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Price of failure for small teams increases: Prize money only for Top 10
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Posted By: James Allen  |  29 Apr 2013   |  7:05 am GMT  |  122 comments

F1 promoter Bernie Ecclestone has confirmed to the Daily Telegraph that the automatic $10m prizemoney payments made to the “new” teams which entered F1 in 2010 are to end. From now on only the top ten teams will receive money each season.

This makes the battle for 10th place in the constructors’ championship more intense than ever, with Caterham and Marussia vying for the final position. Currently Marussia holds 10th place due to Jules Bianchi’s 13th place in Malaysia.

When former FIA president Max Mosley pressed for the new teams to enter the sport, Ecclestone agreed to pay them each $10m per season, in lieu of prize money. It is this which is now to end.

The pressure is greater on Marussia, as the Banbury based team does not have a bilateral commercial deal in place with F1 for its continuation in the sport until 2020. All of the other ten teams including Caterham have such a deal, which guarantees them a share of the commercial revenues of the sport. The shares are not divided equally between teams with Ferrari earning significantly more due to its historic involvement in the sport. But as a guide from now on the teams are set to share 63% of the sport’s operating profit, on turnover of $1.5 billion.

This is the only agreement in place at the moment in the absence of a new Concorde Agreement. The last one expired in December last year and a new one awaits signature. The teams are ready to sign, but Ecclestone and the FIA have some matters to resolve before all three parties can sign it.

However Ecclestone also indicated to the Telegraph that the board of F1’s parent company had indicated its desire to press ahead with the delayed flotation of the sport later this year. For this to happen there will have to be a Concorde Agreement in place. So there are still a few issues to resolve and there are some powerful figures within F1 who do not want the business to be floated.

Plans to float on the Singapore exchange were put on hold last year due to poor market conditions post the Facebook IPO and the Euro crisis.

The implication from this and other recent moves is that F1 only wants 10 teams going forwards into a post flotation future; there were brief merger talks between Marussia and Caterham over the winter but these fell apart quickly.

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1

Have to say I’m a bit disillusioned.

I was always under the impression that the top few teams got a bigger cut (based on results) with the prize money gradually decreasing down the field.

With all this coming out, how do they honestly expect to entice new teams to enter the sport when some of the existing teams eventually go belly up?

2

They don’t

3

I should have made it clear that by the existing teams I meant the more established teams, not just Marussia and Caterham (which are the obvious candidates for elimination).

My thinking was that if teams like Toro Rosso, Force India etc. leave – for whatever reason – it’s just possible we may see a field of seven teams.

It seems hard to believe now, but if it does come to that will Bernie and Jean realise that a mistake might have been made and do a quick back flip?

4

I feel this is a move to make sure any new entrants push/plan to be competitive and get that 10th place. It must be frustrating to pay 10m to a team that is not performing (for whatever reason)

5

The only reason we have fast teams is because we have slow teams

6

“The shares are not divided equally between teams with Ferrari earning significantly more due to its historic involvement in the sport. But as a guide from now on the teams are set to share 63% of the sport’s operating profit, on turnover of $1.5 billion.”

James, how much more does Ferrari get than others? And significant is this in terms of their finishing position in the WCC? For example, would they still get more money than the teams finishing in 1st or 2nd if Ferrari don’t beat other teams to these positions?

7

We keep on hearing about the F1 Show. If that’s how Bernie, the FIA and the teams want to think about Formula 1, then everyone who takes part should be paid – in the same way that everyone who has a part in WWF is paid.

Bernie and the FIA want more overtaking in F1. The slower teams certainly provide plenty of them to satisfy the accountants.

8
Scuderia McLaren

The very kind people at CVC and FOM, if they read this, must be laughing at many of the comments. What a complex web of interspersed truth and lies they have spun to disorientate media and fans so as to misdirect on real issues with perhaps underlying legal basis of challenge.

Incidentally it is my belief that they do indeed keep track of major F1 contributors and the subsequent comments sections.

9

Second that…and I wouldn’t be surprised if they also post under an alias from time to time, just to give the spin a bit of a nudge.

10
Craig in Manila

Yep, and I reckon a few Pirelli employees are posting lately too !

