F1 Fanfiction
F1 Fanfiction

Episode 15 路 1 year ago

Fireside Chat w/ Cold Brew Money - Economics of F1

ABOUT THIS EPISODE

Meet our friends at Cold Brew Money Podcast at our latest episode of our mini series called Fireside Chat. We discuss about the economics of F1 and try and understand how money makes this sport go.

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In this episode we discuss:

  1. Ca$h is King!
  2. Constructors and drivers
  3. Budget Caps
  4. Driver salaries
  5. Pay Drivers
  6. Cost of building a F1 car
  7. Logistics of F1
  8. Sponsorships
  9. Prize Money distribution to teams
  10. Costs of hosting a race
  11. Broadcasting rights and costs

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Music:

Intro: Howling (Sting) - Gunnar Olsen
Outro: Your Intro by Audionautix is licensed under a Creative Commons Attribution 4.0 license. https://creativecommons.org/licenses/by/4.0/Artist: http://audionautix.com/

They apparently had only seven hundred dollars in their bank account. That's the level of scandard was playing. Interesting. Hello, hello, hello, he's are your whole set you up and, and this is cool, to money. We are talking about money because your friends and family won't hire thee. How's it going good? How are you good? How does it feel computing for the episodes? Talking about I know right, the episodes. I don't think I've done anything for fifty consecutive weeks other than go to work, you know, like this is like a project that has survived a holy just pretty interesting. In did you learn anything about money? Yeah, definitely. How to value fix stocks? How do you create a checklist? How do you invest in index funds? So many things that deep and you've been the guiding light it right, I think. I think, I think the main purpose of the podcast was to make sure the we, you know, we gave the tool side, the skill set that is needed to people earlier in their you know, like just a personal finance subject. Try. I think that that kind of from the field that we got that we are serving that purpose right. Like a lot of young adults are listening to the to the PODCAST, so it's which has been resting a hang on, wait, wait, wait, what's what's happening? I think our show has been I think our show has been hijacked. Here, folks, you are listening to fone fan fiction. This is one of the lounge side fireside chats that you are having. We are your original hosts. I am a Kash and I'm sorry, and this is the episode. Oh, actually not. Who Am I kidding? We've got a fun episode for you this week. It's about all it's all about the the finances of fone. And who better to have it with with the Finance Guru's at cold brew money. Hey, Hey, folks from cold brew money, thank you for being on this show and having us. Actually, this is we are on their show. So you got to check them out and then grew will, like you've said, the Bari, no pressure, right, preasure exactly introduce ourselves. At the time I we took got called cold brow money and the whole tagline is we talk about finance and money because your friends and family won't. We started the podcast because we realize there is a stigma, especially in India, around like talking about finances, and we, as young adults, when we just start earning like not a lot of people know how to manage it and we realize that as we are learning about it, we wanted to share it talk about it, so those can be part of that conversation as well. No, this is this is really awesome, because I've been following you guys, and that's bang on, because growing up I've not had the level of financial exposure from my family or my friends that I should have, which which not, which didn't happen until my like mid Twenti S, and I would have loved to, you know, have some platform like this where I could get that information at a very younger age to be, you know, way more ahead in that trajectory, as you mentioned, a thief at this point in my life. So, yeah, cold brew money for everyone listening. If you have not checked them out, which rock are you living under? Go check them out right now. It's at the right cold brew money on any streaming platform. That decade your podcast from and we are so happy to be here on this podcast with cold brew money. And now let's get into the episode. You're happy to have you as als. I started watching drive to survive, as I said, I think two episode the three episodes ago. I finish the whole series in one setting, one weekend, I think, and then I told that he that we need to get these guys, we need to discuss a fun it's so interesting. So be decided we'll do a cool up kind of a thing and fun like overall, it's very interesting because I feel not a lot of people follow it. It's not as favors and especially when you're like crieved in India right a lot of not a lot of people were talking about it. We just have cards like now. And that said, that's the exposure that he had for two of fun. I think dts try to survive was basically one of the best investments that liveering media has done recently, and I think dart has helped fun gain such a large fan following in recent times, especially in the US, which is kind of the target market at the moment. And Yeah, and exactly kind of proves you started following up, but because you saw itts it worked. Yeah, my own exposure to a fun was waiting for, you know, Indian cricket match to start and they would show...

