This week Oracle, ranked #82 on Fortune’s top companies with business roots in hardware, cloud, services, and licensing cemented a five-year title sponsorship with the Red Bull Formula One racing team. Initial reports are the deal is worth approximately $500 million – equivalent to $100 million per year.
F1 racing has experienced a resurgent appeal fueled (pun intended) by the Netflix docuseries “Drive to Survive”.
• In 2019 F1 generated more than $2 billion with the most elite drivers garnering upwards of £40 million – roughly US $54 million.
• Prize money teams compete for is an enormous driver (another pun intended).
• In 2018, Ferrari sped away (you get the idea) with $208 million.
• In total, F1 is a more than $4 billion industry operating in over 30 countries and employing 50,000 people globally.
Formula One earns its money primarily from the following streams:
1. sponsors/partnerships,
2. management,
3. investment from parent manufacturers
4. advertising,
5. TV commercial rights,
6. broadcasting fees,
7. merchandising, and
8. fees for hosting races or promotion fees.
The sport does not carry the same cache in the US where it lacks the same popularity as other parts of the globe; however, the volume of money at stake as detailed above easily runs into the billions.
F1 league officials have stated it can envision tapping into Oracle for guidance around engine & driver development as well as cloud computing too.
There has been some talk in racing circles going so far as to claim advanced computing power can make the difference in winning versus losing. At the close of the previous season, the previous world champion Mercedes driver Lewis Hamilton was passed on the final lap by Max Verstappen.
Verstappen is the defending world champion who drives on behalf of Red Bull F1.
Team officials believe the capital infusion from Oracle will set itself apart concerning budgeting in the coming year.
Red Bull team principal Christian Horner called it “a new technical challenge” ahead of new regulations that all competitors are required to stay within in. Horner framed the Oracle partnership in the context of making sure “we’re as efficient and productive as we possibly can be.”
Formula One established a $145 million cap for the current season, which no doubt played a role in the economic framework ultimately agreed upon between Oracle and Red Bull F1 Racing.