🙂

11

In my opinion this is pretty bad, It means only ten teams, mostly the front runners will get more prize money, while teams at back get nothing, meaning it will be a struggle for them to stay a-float.

This will only lead to what I believe will only be about 4-5 teams(Mclaren,Ferrari,Red Bull,Mercedes) what with new technical regulations.

The whole Concorde Agreement/RRA and also these contracts being mentioned above really need to be looked at and re-aligned so its all in an equal playing field, shouldn’t get priority just on a teams history, etc etc.

12

Marussia and Caterham should go race in GP2, more their speed.

Although, with these cheese tyres, F1 is at many times lapping slower in the race than GP2 cars, so haha.

13

Some good arguments above.

I’ll just say this:

Max might have made some mistakes, but he tried to do a good thing for the sport, enticing the new teams and looking to the future of the the sport.

Sad to see his work coming undone.

14

I absolutely agree….AND where is Jean Todt in all of this…(I like Jean but …..come on).

15

Next year will be make-or-break for Caterham and Marussia. They were never going to catch up under the stable regulations, but they’re respectably close.

16

And the new regulations will probably bankrupt them both I think and maybe one established name as well.

17

Watch Sauber being at the back of the pack next year with their sustainable business model. Hope Hulk switching teams at the end of the season.

Monisha needs to start running an F1 Team.

18

Well F1 is by far my most favorite motor sport.

But to call it the pinnacle of motor sport is a bit rich. It seems to be the pinnacle of spending money. I know some of that is due to EU labor laws however.

In 2014 they are moving over to the engine that is basically ran by Indycar now. The big difference is the ERS-KERS and the fact I think they run on gasoline instead of ethanol.

Financially they bring in less money than NASCAR and a much much smaller field and much less HP and even top speed which is appalling.

Then we have the Ferrari fiasco. How they are treated with such velvet gloves is beyond me. First we give Sergio Marchionne Chrysler and FOM falls all over itself to give him the highest percentage of all team revenues. Without F1 Ferrari is only a Fiat and I feel like Ferrari needs F1 more than F1 needs it. McClaren wouldn’t survive without F1. RedBull and Mercedes are the only ones of the top teams that don’t need F1 for long term survival. I am not saying no one would buy Ferrari, but they would sell less with out the free advertising and caché. McClaren’s ECU would be easier to compete against as well.

I just look at F1 and see how they work as hard as possible to avoid parity and see it as a failed business model in this day and age. One only needs to look at the multi-billion dollar NFL, MBL, and NBA to see there is a better way. I know UK soccer (football)has a different system but they aren’t loosing franchises every few year either.

There is no better examination of the ills that plague the F1 business model than the 2005 GP at Indianapolis. Allowing Ferrari to basically force most of the field out of the race by not agreeing to a chicane or some other speed retardant was disgraceful and showed a true lack of leadership by the FIA and FOM. The Indianopolis Speedway people didn’t do themselves any favors either by not demanding a compromise. With US laws it would have been pretty easy, just tell the teams you would file a TRO and hold all of their equipment untill you were refunded tripple the amount of the promotional fee, each ticket paid, and tripple the lost revenues. If they didn’t work out a solution those would be the consequences. I can tell as someone that knows Red McComb’s personally if they tried that in Texas there might be some people in jail. Especially since that event is funded in part by tax payer money. This rambling paragraph just to say that F1 is a bit rudderless and short sighted.

Then you have the whole lawsuit’s going on about the insider trading. Bernnie says he was blackmailed and the US lawsuit has no jurisdiction on him. That’s pretty funny since the FOM does business in the US and so does many of its lenders.

I feel like, while Bernnie has done much for F1, there is so much more he could do. Yes CART and IndyCar are cautionary tales to what can happen to a motor sport when the teams are allowed to run it into the ground with infighting. Many are talking about some kind of franchise system in NASCAR and it might be a good idea for F1. By sharing revenues more equally and granting franchise’s to current teams there would be incentive to grow the sport as the sell of more franchise would bring in more revenue up to a certain point. The Toyota’s of the world would think twice about jumping out of the sport once they paid half a billion bucks to get into it.

So yeah this looks like Bernnie wants to force contraction, and it looks like a bait and switch. I know the FOM wants a Singapore partial IPO in order to avoid the nastiness in the US but I am not sure the Singapore flotation will go as well as he hopes with the whole US litigation thing hanging over Bernie’s head.

