The weekend in Austin certainly brought out the financial challenges of Formula 1 and with the absence of Marussia and Caterham, it was exacerbated to the point that F1 boss Bernie Ecclestone said that the situation was probably his fault due to the contracts in place for the top teams.
He admitted that he knew what was wrong but suggested that he’s not entirely sure how to fix it. Having said that, he did imply that they would certainly work toward that goal.
One of the suggestions was that CVC and the top teams could take a lesser payout of the prize money that could then be pooled and distributed to the small teams. Red Bull’s Christian Horner wasn’t too keen on that idea when asked about it by AUTOSPORT:
“Every team has negotiated his deal with the commercial rights holder and I think it is an issue that needs to be asked of him about the distribution of money.
“We have signed agreements, and I am not convinced that even if you double the money to Caterham and Marussia it would have solved their issues.
“Their issues are more fundamental on what are the cost-drivers rather than what is the income.”
“We have huge budget pressures, and I have to operate within our budget,” he said.
“If the commercial rights holder wants to put in place more money to the smaller teams then that is their choice and their responsibility.
“Teams are here to compete, not sponsor each other.”
It won’t be popular but I agree with Horner. He’s not in F1 to prop up another team or negotiate better contracts for them. F1 exists to lure the biggest, most well-funded teams into the sport who will invest resources, marketing, engineering, technology and capital into the series to make it the best racing it can be.
I’m not so obtuse that I can’t grasp the concept that this may be a slightly older business model and perhaps it isn’t working for smaller teams now nor is F1 turning away big corporations or automakers who are beating the door down to join the series. Regardless, Red Bull, McLaren, Mercedes, Ferrari and perhaps even Williams are not in the business of giving a percentage of the contractually obligated prize money revenue to small teams so they can continue to remain in F1.
I do find Horner’s comment about the small teams struggling with costs and not income. Ferrari’s Marco Mattiacci says he thinks F1 needs to increase revenue as a whole and this would mean more income to small teams. Well, maybe it would but then if the issue is costs and not revenue, it won’t matter much.
What it does bring about is, once again, the elephant in the room—the cost of F1 and most notably the hybrid engine supply at $28 million. What if the engine supply was at no cost? Would a team be able to still perform with the additional $28 million? It’s a question that they would have to answer but if you divided the prize money equally among the teams, the net impact might be enough to pay for the engine supply with a few million extra and that’s about it. I’m a tad befuddled, then, at how demanding that FOM give more prize money would solve the issue unless you clearly believe that owners, CVC Capital, simply take drastically less from their investment.
If that’s the case, then CVC have a question to ask themselves. As it is, the teams have contracts and perhaps Ecclestone feel they were perhaps the contracts were a little too rich, you can get a sense of that as they were enough to draw Red Bull and Ferrari out of the Formula One Teams Association (FOTA) and into individual deals. This was when the teams were threatening to leave and start their own series.
I’ll be honest, I think those days were more serious than what we face now.
Hat Tip: AUTOSPORT