...some of the of the fun races, like Michael Showmarka is the only driver that I know, but this should be fine. Like, I'm excited to learn more about I know it's a very, very popular sport in Europe and it's it's the numbers are pretty interesting. Yeah, you're essentially is is the Mecca for the sport. And then, as you said, like for me to growing up Nara and was the only person I knew. But I hope with the BUDD International Circuit and now with right preserve, why evens other things, hopefully in the also picks up on the sport. Cool. Cool, cool. Let's get started with the episode, right, the first like economics of a fun and we can start with the budgets and driver. So you guys are the same's your Okah, starn, so just take it. Oh Yeah, I think economics enough. One would you know, is is basically see what the sport is all about. It's all about money, as this is a very popular catch phase that Hamilton said recently, that's cash is king, and that applies, you know, to the full extent to the sport. Cash is literally the king here, because without cash these cars wouldn't exist. And you know just the amount of effort and money that they have to pour into the sport is ridiculous totally and and I guess like beyond just that, the cars itself is so expensive. There's so much that goes beyond the racing, where it's hosting, it's broadcast, saying, you know, the federation itself getting involved with all the minute aspects understanding how such a global sport operates, because usually some of these sports that we watch that's hosted at one place and it's done, but this sport literally moves around the world from from March when they start to December when they and so it's a big, big logistical and financial challenge. Yeah, and just to give kind of an overview like people who don't follow, so there are like ten construct and correct me if I'm wrong anywhere. Right, there ten constructors. So ten constructors, which means there are ten teams. Each team has two drivers and then they have the start from Australia, usually right the up and then that that isn't marge and all the way to December and they go across the world and that are Grand Prix everywhere. And I think there are ten twenty one races, or they have changed that. Twenty one approx by and large that is the number. But yeah, with cash is king nowadays. They've increased that to twenty three this season and they want to pump in more races, but the drivers are really revolting and the revolt led to twenty three, but hopefully that doesn't increase. Yeah, and then all the races happen over the weekend. Friday's practice, Saturday they compete for the pole positions and then Sundays the main race stay and all of this is regulated by FIA. I don't know what it stands for, but that's their regulatory body. Yeah, I think that's basically the Federation International Day Automot Automobile. Yeah, I think it's French. So yeah, yeah, that's that's a very high level overview. If you guys are interested, listen to a fun fan fiction where they go into the details, or else, like even you can watch trive to survive. Cool. Let's start with constructors and drivers, and the first topic that we wanted to touch upon US budget caps. Right, so is it like similar to the football where like every team has certain cap they can go at and things like that? So, like, can you just twelve into details? Sure, that's that's what's going to happen, but right now it's not a level playing field per se. So to give you give you an estimate, like, for example, two thousand and nineteen mercedies ended up spending more than north of four hundred and fifty million dollars and, on the contrary, the bottom table team, which was Williams, ended up spending like one hundred and thirty two million dollars, which is still less than their previous ear which is like one hundred and fifty million dollars. So there is a big difference between the the people who keep doing good and, you know, keep getting price money and more sponsorship, versus teams that are at the bottom of the table and just can't compete and keep up with the bigger teams. Yeah, and there's a huge rift between the top teams and like the mid back and the bottom pack because, like, if you take a look at the amount of money spent by each team, like you know, mercedies, for tray and red bull, all of them kind of spend nearly fo hundred and fifty million dollars, and the team's after that, like you can see a mid pack there where Reyna McLaren kind of are in the range of two hundreds and then from there it keeps going down. So like when when a team's budget is more...

...than double than the other team, like there's absolutely no way the team spending lesser can compete with you know, the yeah, and then the in I fun. Like essentially, if you're spending more at directly means that your car will be better, right, or there is a regulation on. Okay, my Tis nodding, so I'm kissing. It's true. No, don't know. You're absolutely right and I'm totally agreeing with you, because what's happened is you have more money, go buy more engineers, go by more engineering resources and to whatever you want. At that point, you may just break our car and make a new car every weekend. I mean not possible, but that's the idea, right. So crashing for someone like Williams, like if the driver was to crash in free practice, that's going to hurt them so much. Versus if Lewis Hamilton was to crash, toto will be like sure, what's the part we're going to build? It was bought us us, fault dried. Oh, yeah, right here, right, yeah, yeah, yes, I have every following a lot of MEA okay, so, yeah, but now I wanted to say. It's still be on this topic, where what's going to happen going ahead, which is going to be this year, but because of covid that got pushed to next year, which is that there's gonna be a cap on every team's spending, and this only includes like the engineering effort and the car, it's sorry, the car itself, the driver's salary, the top three or five management salaries and some of the other minute stuff don't get counted in this. So that's outside of the one hundred and seventy five million, I remember the figure right. But now there's going to be a cap going ahead, which is, in conversion, that's going to keep decreasing by a few numbers over the next few years. But I think that's interesting in the sense that that gives all teams a level playing field. So what is a tighter race this season can totally be, you know, way, way, way more tighter where it could be anyone's game at that point. Yeah, and one point to add to that is, like the budget caps primarily were introduced because of giving the current conditions, because of covid nineteen, like most of these companies, for facing, you know, large financial crisis, and it was it was a choice between whether constructors start dropping out versus they want to continue, you know, having this series going on. So because top teams were the most to lose at this, because when they are spending north of fifty million dollars, it's not just easy to cut your budget down to, you know, less than half, because it directly translates to pretty much cutting people off the you know, from their jobs, and that that's not always ideal. And not just that, I think even the kind of investments that these big companies put in is it's not easy to scale back that that much. Yeah, that's insane. Like from mercedies spend what a eighty four million and dropping down two one hundred and seventy. I don't know how they'll do that. I think it definitely favors like the the lower tier teams more than the higher ones. They they'll have to get great of somehow. Yeah, yeah, the one thing, actually one exemption kind of is there for these larger teams is that, since most of these larger teams, like Ferrari Mer cities, also develop their own engine and also provided to other manufacturers as well, because they are given a little exemption in terms of engine development. So the CAP that our cash mentioned earlier is mainly for what they call ascar performance costs, and that involves like aerodynamics and everything is like breaks and everything. But the engine doesn't count towards the CAP. It has, I think, a different to cap from what it okay, so the cost of engine will be separate from the overall budget set. Okay, and that makes sense again. Yeah, because by current estimates, from what I have read, the cost of developing fun engine from scratch, if you know a new manufacturer decides to do that, is close to one point five billion dollars. And you know that's that's too large an investment that they just cannot cap it. Of engine that there is Mer cities, and then Honda with is for Alpha, dorry and red bull. Then you have the run, now that's a try, and then B remakes and the Oh yeah, and has on all that. They have their own are engines, are no they so those are black markers, as people have been calling them...