James I apologize in advance for making you or whoever helps with your moderation read this.

19

I did not see a good explanation for this change. Could it be:

A)Effective cost cutting measures have evened out the field so much that timekeeping threatens to fail.

B)Recession is over and small teams have too much money anyway.

C)It would be confusing, if any of those new teams start to beat current leading teams. You can’t give every team extra money due to historic involvement in the sport, can you?

So it is only logical to cut their wings off before it is too late.

Drawing the line after 10th spot would be more tolerable without the historical involvement of Ferrari. What is their “historical involvement”? Austra 2002? Indianapolis 2004? Getting loads of assistance in 2008? Hockenheim 2010?

20

Indianapolis 2005 not 2004.

21

“Freezing” the battle for the lead in a 6 car race in 2005. That’s what I meant indeed. Thanks.

22

James what Will happen to Williams if due to a freak wet race Marussia and Caterham score more points than them?

23

They have a guaranteed payment from Bernie until 2020, quite a large one.

24

Great way for Bernie to get rid of Marusia that he doesent seem to like and keep more $$$ for CVC.

25
Tom in adelaide

I hope Bianchi end up being the difference here. It would be rather poetic.

26

is it only me that thinks its wrong that ferrari get most moneys.

27

Generally people/teams get paid what they are worth. In this case the person who is paying the extra money is Bernie.

Do you really think Bernie would pay Ferrari more than their worth? Unlikely at best.

He is notorious for driving a hard bargain 🙂

28

Since the money is split from a pool, wouldn’t the extra Ferrari money be coming from the other teams?

If the pool is around 600 million euros for the teams to split and Ferrari takes 100 million off the top then that leaves less for the other teams.

29

As I understand it, the size of the pool and the split are not fixed from the outset.

There is a potential total amount of money up for grabs – 100% of the operating profit from the sport. Each team then negotiates for as much of that (operating profit) as possible. The ‘pool’ therefore will fluctuate as the teams try to gain a larger share and Bernie, et al, try to give them a smaller share.

So if my understanding is correct, the figure of 63%, quoted above, is therefore arrived at by adding up each individual teams %. As opposed to starting with 63% and then working out the split between the teams.

I could, of course, be wrong 🙂

30

Not at all. I am a Ferrari fan but completely disagree with their special payments. It is a favouritism that shouldn’t exist in a sporting environment. Money should be dished out in accordance to results, not through “appearance fees”.

31

Many years ago, all teams had to negotiate appearance fees for races. Ferrari would threaten to not race if he didn’t get what he demanded and promoters knew that without Ferrari, there would be no crowd.

Bernie changed F1 from the 70’s onwards and won start money for all teams, making many team owners very wealthy.

In many ways that continues to this day.

But it’s not only F1 that works like this, musicians, actors and sports stars all benefit from meritocracy.

Why does Usain Bolt get paid more for appearing at an event than other sprinters? At the olympics, ticket prices to watch the 100m final was higher than any other day?

Why does a Tom Cruise command massive fees against, for example, an actor in the West End?

You may not agree with the public perception of either Ferrari or the individual star but ultimately the market dictates what monies are paid.

32

So you would prefer a team like Brawn which got lucky with a double diffuser and had 1 year of contribution to the sport to earn more than Ferarri which has 63 years in this sport?

You must be crazy!

If they would do that, every team would consider leaving and joining 2 years later. What sport would Formula 1 be if there would be new teams every 2 years? What would happen to the fans of a team that decides to quit the sport? They move on and support another one, right? And then, 2 years later, their old team comes back to the sport. Nobody will be watching a sport where there is no consistency.

The money are and should be distributed accordingly to the contribution each team brought to Formula 1.

Ferrari were voted the best brand in the world. You think Formula 1 having Ferrari associated with it doesn’t benefit from it?

How much would F1 be worth if Ferrari, McLaren, Williams leave the sport and team like Seat, Hiunday and Mazda join? You really think they would be worth the same?

Who would buy £315 tickets for a weekend to see Mazda racing at Silverstone?

Take the Ferrari and McLaren cars, and paint them green and put Mazda stickers on them. Believe me, they won’t look as impressive as they look now. The brand is a very powerfull asset.

