F1 has a market capitalisation of over $5.4 billion, with which it could keep the sport running for the next 100 years with no new income. Part of that brand is its exclusivity and expense, which means both the drivers, and the majority of the fans belong to a relatively small, and priviledged demographic. There are some exceptions, as both Lewis Hamilton and Esteban Ocon are notable examples on the grid coming from more modest backgrounds. What allows these drivers to break into the impermeable world of F1? And what is at the root of F1's riches? A good place to start is sponsors.
F1 has been around for decades, with its first race being in France, 1950. During this time sponsors were not what they are today. Today sponsors can be seen on car liveries, racing suits and drivers are often seen wearing clothing or accessory brands walking around the paddock. But back in the 1950s and 60s overt sponsorship was banned in the sport and there was not a sponsorship brand insight. This meant sponsors were not gaining any attraction and engagement from viewers. Both BP and Shell (oil providers of F1 at the time) notoriously withdrew from the sport due to the strict regulations in 1968. FireStone provided free tyres but then began charging for new ones as a retort. In response to the sponsor backlash, the governing body overruled their previous ban.
This was a historical change to the sport and the first team to take advantage of this new rule was Lotus, signing a sponsorship with Gold Leaf Cigarettes and switching their usual green livery to a red, white and gold livery. That deal led to the branded liveries we see today such as Vuse with McLaren and Petronas on the Mercedes.
Sponsorships contribute to team income but also to support individual driving careers through funding in lower categories. Lewis Hamilton’s father, Anthony Hamilton gave up his position at an IT company to become a contractor and secure the sponsorships required early on in Hamilton’s racing career. A crucial turning point was in 1997 when McLaren Mercedes took note of Lewis’ talent, earning him a place at their driver academy, and securing a much needed sponsor.
Similarly, Ocon’s father worked in a garage in France, but decided to sell the family home to support his son’s karting career. This was a huge leap of faith for the family which ultimately paid off when Ocon was now recognised as a top karting racer by Gravity Sports in 2011. Gravity Sports organisation was the co-owner of Formula One team Renault, this meant Ocon now had the sponsorship and backing to begin competing in single-seating cars through 2012-2014.
Other cases of sponsorship include ‘pay drivers’ such as Lance Stroll, who feed income into the team due to their stature. With these drivers come sponsorship deals that allow the team to stay afloat. In Stroll’s case, his father Lawrence Stroll provided the initial investment in what was then Force India Racing which has since then been rebranded. The obvious exchange for this investment is to allow his son Lance to race with the team.
Sponsorships are often vital to keeping a team alive. Famously, the Force India team were relatively successful for the better part of 10 years between 2008-2018. With Sergio Perez scoring five podiums, they finished a respectable fourth in the constructor’s in 2016 and 2017. The team took a blow when the CEO Vijay Mallya was accused of fraud and defaulting on loans, which meant the team was sadly put into administration. It looked like the end until a call came through from Lawrence Stroll who wanted to buy the team for £182 million. Although reborn as Racing Point, the team managed to survive and in 2020 became Aston Martin Racing.
There have been cases where sponsorships have been controversial. Smoking brands in particular became popular on car liveries between 1960-2000, producing famously iconic liveries by Marlboro, Camel, and John Player Special. This all changed in 2001 when the FIA stated all tobacco sponsorships would cease to an end in 2005. This was amended slightly in 2003, with the FIA announcing that this was not an official ban but a ‘recommended’ caution, and the decision stayed with teams. Ferrari, then racing in Marlboro livery, opted to continue their relationship. By 2010, promoting tobacco brands was fully banned in Europe but the iconic Marlboro-Ferrari partnership did not officially end until April 2022, marking the longest sponsorship deal in the sport, lasting 50 years!
In 2009 there was a different kind of controversy to the sport with the scandal of ‘crashgate’. During the 2008 Singapore Grand Prix, Renaults driver and the two-time World Champion Fernando Alonso started 15th on the grid. Alonso had no wins or podiums all season and from a lot of viewers' perspective it looked like nothing would change. As Alonso pitted early on lap 11, (which at the time did not seem suspicious), Nelson Piquet Jr. – Alonso’s rookie teammate at the time – then crashed a lap later, ultimately allowing Alonso to lead the race and win. Only a year later did Nelson Piquet Jr. come out and confess to being coerced by his team to deliberately crash. The FIA ruled the team would have a suspended ban; they could still race but if another incident happened, they would be banned indefinitely from the sport. This majorly affected the sponsors, as Renault was not the only team to be caught race fixing, it meant the integrity of the sport was now at risk and sponsors did not want to be involved with something that could damage their reputation as a brand. Two sponsors dropped out, one of which was Renault’s £100 million-pound sponsor, ING. This loss ended up being detrimental to their car and to their races on the grid in 2009 where Fernando Alonso finished ninth in the overall standings with only a total of 26 points.
Controversies still happen in more recent times. Rumours about the Mercedes sponsor FTX included the brand filing for Chapter 11 bankruptcy and facing $8 million in debt. FTX are now waiting for an investigation by the USA Securities and Exchange Commission to investigate criminal activity during FTX customer deposits. Former CEO, Sam Bankman-Fried was arrested and jailed with connection on multiple fraud charges involving FTX. This resulted in Mercedes announcing that FTX will be removed from the livery just ahead of the 2022 Brazilian Grand Prix, and since then has furthermore suspended the sponsorship between the pair until further notice.
Sponsorships are a complex creature of F1, both hindering and helping fund the talents of the sport.