Formula One is a cash king with big appeal

Formula One races take place in eight of the 10 nations with the highest gross domestic product, according to data from the World Bank.

It particularly appeals to a certain type of country: youthful; strident and outward looking.

F1 generated around US$1.9 billion in commercial revenues in 2015, of which $950 million was distributed to the teams. About half of this cash fund is shared equally with the other half allocated according to where the team finished in the championship.

That should mean that the sport is in good health but many of its 10 teams are struggling to make ends meet and many of its car pilots are “pay-drivers” – that means they have to bring their own sponsorship, and the person with the biggest sponsor gets the drive.

However, many of the pay drivers in F1 today come with good racing records. Sergio Pérez, Marcus Ericsson, Felipe Nasr, Esteban Gutiérrez and Jolyon Palmer are all GP2/GP3 race winners; drivers with their records commonly move up into F1 anyway. The fact that they can bring backing just makes them more attractive than their similarly-qualified rivals.

That cash pays for the cars and the research and development – which, ironically, is required to keep cars so technically advanced the need for a driver is, arguably, irrelevant.

It is a constant debate within Formula 1 whether it is the team with the best drivers or the best cars that win the championship. Ferrari, McLaren, Williams, Red Bull and now Mercedes; the biggest teams with the deepest pockets have their own side agreements over how much they should get paid. This is not a level racing track – and means the competitive element that drives F1 has become less apparent and the races more predictable.

So why do cities want to bring such a seemingly unbalanced, environmentally unfriendly, hugely expensive sport to their shores? Well, few sports can attract fans from across the globe in such quantities. F1 guarantees an audience because its endless machinations and arguments and technical changes are part of a soap opera that keeps its followers actively engaged and locked to their screens. Not only that, the cities that host F1 buy into the allure of Monte Carlo, the history of car racing and its heroes such as Fangio, Senna, Lauda and Schumacher. In addition they gain halo appeal from the lustre of adrenalin-fuelled, devil-may-care racing in cars that can go from 0-60mph in under 2 seconds and 0-200mph in about 10 seconds. Such acceleration creates more G-force than a space shuttle launch.

Any coverage of the F1 behemoth is incomplete without a mention of Bernie Ecclestone, the F1 circus master. At 85, he has run the sport for 40 years.

However, this year things have changed because Liberty Media, a US cable juggernaut, paid in the region of $8bn for ownership of the sport, subject to approval.

Liberty Media is the world’s largest international TV and broadband company, operating in more than 30 countries in Europe, Latin America and the Caribbean.

Mr Ecclestone has been kept on as chief executive for now. Chase Carey, the executive vice chairman of Rupert Murdoch’s 21st Century Fox, will take over as chairman of the board. Mr Carey has made noises about making F1 bigger in America with races in Los Angeles, Miami and New York – currently there is only one Grand Prix in the United States, in Austin Texas.

That, however, would alter the business plan Mr Ecclestone has pursued with gusto. He has taken the F1 fiesta to newer geographies outside its heartland, the European tracks.

These tracks find it hard to match the fees paid by younger cities boosted by government support for the global attention that the high octane sport brings. Bahrain and Abu Dhabi, Singapore and Malaysia have become regulars – although the two Asian nations say they may not renew their contracts to host F1 Grand Prix – on the race calendar and this year saw Azerbaijan join the F1 club.

In the end, Formula One is driven by money; as Frank Williams, the team principal of the Williams team, succinctly puts it: “For six and half days a week F1 is a business; then on Sunday afternoon it becomes a sport.”

Follow The National's Business section on Twitter