Red Bull F1 - The riskiest sporting gamble ever

Red Bull Racing's F1 team has become one of the biggest marketing efforts of the company and has been one of the best decisions the company has ever made, what many people don't realise it was one of the riskiest decisions ever made, for many companies such as Toyota, BMW, Honda, Ford, Air Asia, Virgin it was the worst decisions they had ever made and did considerable damage to their organisation and owners.

Red Bull's decision to move from sponsorship to a Formula One team has to be in my opinion one of the craziest gambles that a company has made in regards to entering a sporting arena, Red Bull is no stranger to motor sports or even Formula 1, having sponsored teams since 1995 but in 2005 they decided to outright buy a Formula 1 team, while they got a good deal taking over Jaguar (from Ford) who were looking to pull out, the costs involved with running a team do reach into the hundreds of milllions.

Moneywise, it is way safer and less riskier to engage in a sponsorship.  Most sporting organisations do not aim to make a profit as winning is always seen to come before profit.  To get an idea of the costs involved, it can cost around $100 million to even compete in a season of Formula 1 and this is a budget for a "backmarker" a team that generally trails the back of the pack and is often lapped by the leaders.  In comparison $100 million bought the major sponsor rights of Ferrari at the time, a household name and dominant motorsport organisation that was near impossible to beat when Schumacher was as his peak.

The sponsorship fees of $100 million were also considered overpriced and were highly likely to drop in 2007, not too long after Red Bull bought a team.  This was due to many of the top teams were sporting tobacco sponsorship, if you were in charge of the marketing/sponsorship division, tobacco sponsorship was a must have.  Formula 1 was one of the last major global events that allowed tobacco sponsorship, tobacco brands were of course willing to pay a massive premium as they had few other options and even if they did they wanted to be associated with the global reach and glamour of Formula 1.  The effects post-tobacco were so devastating for teams especially for Renault, they won the 2005 and 2006 championship with tobacco sponsor Mild Seven, Renault would struggle over the next few years and was forced to eventually sell the team.

To make matters worse, the financial crisis made finding sponsors near impossible and many teams opted for "pay drivers".  The team would usually have one top driver who would score points for the team and another "paid driver" who would be slower than the head driver but would bring in millions in sponsor money to help develop the car.  Red Bull could have easily had their pick of sponsorships for incredibly cheap.  After losing many millions on an F1 team, Virgin would later sponsor (and was the only sponsor for a while) a car for way, way less that won the world championship.

There is of course the control of running your own team and there is the myth that if you have enough money you can buy a championship, there was a great example of this in the English Premier League when Roman Abramovich bought Chelsea and use his wealth to create a superteam that would dominate the Premier League and Europe.  Soccer is much easier, you can buy talented players to make a team better Formula 1 is far from this easy, you can't simply buy a fast car or parts, they need to be designed, manufactured and tested and it's a long and difficult process.  Even with lots of money some of the last place teams in recent times that have struggled included Virgin F1 and Caterham owned by Richard Branson and Tony Fernandes (Owner of Air Asia) who are far from short of money.

To make matters even more scary, in the last 15 years, Honda, BMW, Toyota and Jaguar (Ford), massive car manufacturers with lots of money and who could benefit from Formula 1 by being able to right off losses as both a marketing and RnD exercise (F1 technology goes into future road cars, but it's not going into Red Bull cans), they had a lot more they were willing and prepared to lose compared to Red Bull, plus these organisations have had lots of expertise, knowledge and experience in other motorsports.  These 4 teams spent on average around only 5-6 years in Formula one, of all the teams, BMW was the only team to actually win a race and it only happened once.  Toyota had insane costs to build their team from scratch and also reportedly had the biggest budgets year in and out and struggled to ever get a podium position, Toyota won no races in their 8 years in Formula 1.

Honda's spend wasn't as much as Toyota but their investment was rumoured to be upwards of a billion, their last season saw them constantly near the back in 2008 although rumour had it they had created a revolutionary F1 car that would win races easily.  The corporate board didn't want to spend any more money and with all the costs and debts and sold the team the current manager at the time.  The new owner won the 2009 championship with a team he purchased for only $1, Honda couldn't even get one win, let alone a championship with over $1 billion!

One other thing to make things interesting was that Red Bull didn't buy one Formula 1 team, they bought 2!  This was the purchase of both Red Bull Racing (formerly Jaguar) and Scuderia Toro Rosso (formerly Minardi), so when most mega car companies struggled to even afford to run a single Formula 1 team, this company does the impossible.  Red Bull was using Toro Rosso as a junior and testing team for up and coming talent for their main team Red Bull Racing, they also offer racing sponsorships to those they believe are the next big thing.

Some people may have thought this was overkill but early on, however keep in mind Schumacher had retired and teams were actively hunting around to find the next big thing.  Red Bull found another fast German by the name of Sebastian Vettel, starting out in Toro Rosso he performed well and even grabbed their first win.  Vettel would later graduate to become among an elite group of only 3 people who have won 4 championships in a row.