...for ages, and usually most and all of these back markers take secondary engines from the higher tier suppliers. That's why they also get sort of called as B teams for the Higher Teams, or horse is technically a B team for for ours. It uses for our engine and so on and so forth. Got Oh cool. So it's very much like like the end are plain industry also right, like all the mostly, yeah, all the older and planes are are crowds, are used by Deveriping country. Is Yet okay, and I think in terms of how economics works for these companies, is that, like, not all teams even want to develop everything right, like they come in as privateer teams where they basically, like horse is a perfect example for that, because they pretty much by all the parts that they can buy, which is allowed in a fun so that they don't have to, you know, spend any almost anything into our ind and just by the parts from and most most of the parts up the buyer from Ferrari, which has proven that, you know, they have a good car, except for last year. But, but, but, yeah, that, that saves them a lot of money and I think is a very good model for new teams which are planning to join. Yeah, absolutely, I think they don't have to start on crash like not inventing the wheel and focusing on the things that matter, which I think are the drivers, where is the most money spent from that budget, from that Cap, is it on the drivers or the R the team? I want to say it has to be the car because at the end of the day it's become a computer at this point. Right, the number of just the number of buttons that go on the steering wheel is insane, like it's so mind blowing that these drivers can understand them. No where's rich and then even change them at the speech that they go. But aerodynamics and the the engineering that goes behind these these machines is definitely where they're spending the big box salaries. I'm I'm glad that it's not capped. Otherwise is, I guess, like mercedies and folks like the Ferrari and stuff just gonna be broken with the amount of money these these high drivers take. Like I think Lewis is taking thirty million this year, which in if we go by the news, he took a bacer because he was expecting fifty million. Wow, that's that's fifty million. That's like he could. I think Ronaldo, like all the top two of footballets, on that much. Right. I think that's more than what they own. It is almost one third. Williams budget that when you put Butler, I think right after Hamilton, comes maxed out of the twenty five million dollars salary, and I think that's basically the red bull saying that he is the start of the team. And so, like all of the if you take a look at the salaries of all of these drivers, all of the top drivers always get a very big paycheck and then, if you see, there's a very large drift and then suddenly all newer drivers and smaller teams are paying like one million and like Williams, a billion driver, you can steal like tea teams like it starts jumping up where. I think surgery partis gets about eight million and pot askets around ten million and Ricardo gets fifteen, Alonso got twenty, and so I bet als I'll want so at twenty million. That's the lot I feel anyway. I who am I to judge? That's interesting. And then for a fun like, and it was covered in the drive to survive series as well, buying into the team's right like drivers and representing the countries, and they basically use the money that comes with those drivers to be part to get a seat in the fun because, as we said, initially there are just twenty drivers in total, so that's also a big deal. Do you guys want to like touch on it, like what happens with that? Buying seats as a has been a part of a fun since the start of fun, I would say, like right back. If I don't know if you guys have seen rush, the movie rush, where which was about the rivalry between nickel loud and James Hunt and Nikolada who, when he like basically joined a fun, he wasn't getting a seat Solon Merrit so he basically got out alone and bought his own seat. And and yeah, I mean it's a part of the sport. It's not looked down upon at all in the sport because people do recognize how much money is required. You know, when you need for eighty million dollars...