33

“The money are and should be distributed accordingly to the contribution each team brought to Formula 1.”

Why?…

I don’t see the relevance, longevity equals more money?…

34

You looking at it from one point of view. Don’t think Ferrari would have been what it is right now with out F1.

This is a competition and not a gentlemen club. If to perform you get various rewards if you dont, well you need to find the ways to do so.

There is a reason why top teams have big budgets, they know why it is so important to compete for the top. They dont need welfare checks for not quite making in a particular year.

35

Ferrari is not winning under fair conditions. People say they are being paid close to 100 million a year.

100 million a year.

Again, onehundredmillionayear. Add to that the few hundred million they put into it themselves (still surpassing RBR spending with at least 100 million) and wonder how they cannot win the title each year easily. It’s a mystery.

36

MISTER,

Super funny how you can’t spell Hyinday. I never can myself!

37
6 Wheeled Tyrrell

I agree 100%

38

+100

39

Ferrari is a Billion dollar brand in itself. Imagine F1’s value without any association with Ferrari, I should think lot less than the 2BN valuation that’s been rumoured in the press.

So it’s right in the sense that FOM pays Ferrari to keeps the value for the shareholders of FOM.

40

Imagine Ferrari’s value without F1. Don’t forget that Ferrari was once an independent team running Alfas, they would only sell cars to selected celebrities that could be used as promotion for the brand, Formula 1 NADE Ferrari. Dont forget also that the car manufacturing arm of Ferrari is owned by Fiat.

41

This link may be of interest to you, I found it typing in Enzo Ferrari into google of all places!

http://en.wikipedia.org/wiki/Enzo_Ferrari

This may also be of interest, seeing that the F1 championship didn’t start until 1950, the winner of the Mille Miglia races in 1948 and 1949 was Ferrari.

http://en.wikipedia.org/wiki/Mille_Miglia

1949, incidentally was Ferrari’s first Le Mans victory.

42

He placed the prancing horse sheild on the Alfas he was running, so you agreed with me. Ferrari was an independent team running customer Alfas with a Ferrari shield, still makes them Alfas. Thats how the team got its start.

Sportscar may have been the more pretigious category back then, but Ferrai got its start in racing IN Formula 1.

43

This. Big teams don’t need hand outs they know what they in for. Look at Red Bull, they know exactly why they investing so heavily.

Makes more sense to me to reward a best performing teams for that particular season.

44

Actually you are wrong. Ferrari was never an in dependant team running Alfa’s!

Enzo Ferrari raced in a few races back in the 1920’s for Alfa before becoming the team manager. When he took over, he placed a prancing horse shield on the cars because it was given to him by the family if a WW1 flying ace.

When he parted from the team, he was under contract that he couldn’t build cars using his name for some years, which is why Scuderia Ferrari was formed in 1947.

We look back now, and because of the importance of F1, and the relative obscurity of sportscar racing, we believe it was always so, but up to the 70’s, it was actually sportscar racing that was more important.

Look at the top ten most valuable cars of all time, all Le Mans racers, or linked to endurance racing. Not one F1 car amongst them

45

The Fangio 1954 Mercedes F1 car coming up for auction might change that

46

Seems strange to want to restrict the grid to ten teams, and against the sport’s best interest – who doesn’t love seeing a massive 26+ car grid? There’d be a space for pay drivers and the unluckier talent alike then.

47
Mark in Australia

I’m all for large fields too. Provided we don’t have situations like previous years where cars are outside of the 107% rule in qualifying.

I’d love to see another team or two, provided they are competitive. Customer cars would be the way to go rather than 3rd cars for the top teams.

48

What’s wrong with the old 107% qualifying rule?

49
Mark in Australia

Nothing wrong with it at all. I think it should be enforced!!! I’d love to see F1 like our Australian V8 Supercars with the 28 car field seperated by around a second in qualy.

50
Craig in Manila

All it would need would be a freak-result by Bianchi in a rain/crash-marred race and Williams would quickly find themselves in the no-money-zone too…

As for Marussia : I still have a feeling that Honda will come knocking and snap them up to form the basis of their factory team. Just a feeling of course.

