What is the business of Formula 1? Prize Money, Bonuses, and Financial Rewards

Formula 1 distributes its prize money to the constructors (teams) based on their performance in the championship. Drivers themselves do not directly receive prize money because they are paid salaries by their respective teams.

The team that finishes top of the constructors’ championship earns the most prize money, while the team that finishes in 10th place receives the least. In 2023, Red Bull Racing dominated both the driver and constructor championships, earning an estimated $140 million in prize money. However, prize money is just one part of a team’s income; sponsorships, merchandise, and commercial deals contribute significantly.

What is the eighth Concorde Agreement in Formula One?

The Concorde Agreement is a confidential contract between the Fédération Internationale de l’Automobile (FIA), the Formula One teams, and the Formula One Group. It outlines the terms by which the teams compete in races, as well as how television revenues and prize money are shared. There have been eight versions of the Concorde Agreement, each kept strictly secret until recently.

The eighth Concorde Agreement (signed in 2021) revamped the prize money distribution. Under this agreement. The top team now receives 14% of the total prize pot. The bottom team receives 6% of the total prize pot. Previously, the top team received 20%, while the bottom team received only 4%. This arrangement is locked in until January 2025.

This agreement introduced F1′s first-ever budget cap. Initially set at $145 million per season, it gradually decreases by $5 million each year until settling at $135 million from 2023 onwards. While the constructors get the direct prize money, drivers benefit from their team’s success through contractual arrangements.