...to develop a championship wearing team, you will take any amount of money that comes by. So pay drivers have been an integral part of the sport. Currently, I think they're two pay drivers, three pay drivers actually on the on the grade. One is Lance Roll, who whose father Lawrence Roll, who is a Canadian billionaire, and he basically bought the formerly known as for Cyndier which became racing point and now is under the Ashton Martin brand. And similarly, we have two other drivers. One as Nicholas Latife, who who bought a seat into Williams, and the last is the very famous Mazepin, who basically has bought in two hours. And the whole discussion this year of buying into a fun I think, and from based on what I've rode, was because of Mars up and right, because he is not. There are better drivers who wouldn't get a seat and he was able to just buy into it because of his Russian knowledge. Father. Yeah, I totally. It is actually that, because I let me put it this, I wouldn't be surprised if his teammate, Makeshi Macer, at one point laps in. That's that's how he's driving. But he was ahead of Hamilton in the last phace. So fair point. Adit to him. But buying, buying in is on on a new entrant. That's also very much possible. Like if one of the teams was like Williams, was in a very bad position and there were news that you know, hey for some years, probably they're going to step back and get out of f one to recoup and see how they can enter in again, and there have been teams in the past to which have entered and left F one. But for a new entrant to come into into the sport, it's I think, like roughly around two hundred million dollars which eventually gets you into the sport. So anyone can come in at that. And one quick point there is that the two hundred million dollars that you mentioned is just the money that you give to Fi and you don't get that back. Ever, that just like a registration fee, and that's mainly to protect the earnings of the rest of the teams because if a new team joins that space, clearing to, you know, make the pot smaller for everyone. So that's more like a fee that you pay to play and just sort of curiosity. So of like a keep wanted to drive and he just pit wanted million. Tomorrow. Will you be able to dry? Our other other requirement that the driver will need to only if he's a Russian Oligar, but in in some sense yes, so because you bring that upon a I want to talk about Yuki soon. Know, the WHO's a new driver in this year's formation, and it's highly debate, not debated, but it's a fact that he's gotten Honda in some sense backing him and and that's why he sort of gone up their ranks. I mean, given he's a very good driver. So No, nothing against him, but the Honda backing that he's had has played a very big role in him jumping up the ranks and then moving from F to to fun this year. And similar goes with, like many other people, to like you mentioned Perez, but as was with racing point last year, and he has his Mexican sponsor. It tells hell, if I'm not wrong, and now that he's with the red bull, the sponsor comes with him. So now tells hell sponsors presses car in red bull. So some of these drivers bring their own sponsors, which gives them that edge into the sport, and then they get the money to so, as I say, Hamilton said recently it's a billion its club. HMM. So essentially, if there are teams that are struggling, like low tier teams, and if they get these drivers, then they are able to get those that get that money as well. Essentially, in some sense, yes, and that's that's essentially what's happening with Hars at this point because the money that they've got with a German backing sponsor and they wanted a German driver, which is probably why make sure makers also there, and the money that Russia, God, that's given harsh the money to build the car and they're not going to use it for this year, but then they're going to use it for the next season. So yes, totally got it. Okay, so you talked about building a car, so let's let's get there. Like the cost, and we discuss this as part of like budget caps. Like building a car. That's the biggest budget, that biggest chunk of your budget that goes into this. So, like, what are the parts and how much does it cost, and also like repairs and all that. Do and this is general, like really out of curiosity, do they have a bunch of cars that are just lined up and they like if something breaks? No, right, okay, they have literally two cars. That's it, which is see on the field.

That's little, the two cars that they have. Like they do have some spare chassis lying around, but not the whole build cars because, yeah, like creating the chassis itself, you know, takes a lot of time. So yeah, and that too. Again. You know, actually that depends on what team you're talking about, because there was this time last year. I remembered, for horse where I think man, I keep forgetting his name, Kevin Magnusin. Yes, that that's how short lived, because you're the one weapon people just forget you anyways. So Kevin Maguson he was complaining last year about, you know, having a poor chassis. He felt that there's some crack in the chassis or something. And actually Hass was not able to change the chassis because they didn't have one and they didn't have the means to, you know, create the Sashi as fast as they could. So for like they had to use the old chassis till they had a new one. So, yeah, it just goes to show that, you know, it's super expensive to develop these things in a fun yeah, and the biggest cost, as we touched earlier to is the engine. That, combined with like the gear box and that that anger entire piece that sits behind you, that's where the entire power is. I think the biggest second after that would probably be aerodynamics, because that is what's going to get you through those speeds and give you edge or over the other people. The engineer is backing those designs. I think those are paid definitely high bugs because there is there's this thing going on in debates right now between Red Bull and other team use of wind being bending. So you know, for folks listening, after you're done with this, go and check out out wind rare wind wing bending is but just that slight bend that the engineers were able to get for these teams has given red bulls such a big edge the season. But talking about the whole breakdown right, like if you have like a one hundred and fifty million dollar budget, most of it is research and development, the production of the car and the operations. It's roughly, I would say, two thirds of that entire money. Is Is there? Yeah, and you you might not be able to imagine the costs of developing these, you know, parts is and and I'm not even talk about the talking about the R India here, I'm just talking about actually manufacturing these parts. So you know, just manufacturing the engine unit takes around ten million dollars for these teams. So you know that is a huge part of the cost. And this is just the manufacturing part of things. And you know, things like the chat see, which is basically a carbon fiber monocoq that costs around seven million dollars. Again, you know, it's most of this is completely handcrafted. And Yeah, you don't have an assembly line or anything for this, because, I mean it's literally that, you know, those few twenty thirteen engineers which are they're working, only know how to actually create this card at all. So it's not like that. You know, they can have an assembly linder for the engine. Is it created every year or because I thought always that once the engine is creted you have that Indn't done right. I got. Do they do research every year on it and try to improve a tear after are over? They do, by and largest, stays the same because the specs are are provided by FIA as part of regulations. But this sport is, at least in my knowledge, one of the biggest one where they try to find loopholes even anywhere they can, and they'll try to bend those regulations as much as possible to give them, you know, the minute test advantage even on the engines. Yeah, I mean most of the engine kind of remains the same, but but they keep bringing in upgrades always because, you know, as op said, like even gaining like a tent in a lap time gives a huge advantage to the teams and so like. For example, you know when Ferrari was, you know, caught cheating some time ago, like basically, they they were tricking the sensors that fi was using for measuring the fuel injection into the engine. And what they were doing is basically when so the senser kind of samples the rate of flow of fuel and what they would do is the gap in which the sensor is not measuring, they would incluse increase the fuel flow so that they can push in more fuel to the engine. So so, for example, this when they were caught, they had to obviously to move the south and then they lost a lot of performance and then they have...