51

If the Japanese didn’t learn what a money pit F1 Team ownership can be and want their fingers…or wallets burned again – they will be welcomed with arms wide open.

I really think that this Honda story is a conspiracy theory. Not one of mine, but a theory nonetheless. What seals it for me is this:

>

Renault Sport F1’s deputy managing director Rob White says he doubts reports that both Honda and Toyota are planning to return to F1 by supplying new V6 engines.

“If they actually wanted to come back then why not take part in the planning meetings?

“We have never received a request in this regard. The meetings are always only represented by Ferrari, Mercedes and us,” he told SpeedWeek.

“But Honda and Toyota could easily ask the FIA for permission and join in.”

“The first project meetings were held four years ago, and the interest was great – Audi, Cosworth, Ilmor, Honda, Toyota, Mecachrome and others [were present].

“However, as it got more specific, only Pure was left, but now it’s only us three.

“I simply cannot imagine that a company will enter in 2015 without having wanted a say in the rules,” he added.

52

Not likely, partucularly as they are supposed to be linking up with Mclaren in 2015.

53
Craig in Manila

Hard to believe that Honda would invest in F1 just to supply one team in 2015.

I dont think its unreasonable to assume/expect that they will want to have a factory team in addition to supplying engines to McLaren and others.

Time will tell.

54

Honda tried team ownership before and the results were, how shall I out this, disappointing.

I would be surprised if they entered a full factory team into F1 in the foreseeable future.

Still, never say never.

55

Maybe Marussia will have a Mugen Honda engine rather than full factory engine?

56

Caterham and Marussia have had enough time to get established on the grid, it is now time to perform, and show that they want to be on the grid.

57

Totally agree if they’d made the progress they and HRT promised when entering the sport it would be much less of a worry for them.

58

Of course… it’s so easy… all they have to do is throw the same amount of money at it as Red Bull, Ferrari and McLaren do…

59

I still think the best solution would be for the teams and FIA to buy the commercial rights, all the money that goes to FOM goes out of the sport.

The whole thing rests on credit anyway, they can probably make a better long term business model to lenders.

As for the stock flotation, no chance, all the secrets will have to come out.

60

I don’t see a problem with 10 teams, especially if some of those teams then run 3 cars. Better to see 20-25 drivers all competing hard in comparable machinery, than 2 teams limping along at the back – although both Caterham and Marussia are much closer to the pace than back markers of 5-10 years ago.

61

“…although both Caterham and Marussia are much closer to the pace than back markers of 5-10 years ago.”

Hard to make exact comparisons due to the changes in qualifying, but I’d say they were about the same as the Jordans and Minardis of ten years’ ago.

62

Effectively culling the number of teams to 10 could be quite dangerous for Formula One. As I understand it, FOM are contracted to ensure that there 20 cars per Grand Prix. If we are down to 10 teams (and therefore 20 cars) it only takes someone to do a Toyota and close down their operation for the 20 car minimum to not be met.

People may therefore say that some teams should be able to run 3 cars, or introduce customer cars, but these scenarios could be disastrous and would wipe out the lower half of the grid in the long run.

11 teams is a nice number, as it provides a slight ‘comfort zone’ in respect to ensuring that there are enough teams on the grid and not having to delve into the murky waters of 3 cars.

63

They’re much closer to the pace due to the restrictions on testing.

If the top teams could test as they used to, then Caterham, Marussia, and to some extent the midfield teams, would be nowhere near the pace of the top teams.

64

Caterham and Marussia should reconsider merging.

65

They would need to be careful, as neither team would then have anyone to beat and would guarantee coming last 🙂

66

Marussia did well to avoid this over the winter. I hope they don’t, while they were making gains (their operations and infrastructure investments are impressive), Caterham been going downhill with each year.

67

In any other sport, finishing 2nd from the bottom does not earn you a $10m prize. However, F1 is not like any other sport. Narain Karthikeyan driving for HRT at the back of the field in 2012 helped Red Bull sell drinks and Mercedes sell cars in india, because it helped raise the popularity of F1.

The competition would not suffer in the short term if one more of the new teams withdrew. However, in the long term, not having opportunities for drivers like Karthikeyan will prevent the sport from expanding its worldwide appeal.

