Inside look at GP2 budgets

It is common knowledge that a full season budget for GP2 costs between €1.0 and €1.3 million per driver.  Consequently, revenues for a GP2 team should be about €2.2 million for a profitable and money-making season.  As few teams have a title or team sponsor, the budgets are generally covered fully by the drivers and their sponsors.

In 2009, most teams will be fighting for survival- barely making the €1.8 million breakeven point for the category (revenues, but no profits).  What is the general picture for this year? How do the different teams make their revenues this year? Who will make what?

In my opinion, and as has been proven true in the category, there are four different ways to survive in GP2.  These revenue models are a matrix sponsor revenues vs. driver budgets (and their sponsors).  To illustrate this point better, I have drawn up a grid showing the 13 teams and their position regarding income from sponsors and/or drivers (as of the end of March 2009) and the 4 revenue models that currently apply in GP2:

For further clarification, let’s take a closer look at these four models with examples.  Note that these revenues/budgets are estimates that apply only to the 2009 GP2 Main Series.

Revenue model 1:  Team with sponsor and full-budget drivers

Team:  ART Grand Prix

Driver 1:  Pastor Maldonado

• sponsor: PDVSA
• estimated budget:  €1.3 million

Driver 2: Nico Hulkenberg

• sponsor:  Dekra, Deutche Vermogensberatung, Wili Weber?
• estimated budget: €1 million
  

Team

• sponsor: Richard Mille (luxury watches)
• estimated deal size:  €300k
• Total team revenues 2009:  €2.6 million
  
• 2009 outlook:  Another solid and very profitable season for Vasseur, Todt and company, with a good shot at winning both the driver’s and team championship.

Revenue model 2:  Team with sponsor and partial-budget drivers

Team: Racing Engineering

Driver 1: Dani Clos

• sponsor: Majestic Hotel Group ( hotels in Barcelona and Paris), Mediapro Group
• estimated budget:  €1.2 million

Driver 2: Lucas DiGrassi

• sponsor:  Renault Development Driver program
• estimated budget: €400k

Team

• sponsor: Estonian energy drink brand Fat Burner
• estimated deal size:  €300k
• Total team revenues 2009:  €1.9 million – plus
• 2009 outlook:  Despite winning the 2008 driver’s championship, RE will make it a break even season in 2009, though with a very good shot at winning  the driver’s championship with DiGrassi.

Revenue model 3:  Team with no sponsor and full-budget drivers

Team: iSport

Driver 1: Giedo van der Garde

• sponsor: McGregor (Dutch fashion group)
• estimated budget:  €1.1 million

Driver 2: Diego Nunes

• sponsor: Nescafé, Garoto (Brazilian candy company)
• estimated budget: €1.25 million
  

Team

• No sponsor
• Total team revenues 2009: €2.35 million
• 2009 outlook:  iSport still commands top-dollar for its seats, still amortizing its 2007 driver and team championship; 2009 will be an average year in terms of on-track results, but profitable for Paul Jackson.  Unless van der Garde can put his iSport in the top spots, the team’s “caché” for 2010 may start to decrease.

Revenue model 4:  Team with no sponsor and partial-budget drivers

Team: Super Nova

Driver 1: Luca Filippi

• sponsor: NorDiesel
• estimated budget:  €800k

Driver 2: Javier Villa

• sponsor: Mapfre, Farho, Asturias, Feve
• estimated budget: €900k
• note: with strong cross-subsidization of GP2 Asia drive from Villa’s cash, estimated total of €1.2 million

Team

• No sponsor
• Total team revenues 2009: €1.6 million
• 2009 outlook:  Estimated to be under break-even by at least €200.000 for 2009.  Has 2 good drivers that can win races, and hopefyll Filippi will last the whole season on his budget, unless David Sears finds a replacement with deeper pockets.

After this snapshot of these teams, the question is: which is the winning model?  The short answer is there is no single winning model to earn money in GP2.  Teams with similar historical results make their revenues from different sources, as can be seen.

What is true for everyone is that breakeven for a GP2 team in 2009, after the category’s cost-cutting measures, should lie at about €900k per driver.  That said,  many drivers have signed for less than that, with teams surely banking on a “better than nothing” vision of the 2009 season.

I believe competitive drivers like  Alvaro Parente, Andreas Zuber and Davide Valsecchi all have budgets €300k to €500k under the team’s breakeven line.  Teams will bet on this approach for several reasons:

1. If I’m going to give up revenues, might as well do it with a race-winning driver that will raise the level and image of my team
2. There’s always time to bring in a well-funded driver, even if not a race winner from the start
3. 2009 is a recession year, and I need to lose as little money as possible – even if I have to dig into my reserves
4. I sign the driver now and work on raising more cash during the year, or in the worst case substituting for a better-funded one later in the season

So in summary 2009, is a year for surviving. Let’s see how large the debt of GP2 team gets and how many teams will face the wrath of Bruno Michel.