...been slowly building up their engine again to reach the same, you know, same power as before. So, yeah, they have to keep developing these because once they stopped doing that, they're going to lose that touch interesting story. They're so Farri is is publicly traded under under the ticker RAC race, and last year, when this all of this fiasco came out, their stock was just way down. It's slowly building up. I think it's stays directly proportional to how good the team is doing in fun. But they yeah, they took a big hit to thousand nineteen. When, when the teams were not doing that? Do you do invest in for our you do? How do you have? I did think because I think even McLaren, I forget they're there ticker, but even McLaren is is publicly traded races in us, so that's still easier for me. But yeah, Ferrari, other than Fone, it's I don't think it's doing that well as a company. Rare. I mean if it keeps winning in fun, I might just sort of love for the support do it cool. So that was the car. Do we want to touch upon anything like on building the car? That we've missed? Anything else that you wanted to talk about? The just a passing statement. They're like we spoke about engine, but even even the minute parts like a front nose or air wing is is, you know, as North as two million dollars. So Bako Twenty one, where you know Max was stepping, crashed. He definitely broke his front Andy Rare and the Axel and you know the stuff that goes. We got lost in collateral damage. As part of that crash. That has definitely gonna set the team back like ten million dollars, just just the the outer parts, not even counting the inner part. So each crash is just too expensive, even if it's like something where Charles Leclaire was on the pole but he went he was in a crash. At that point, I'm pretty sure besides the mechanics and the garage and the person handling the budget, everyone else was probably happy with Charles being there. But those guys were the saded people because they knew what's going to happen because of the HMM. But for the BACCO crash, shouldn't like fatally, the tire company shouldn't be paying for it. I hope they do, because they are. Actually they weren't, because what they are saying is this. There there was debris on the track. So that's what they claim. Let's see where that is. I was going through the list that we have, like we have a documents a set of tires. Twenty seven hundred is don't they sponsors the tires or the cut the constructors still have to pay for the tyles. They have to pay for it, Oh man, and they eat a side stiles pretty much like. I think in a weekend they have they have a like number of set pairs of tires that they can use. I guess it's somewhere around twenty sets or something like that. Two to twenty five set cool. Cool. Then let's move to the next piece that you wanted to discuss, logistics of if one. What is the cost, and we touched up on this again in the beginning. F One moves across the world throughout the year, so every weekend they are in a new country, new city. A lot of the races happened in European countries, but then a lot of phrases are outside of that as well. So there is a huge cost of logistics and just to add to that, like I saw one video by window productions on the logistics of f one like that. That's what also got me interested, because it's a lot. It's a lot like moving all the scars, your entire team and then building those paraducts, like Red Bull building that you three floored. That's a lot. Yeah, logistically I think it's just too much. That goes on to the fact that when the celebrations are actually going on and you know everyone's pouring champagne over each other. There is a huge team behind where which is definitely almost wrapped up and they're, you know, planning to go to the next location. As far as I know, I think like dlh DHL's being there. Their biggest partner in this whole freight part, and you touched up on windows video, so it's on point. They're easier part is definitely Europe, where they can just move things around in buses, but the freight part is is also how, you know, they move between continents. It's said that it's the the whole cost is roughly, you know, upwards of eight million. But I beyond just the money, I think the logistics of the whole thing is is just too crazy, because...

