F1 Economics Effect on the Driver Market

Hey friends,

This weeks letter comes special from my podcast co-host, Vanessa “VF” Castro. Vanessa is a Harvard Alumna, Comms Director at PLUG, as well as a former football writer. Her experience with the government and political side of sports brings a unique perspective to both our podcast and her writing.

Earlier this week, Fernando Alonso signed a deal to keep him at Aston Martin, pairing him with the Silverstone team through 2026. It also shifts the driver market rumors we’ve been hearing involving Mercedes, Red Bull, Carlos Sainz, Checo Perez and Fernando Alonso.

It got us thinking about how even as Formula 1 enjoys financial health, the driver seats are still affected by how marketable a driver is (Ricciardo), nepotism (Stroll), or the sponsors they bring to the team (Zhou).

While you’re here, tune in to the latest episode of the VF1 Show where we talked about the potential of F1 x MotoGP crossover weekends.

Until next time 🏎️

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F1 Economics Effect on the Driver Market

In Formula 1, cost influences the driver market. As costs rise, team finances and sponsorships increasingly determine driver opportunities. 

F1 teams once freely changed drivers during a season. Frank Williams Racing Cars, later Williams F1, used ten drivers in both 1975 and 1976. This led to stricter rules on driver changes.

Teams at the back of the grid, often financially struggling, would hire pay drivers who brought funding but sometimes required shares or operational influence.

Pay Drivers and Commercialization

When pay drivers like Pedro Diniz left, such as his 1995 move from Forti to Ligier, it could destabilize a team. Forti folded after the 1996 German Grand Prix.

Drivers like Ricardo Rosset and Alex Yoong are known for their family-funded careers, often with less success. Diniz, also backed by family, performed better than many pay drivers, earning 10 championship points over six years under old scoring rules. By contrast, many pay drivers have failed to ever score a championship point.

Some champions, including Niki Lauda and Michael Schumacher, began as pay drivers. Lauda borrowed money against his life insurance to secure drives in Formula 2 and Formula 1, before impressing enough to have his debts cleared by BRM and then Ferrari. 

Michael Schumacher was associated with Mercedes in the early 1990s. When a seat opened up at Jordan in the 1991 season, Mercedes provided Eddie Jordan with $150,000 to sign Schumacher to the seat. The rest is history.

More recently, the now defunct Racing Point, bought by Lawrence Stroll, placed his son Lance in a team seat in 2019. Williams, struggling for funding, signed Sergey Sirotkin in 2018 alongside Lance Stroll, despite concerns over his inexperience compared to Robert Kubica. Claire Williams addressed criticism, calling the pay driver label "unfair." Kubica then replaced Sirotkin, backed by a major sponsorship.

While some criticize pay drivers as "unworthy," many have found success in lower formulas. Notable among them are Pastor Maldonado and Jolyon Palmer, both GP2 Series winners, and Mick Schumacher, the 2020 FIA Formula 2 Champion. Pastor Maldonado also won the 2012 Spanish Grand Prix, a significant victory for Williams, their first since the 2004 Brazilian Grand Prix and last as of race four in the 2024 season.

Consider the current era of stars like George Russell and Lando Norris. Despite showcasing immense promise and talent, their journeys have been quite different and marred by the harsh realities of financial constraints. While Russell managed to secure a seat with Williams, a team further down the grid, Norris found himself in a more fortunate position with McLaren, backed by substantial family wealth. 

Of course, wealth and sponsorship only goes so far, and for Norris and Russell, their skills have kept them in seats.

Navigating Financial Barriers

To this day, Williams can’t even hit the spending cap, which has reopened advocacy for Andretti, which was denied entry over questions about the “value” it would add to the series. These debates were especially spirited when Williams lacked a third chassis after Alex Albon totaled his car in practice ahead of the Australian GP. We now know that Williams’ total damage cost this season exceeds $2 million, with Albon’s crash accounting for the majority of that.

On the flip side, seasoned veterans like Fernando Alonso have continued to weather the storm of escalating costs through his established reputation and lucrative endorsements. More importantly, for being the oldest driver on the grid at 42, Alonso keeps performing and proving that consistency is an important factor in keeping sponsors interested. 

Despite being linked with both Red Bull and Mercedes, Alonso has committed to staying at Aston Martin for the 2025 Formula 1 season and beyond.

The cap was supposed to create more equality up and down the grid, but as the financial landscape of F1 continues to evolve, the “sink or swim” aspect of the sport has never been more cutthroat. 

Look no further than Alpine for incontrovertible proof of that. After actor Ryan Reynolds led an investment group consisting of Kansas City Chiefs’ quarterback Patrick Mahomes and tight end Travis Kelce (who is also dating the most globally recognized superstar, Taylor Swift), the French-based team has only regressed, leading to pundits calling for a sale to a more “serious” team. 

Andretti Global just announced this week its new 48,000 square feet facility in Silverstone. 

The Intersection of Talent and Investment

One thing is abundantly clear: talent alone is no longer enough to guarantee a spot on the grid. In an age where every millisecond counts and every sponsorship dollar holds immense value, drivers must balance talent with marketability. 

Let’s take a look at Daniel Ricciardo for example.

Ricciardo's marketing value is also often cited as an asset for his jump back to the Red Bull family. Ricciardo is a popular driver and at the end of the day, Red Bull is all about selling energy drinks.

Ricciardo stands out in Formula 1, not just for his skills on the track but for his engaging presence off it. He often stars in his F1 teams' social media content, from posts to YouTube videos, bringing humor to the sport.

Nicknamed 'The Honey Badger,' Ricciardo is known for his witty remarks in interviews and plays a significant role early in Netflix's 'Drive to Survive.' His approachable nature in the paddock lightens the often intense atmosphere of Formula 1. Above all, he maintains positive relations with most other drivers, rarely facing confrontations.

And there’s also Sergio Perez, Red Bull’s current second driver.

Sky Sports' David Croft says that Perez's marketing value should not be underestimated. Crofty argues that it is precisely his marketing value that is a major reason Perez still has his seat. Croft: "Checo is good for selling a lot of cans of Red Bull, both in North America and Latin America. He brings a lot of sponsorship money to the team and that is important, even at this time in F1 with a budget cap. Almost 65% of all online Red Bull F1 merchandise is sold to Mexico."

Racing Towards the Future

As we reflect on the symbiotic relationship between the economics and talent in Formula 1, one thing remains certain—the thrill of the race and the pursuit of excellence should always be the goal. While the cost of participation may continue to rise, the spirit of competition burns brighter than ever before. 

It's time for Formula 1 to prioritize competitive racing above all else, even if it means acknowledging any shortcomings in its current model. For only then can we ensure that the legacy of true champions endures, dwarfing the “spectacle of the sport”, inspiring generations yet to come.

An Experience You Won’t Want to Miss

I’m excited about this one, not just for obvious reasons, but because it’s one of those collaborations that offers an upscale experience without forgetting to pay homage to the series’ history.

The Legends Lounge | Schumacher sets out to celebrate the legend himself and his illustrious Formula One legacy. The lounge commemorates 30 years since his first championship win.

You’ll dive into an exclusive showcase featuring rare artifacts, Schumacher's iconic cars, and special guest appearances. Experience the extraordinary with behind-the-scenes insights into Michael's unparalleled career and the resilience that made him a legend.

You’ll also have the opportunity to attend "An Evening for Michael," a unique dining experience with F1 legends, sharing untold stories and auctioning precious memorabilia to benefit the Keep Fighting Foundation.

Read the official press release here.