Sunday, April 21, 2013

The Value of Motor - Sports

Along the world's fear of losing its most valuable resource, the oil, the motor-sports are the key players in the position of wasting it and surprisingly making money out of it. And the level of profits derived from the gas-guzzling men's favorite hobby is enormous, considering the prices of the oil on the global markets. To name the biggest players in this industry, if i may call it that, are Formula 1, considered to be the world's best automotive sport and NASCAR, USA's most famous Motorsport and the world's number one spectator sport. A glance at a racing event and you will find every major international company, sticking its name at the racing cars or even at the racing clothes of the drivers. Once you can set your mind beyond the irrational spending of money and fuel, it is fascinating to see the big marketing and money-making mechanism at work.

That’s what you can expect when an F1 team is built by a marketing guru like Red Bull co-founder Dietrich Mateschitz. The Austrian billionaire has become famous for his approach to brand marketing, and Formula One ownership is just one of his many strategies (Red Bull also owns the Italian Toro Rosso, the ninth-most valuable team worth $135 million). Red Bull owns an MLS team, hosts action sports competitions around the world and funded Felix Baumgartner for the Red Bull Stratos jump from near-space. It’s a strategy that works, especially in the F1 market: One report estimates that Red Bull generated $14 million in brand exposure at the 2011 Autralian Grand Prix alone. Other owners certainly utilize F1 success to promote non-racing business interests, but most still rely on major title sponsorship deals to fund their annual race budgets. Ferrari receives about $160 million from Philip Morris' Marlboro, McLaren gets $75 million from Vodafone, Mercedes enjoys a $55 million payout from Petronas and even a smaller team like Caterham takes home an estimated $30 million from a deal with General Electric.
The fastest growing team is of course Red Bull, which debuted just seven years ago. The team is now Formula One’s most competitive and shows no signs of slowing. Three-year stretches of dominance are not unheard of in Formula One, but the other teams to show such consistent success in recent years – Ferrari, Renault, McLaren – all have storied histories both in the sport and the automotive industry. Red Bull Racing is now worth $400 million, up 67% since the last valuation in 2010, easily the largest growth of any F1 team. The team collected nearly $98 million in prize money in 2011, the most of any team, and added another $62 million in technical support, merchandise sales and sponsorship with brands like Casio, Infinity and other companies. And in a move that would be outrageous to most F1 teams and business strategies, Red Bull reserves the majority of its car's sponsorship space for advertising its own world-famous energy drink.

Yet despite all of Red Bull Racing’s recent success, the bull-branded team is still far from the top. Ferrari  the sport’s oldest and most storied team, holds the number one spot on our list with a valuation of $1.15 billion, good for the 15th-most valuable sports team in the world. That value is driven by $384 million in revenue, generated mostly from sponsorship deals with companies like Shell, Santander and Marlboro. Those three deals alone bring in nearly $250 million annually, more than any other team gets from its entire sponsorship pen put together. Ferrari also enjoys special treatment in F1 thanks to its longevity in, and importance to the sport. McLaren takes runner-up in the valuations, just as it has in the last two Formula One seasons. Now worth $800 million, McLaren is the only team on our list to decline in value since 2010, though the slide is barely perceptible (down less than 1% from $805 million). Red Bull ranks third and Mercedes takes a close fourth place with an estimated value of $390 million. Formula One’s 12 teams are worth a combined $4 billion, and the average F1 team is worth $337 million with an average annual revenue of $145 million. 
Of course, now we have to put the two sports head to head. A debate that takes place for years and will continue for the years to come, lead by the fans of the two sports, F1 and NASCAR. Even though the lower investment values and revenue returns and the fact that it takes place only in the US, NASCAR is still voted to be the biggest spectator sport in the world. 

Creating marketing place for most of the American based companies, takes up most of its profits by the Media industry in the US and the major car manufacturers as Ford, Chevy and Toyota. Hendrick Motorsports is Nascar’s most valuable team with a value of $357 million. Hendrick is worth twice as much as second-ranked Joe Gibbs Racing which is worth over $168 million, staying barely in front of Roush Fenway Racing with value of $166 milion. Number four ranks Richard Childress Racing with $139 million followed by Stewart - Haas with $123 million ranking fifth. Nascar’s top nine teams are worth $143 million on average, with a 1% increase over last year. Even though most famous by its amazing crashes and second-rated by the royalty that is Formula One, NASCAR continues to compete neck-a-neck with the biggest motor-sports, if not it anything else, but in value of profit and of course in the pleasure of its massive audience. 

For those that want to debate the greatness of each of these sports, here is an infographic that compares the two sports for the year 2011 :


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