...they need to again, you know, preserve these parts, because if the front doing gets damaged, that's eighty two million. Are Sorry, ten million at that point. Logistically, you know, it's just a nightmare. I I can't believe how these guys actually plan the entire thing, because these teams have a lot of times just one of those parts and it's not like, you know, if your Atherthan packets catch toolen, you can just reorder it does that. It cannot be replaced, and a lot of times what happens is, like these factories are located, most of these factories are located in UK and like, if something breaks, something you need a new part, they have to actually ship it from the factory itself and yeah, it's not always easy to do that when you have a race somewhere on the other side of the world. If there are back to back races, like back to back weekends, and they're racing in five days out to ship, ship all of those things again, that that sounds crazy and I guess there's a you know, basically this this whole crew that they have which entirely works only on logistics. Each team has that. Probably like smaller teams like have people playing dual roles, but yeah, at least these larger teams like Mercedes and Frady have this entire crew which is completely focused on you know, as soon as the race finishes, literally as a podium is going on, they're packing and, you know, ready to go to the next one. And like, especially if you think about it, this season, like we're going to have some triple headers, which which is just going to be insane because Sunday, when the race gets over, you're packing and you're ready to go to the next location. And again, Thursday you have to be there because free practice starts. So, yeah, it's super difficult. Okay, let's let's hop onto the next section, sponsorships. F One wouldn't exist without sponsorships, I guess, because like whenever even the drivers, their entire suit is filled with sponsors everywhere, there are so many of them. Yeah, let's let's talk about sponsors. Sponsors is interesting because we're be for going into like the shadiness of sponsorships. The good part about how sponsorship works also is the title sponsor, because in that becomes your registered name and you can't get out of it, even if something was to happen to their team and your teammate existed at that point. So point in case is was Jemalia's team when all of his assets were taken away and there was a point when the team was going to get shot, but because force India was part of the registered chassis name as as the sponsor, primary sponsor, they still had to keep that. So then it became racing point, force indior, force India racing pot or something like that. But point being that title sponsor gets you the registered name for that season and then you end up having that name as part of your team. So, for the other example is red bull having Honda in their name this year, which probably won't be next year, but you have to have Honda whenever you publicly say anything with respect to red I think sponsorship basically is the bread and butter of a fun. Fun Exists for sponsorships pretty much, and that what pays the bills for almost all the teams. Sponsorships have always been an important part and thus have also been cheaty sponsorships. So you know, as as where there's money, you know you're going to have all these weird, shady things going on. And Yeah, obviously fun is not exempt from that. People try and just, you know, turn a blind ie towards it because they love the sport and they don't want to get that money out of the sport because if that happens, yeah, the sport probably won't exist at all. Know, what do you mean by a shady sponsorship? Like is going to give an example? Yeah, I mean, so let's take an example here of rich energy, which was sponsor of horse so basically, rich energy was this new sponsor, title sponsor that came to hars where they claimed that they were energy drink company which they were launching, you know, very soon, and they had basically it was entirely a scamp. The company was just on paper, like they did not have any physical presence anywhere. And Basically, as as I've mentioned earlier, you know, like most of the teams are based of UK, and so thus these teams have to kind of do some financial disclosures and because of that, basically what happened is a lot of creditors kind of we're investigating this rich energy and they went through...

...art documents. They went through all these documents and kind of found the address that's mentioned on those documents for rich energy and people were like actually seeing it on Google mapses or somebody actually went there as well to actually check out if there's anything now and then. Basically it was just one building and it turns out, like, you know, around fifty different companies are adgistered to the same building. So, yeah, you know what's going down here. They apparently had only seven hundred dollars in their bank account. That's the level of scandard was playing. That's interesting. So basically, what happened with Hoss is that they like had a long term, I think two years, sponsorship deal with them, something like that, and there was this guy, Williams story, who was the CEO of rich energy and you know, used to talk shit a lot about red bull because they were trying to compete with red bull as a energy drink. And and the the funny thing was that nobody could actually buy their product anywhere because, you know, people were trying so hard to buy it, but it was so rare to get a single can of rich energy. And the funny thing is that even the logo that they had was straight up stolen from something called white bikes or something like that, which is a mountain biking company. And Yeah, basically rich energy were not able to hold their part of the deal. They were not able to pay has the money that's acquired and it was a whole story. And you know, basically that William Story went rogue on twitter. He started, you know, bad mouthing ha saying that, you know, we are quitting the sponsorship deal because horse is performing poorly, and then it turns out that he was kicked out of from the company and they you can't fire me if I quit. Yeah, pretty much that was rich of it. That's only any other examples? Marlborough, I. We were discussing that before we started recording. Like Marlborough because it's at a baccup company, I think a fun banded from sponsoring. But before, if you're I think Michael Schumagat right, Ferrari had the whole Marlboro logo on the rare wing. So they are still part of it, but they have changed the way they sponsor now, so they come under different, as guy says, different company names. Right now it's called mission winner, right, yeah, mission when? I yeah, yeah, Marlborough is being associated with this quote like way long. If you see any of those old cars, you're going to have a big rear wing Marlborough White and red car. But I think like around two thousand and six Ferrari came down with strict andi smoking, you know, promotions and laws and stuff. So that's when they banned anything that had to do anything with with cigarettes. But obviously no one told them that you can't band shell companies and F one's very famous for finding these loop holes. So there's mission winnow, which under the hood is a promoter for Marlborough or cigarettes. They you're right, they they had a very famous car somewhere in that era where they basically had bar codes and the shape of the bar code was such that if the car went whenever the car went on streets or was at high speed, you could see the the triangle of Marlborough and that obviously again got into controversy. And then they moved to mission Wino in an mwe fashion, in such a way that when written horizontally but tilted and then looked at from a vertical point of view, they're going to then again see the marlborough trying M as well. You can see the air as well. That's pretty evident what it is. And have you? Have you visited mission winner's website? It's just, you know, a load of corporate speak, like it's you know that synergy and you know all those corporate words, just some good A. I wrote one sentence itself all the corporate buzz words in there, but it'sn't interesting right. The whole the whole genre is very interesting because it because mission when was not the only one doing this. Even McLaren has a backer which under the hood is is is a cigarette company. What's good to see here is there are stricter countries which force these teams to not have those logos as well. So, for example, Australia has very strict anti smoking laws and whenever these cars are racing on those tracks they have to mask that or change that. So they change their body before the race. Or say, those trators paint holder to can make sums. Hey, by the way, I think like everyone's gotten this,...