Also, keep in mind that “midfield” teams need back markers, so that they can be midfielders. Williams and Sauber continuously coming last would not be to the benefit of Williams either.

68

Good comments.

69

Only ten teams? Really? The so called top motorsport category running only 20 cars per season? Ridiculous. Pathetic.

70

Couldnt agree more. Just goes to show it is not necessarily about being the “top motorsport” category, that is simply PR. F1 is about business and greed just like any revenue based enterprise.

71
Bring Back Murray

What happened to 26 cars like the good old days?

The more of these extremely high speed things going round the better, that’s what I’ve always thought.

72

I don’t really understand why f1 only wants 10 teams going forward. Where are all the drivers from gp2 going to go to even if they have big budgets to bring with them!

It is also bad for f1 when quite experienced and fast drivers such as heikki and kamui are passed over for drives because surely these back of the grid teams need an experienced driver to set the development direction and drive consistent laps and give feedback that the engineers can definetly trust.

73

I think Bernies vision is 10 stronger teams, and a more professional GP2.

74

I keep saying this over and over again…Red Bull have F1 figured out to a “T”. They have the best business plan, funding source and structure. Anyone who wants success in F1 need to copy them. Anyone going hat in hand to find marketing funds from firms may have a harder time going forward in F1. Look at McLaren, Williams…

I am of the view that F1 is overall a marketing show to a high degree. That means businesses that have the desire to market and budgets to do so should look at F1 Team ownership. The challange of course is to have a large marketing budget and long term outlook to do so. But I could absolutely see a bunch of firms compete in F1 on the Red Bull Racing model.

I also think it would be interesting to look at this subject closer. Of course it would be all speculation to think about F1 in 10 years. What happens if someone takes over Red Bull in the market place and they are not as rich and want out F1? It is possible, and it’s a big hole – 4 cars! What if Mercedes gets tired of lack of WCC/WDCs and wants out of F1 in 3 years. Who will come in and pay these bills?

75

Fair points, my friend

76

BTW hero, I don’t think Red Bull is bullet proof. There used to be a time where they cast their marketing activities far and wide. But back then they also owned Apple-like share of the energy drinks market. Just like Samsung is challanging Apple, Monster and others are challanging Red Bull’s market share.

I wonder how much longer they can spend these huge amounts on F1. I think even Red Bull is becoming more selective in their marketing efforts. There was word about STR being for sale, right? Air Race – we haven’t seen an event for 3 years now? Things are being cut another words.

Remember how Benetton was everywhere in the 90s and could do no wrong? Where is that brand today in F1?

It could be that when sales flatten out for a few quarters or years for Red Bull, or perhaps even drop they will shop the company to Pepsi for example. (I think Monster is cozy with Coke, right?) So once Pepsi or perhaps Coke or whoever pick up Red Bull you think they will have the desire to run an F1 Team? Why not just pay a few drivers to slap a Red Bull logo on the helmets and call it a day?

Of course it could play out a number of ways, but my point is, history says Red Bull most likely won’t be around forever.

77

Red Bull have it worked out to a T, from an article I read recently, their annual budget is $300,000,000! So much for resource restriction.

This is why Ferrari withdrew from the RRA, because it couldn’t be policed properly.

I believe this is a fundamental reason why Vettel doesn’t get the credit he deserved, many people regard his dominance as circumstances and rules being pushed beyond what has been agreed.

78

hero,

I’m going back to my old stand-by. It isn’t my $300M, and so I don’t care. If Red Bull feels that they have sufficient margin in their $3 per can beverage to dedicate these funds to F1, who am I to tell them otherwise?

I don’t drink the stuff so it really isn’t my money. And even if it was, it would be going to something I enjoy.

In the bigger picture, obviously these guys have to agree to not try to outspend each other for the good of the longevity of the sport or eventually the medium and smaller teams will fail according to logic. However, while $300M is spend by RBR and probably others, it seems to me that many mid field teams are actually more competitive and relavant today than they were in the past. And so perhaps we’re wrong about this.

To add to my note about $300M spend on building an F1 engine and wanting to see that itemized annual budget, I would love to see the $300M itemized budget of an F1 team. Must make for really fun reading, especially right after reading the news about some collapsed where 400 people die earning pennies to feed their families. Tears for Fears said it best…Mad World.

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