...this email of a Nigerian prince trying to send you all money right that? If you haven't, go check your spam folder. I guarantee you have that email. But for everyone that's actually been true, because there was there was a season where a Nigerian prince invested into Fone, which was obviously a scam because when he had to actually give money he just disappeared. He took all the fame, you know. He came into the Paddocks, he came into all races. He was trying to launch this new brand of his, culled Tyns, again very similar to you, to rich energy. They didn't really have any product in the market, but just trying to create the brand first before hitting the market. But that's really baller, you know, to be that confidant. Just come for the races. HAVE ANYTHING TO BACK YOU UP? I wonder if he's the same Nigerian prince still sending everyone emails like let's make the brand first, then we'll get the money, money fast. Our another interesting one is like Singapore's one of the sponsor and he hosts like after parties, and there a sponsor for that. It's called sugar book. I'm not wrong. It's it's dating website made for old rich people to find young, hot the girls who, so to say, it's like an apple what you went download and sign up for. I left to have a few guys. I'm still waiting for my builions for that. But it's see, as some of these, some of these ones have been just too shady, like rich energy is one example. But there I've been like three or four other energy drinks that have tried to pose as energy drinks and be shell companies for others. Yeah, I think at this point it might be like a badge of honors that I was I was able to pull off a shelf company. Yeah, that's true. Cool, cool. Let's let's move to the next section, the grant Grand Prix and the cost of hosting a days. I'm guessing there and this question was I because I couldn't find the answer and try to survive. But essentially, how do they decide which country will host the race for that year? And then are there are these countries paying money because, for example, Monaco has the race every year, right, but then India, I think there was only one race there. Yeah, so reason like yeah, Oh yeah. So how do they decide on that? So there's there is a running there's a running partnership between FIA and these tracks per se and they usually, you know, have three to four years of contracts, and that's why bood international had a three year old contract. There was the controversy, obviously politically. Why would got canceled? Because then the then up government, with Maya, with the IT termed f one as not a sport but and entertainment and Levy try to levy entertainment tax on FIA, and the then Bernie Eccleston, the guy running the show, was like by so yeah, but but yeah, the there these usually three to four year contracts. I think roughly, and I could be wrong here, but roughly, building a track costs somewhere around eighty million and then hosting is a fee that the track also pays to the FIA because then that that gives them exclusivity and all of those things. But then there is the other side where FIA also has to pay local authorities and the track for for being there and, you know, doing the thing. Fi is who is the entity that is earning the most out of this, like because the cost of hosting a race is not exactly public data, so we don't know the exact numbers for that and it differs from when you to whnue because, like, for example, I'm sure monacco has a very big discount in terms of the hosting fees, because Monaco is kind of the crown jeweler of Fone and yeah, they pretty much more to raise there no matter what every year. But other tracks, like, you know, let's say Sauthy, which is going to be introduced this time, is pro is probably, you know, just the crowd in msb just throwing money at Fone to get them there and, you know, get some sports washing for their country as well. So yeah, I mean from what I have read, I had read article by Forbes where this person had kind of done a proper breakdown of the total cost that's required from right...

...from building the track to, you know, paying the annual fees for hosting, as well as promoting and everything, because even after sorry and the total amount came down to around one billion dollars, including everything, if you consider a long term contract of ten years with fi because the way it works is the hosting fee slowly increase each year and the reason mainly is that if you're having consecutive races in the same track, you're going to have more people coming in, you're going to have more money coming in. So yeah, like FIA wants a good chunk of that money. So it's a it's a step ladder that and it keeps increasing in terms of hosting fees. Now I was just thinking, you know, talking about numbers. These team need these teams need money to survive and you know, the first question that comes to your mind is where is this money coming from? Right, so sponsorship is just one part of how I get my team money. But then what's my incentive to drive that fast? I mean it's not just for the sponsors, because my cars on that track, Martini or whatever was the village with the it's getting showed, right, we're talking about rich and your whatever. So these these other things come from, you know, being first or being second, like being there on the podium, being there on their table, and the higher you are, the better you make. And that's that's the gist of fun. We did this thing. Yeah, I mean the sole purpose of participating in Fone is for the prize money. I mean that's what the companies are therefore, and obviously for the praget lights as well. But Yeah, money is what the main incentive is, for sure. And and like what Groand Prix basically means is grand prize and like that's how, you know, fun kind of has its origin where, like used to have these you know, individual grand previouses, and there was no FIA. There was no fun at that time. And then you'd have a prize money and all teams would, you know, compete for that prize money, and I think at that time only the first, like whoever comes first, would get the prize money and nobody else. But obviously that that was not a sustainable model at all, and so they kind of formed FIA and like kind of standardize the sport a little, which would make things easier for all teams and as well as if they have, you know, a governing body they can have this pool of money that they collect and, you know, just distribute it towards the end of the year. HMM, so much do the like top team zone? Wow, yeah, that's that's way high up. So I think that the publicly available numbers are up until two thousand and nineteen or twenty twenty. But think what I have is two thousand and nineteen, where Ferrari got all the way up to like two hundred and five million for just being on that constructors table. I think for a re was second two thousand and nineteen. So this this might be twe thousand nineteen stable, but yeah, it's so around two hundred million dollars is what they get just from being high up on that table. But it's the entire gag. So let's say the whole pool is somewhere around one billion. That's that's going to be split into these ten teams, excluding that the lower two or three teams that just make the smaller bug looks the the big the biggest chunk of this price is as essentially split fifty where the the first fifty goes to Formula One group and shareholders and the second fifty goes to the constructor and and their team, and there's this finer breakdown of the entire prize prize money as well. But the distinction is, let's say, Ferrari at the top made two hundred million dollars. The the team that finishes outside of you know, or top, the last one, yet something around like ten million just for participating in that tournament. So, yeah, the divides too high and that that eventually becomes the incentive to for you to keep performing matter. Yeah, and they also have certain bonuses in place for certain teams. So like, for example, they have this bonus for the team that wins consecutively. So like, for example, basically mercendies has been the beneficiary for this particular bonus in the past few years. And they also have bonuses for the top three teams which have been winning the most number of races in the past, I think, five years. And similarly they have some other kind of bonuses in place as well. So they have this long term compensation kind of a thing with Ferrari, because since Ferrari is...

...one of the only teams that has been since the origin of fun, they're kind of rewarding them for their loyalty and other teams which have been there for a very long time, which are McLaren and Williams also receive some you know, heritage bonuses because of the same thing. Yeah, so even though Mercedyes won the race that you're Ferrari earned more than because Farada has been in the sports long the okay, there's always only the only team that's never left the sport and come back in. It's like it's always been there, since this another sport. Yeah, I mean you could say that Ferrari is, you know, Ferrari is fun, and fun is Ferrari, because what what does anyone think when, you know, you say Fone, they think about a red car, like that's that's the first thing that comes to your mind. So yeah, Oh, cool, yeah, that that's true. I thought of like that. There is this other part which is an incenter for the drivers to and and that's why you have the driver's points table as well. And then at the end of the year again with those other bonuses and stuff, drivers price money is distributed. So I think like twenty twenty Sebastian metal made like somewhere around like five hundred and eleven million dollars. If this article from the Internet is to be believed, and you right behind him was Louis. Four hundred and fifty million dollars. So that the prize pink that they got to the team. I guess that that's what they mean. I yes, so, yeah, all time money, I guess. HMM. But yeah, so it's an incentive for both the constructors and the drivers at this point where these prize moneys and their individual sponsorship is what gives the show running and I think also the prize money like kind of has a minimum guarantee component to it for each team, as well as component which is based off the constructor stable, because at the end of the day, the economics have to work out, like, unless teams aren't guaranteed that they are going to make at least x amount of money, you know, it doesn't make sense for these smaller teams to even participate at that point because if you are, you know, putting in one forty five million dollars or something like that, which are, you know, literally scraping by, you know, you're just like begging sponsors for each time that you're getting and if you can't even, you know, break even, it just doesn't make sense for anybody to and participate. So what basically happens is that the prize money that we have is kind of Split, which is going to be like distributed with the within the teams, is split into two parts, where one part is fairly distributed equally to all teams and the other part is, you know, proportional to your ranking in the table. Cool. Thank you so much. This was really helpful. I I personally. We learned a lot and a teeth. I think he just got started. Yeah, yeah, this is I think. Are you? Are you signing up for FT AS WE SPEAK? Exactly? Yeah, that's what I'm doing. One DAB is that and another day is drive to survive. That's that's the rest of my day. Theyll spent. Yeah, a hundred percent. And the show itself, like I think we should, can give a couple of minutes, but like the show itself, it's so dramatized, so it's like a reality show almost. Not all races are like that, though, but Baku was like that for sure. And there's so much drama even around the sport, like, even when the race is not going on, there's always some drama going on, like, for example, what crush mentioned earlier about the bendy wings like teams are, you know, complaining to fi about each other, and it's like you a bunch of school kids fighting in the school yard. Yeah, but yeah, again. Thank you, Saren. Thank you for Kush, for talking, and what we'll do is so, if it is anyone is interested in fun, amazing show, check out their podcast. It's called a fun fan fiction. will link it in the bio below pan. Yeah, just reached out of them if you are interested in fun as well. It was a pleasure being here, man, thank you for having us. Thank you, thank you, guys,.

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