By on September 14, 2020

Interested in joining Formula 1? We hope you have $200 million handy because that’s the amount you have to pay to enter a new team under the sport’s seventh Concorde Agreement. Signed by the Fédération Internationale de l’Automobile (FIA), the Constructors Association, and existing F1 teams last month, this arrangement exists to help ensure participants remain committed to the sport to offer organizers and broadcasters the ability to maximize marketability.

They also tend to be kept a secret, with only their most general aspects of the deal ever making it out to the public. We already knew that teams would be subject to additional fees through 2025 to prove they were serious about joining while discouraging existing names from exiting the sport. But McLaren Racing CEO Zak Brown has since confirmed the amount with Racer. Over the weekend he said new entrants would be starring down the barrel of a $200-million fee, adding that the rationale was to avoid diluting the existing prize totals split between teams.

“What that $200 million is intended to do [is protect] the value of the existing teams — as reported on the Williams sale that’s less expensive and you get a lot more for your money than starting a new team — but I think if you believe in the franchise value growth of Formula 1 then you’ll get that $200 million back and then some at a later date,” Brown said. “Also, the way the regulations are written there is the ability for [Liberty Media] and the teams to agree to adjust that number.”

“I think what we’re trying to do as an industry is stop what we’ve had in the past, where a USF1 announces they are going Formula 1 racing and they never get to the track. So the $200 million is intended to really make sure that if someone is coming into the sport that they have the wherewithal to do it and we don’t have what we’ve historically had, which is random announcements that people are going to come in and then they never make it to the track. I don’t think you’d ever see that in other major forms of sport.”

While Brown claimed the changes make F1 “attractive to enter and be competitive in” and would ultimately add value to franchises, he estimated it would take at least a couple of years before we’d see another factory added to the grid.

“I think having a Formula 1 team that can be competitive, that isn’t a money pit, which is where Formula 1 has been — if you want to be competitive then it’s a money pit, and that’s not attractive — to now, I think Formula 1 has set on a journey with fairer revenue distribution, tighter rules, budget cap, there’s no reason why other racing teams won’t start to look at Formula 1 and see that it’s a viable business model. So I do think we’ll see more teams but I think it’s a few years away,” Brown said.

From our vantage, the fee probably will discourage smaller teams from entering but that’s kind of the point. Formula 1 doesn’t want to see any existing teams drop out and has tried to make the sport “fairer” without turning anybody off. It also isn’t all that unique for upper echelon sporting leagues to charge giant fees for the privilege of owning a team. But we’re not certain it’s a wise decision when tons of people seem to be snubbing sports across the board. While we normally harp upon NASCAR’s cratering viewership, F1 has lost nearly 130 million viewers since 2008. Some of this can be chalked up to programming changes as the sport moves toward paid platforms and subscription services, a lack of fans in the stands thanks to COVID-19, or bizarre concessions that have to be made in order to broadcast in China. Regardless of the causes, the general trend for televised sports has been down this year. Way down.

On Sunday, Mercedes F1 chief Toto Wolff agreed that the fee would indeed offer some protection by providing additional franchise value to those already racing. “Obviously it’s in the discretion of the commercial rights holder to decide otherwise if we are less than 10 teams, but I think such franchise value is completely normal,” he said.

“It should be limited to 10 teams. It is something special, to have an entry into Formula 1 … That is valid for most of the professional sports leagues.”

Ironically, Wolff also had to downplay rumors that partner INEOS (a multinational chemical company) was considering buying out Daimler to obtain a majority share of the Mercedes-AMG Petronas F1 team this week. He said the partnership was invaluable to the team but that INEOS wasn’t interested in taking control. Though they probably could or even start their own team since it has that “something special” required to enter into the big leagues — $83 billion worth, by revenue.

[Image: FIA]

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18 Comments on “New F1 Teams Have To Pay $200 Million Under Latest Agreement...”

  • avatar

    I guess they really don’t want anymore teams.

    • 0 avatar

      More importantly they apparently trying to keep current teams from leaving. Indy Car is looking better and better every day. F1 viewers are down because you can almost guarantee Lewis is going to win every race. F1 is not competitive. It is a soap opera based on technical rules interruption. I find it interesting and watch the races, but its not fun or entertaining to watch, more like chess that just happens to evolve extremely fast cars.

      • 0 avatar
        Matt Posky

        Extremely good assessment and sums up why F1 has gotten to be a literal chore to watch.

        • 0 avatar
          Steve Biro

          Agreed. I’ve been an F1 fan since the 1960’s and I honestly don’t think it will exist a decade from now without big, big changes.

          They could start by getting rid of the wings, going to narrower tires and changing the power plants to something like 2.5-liter normally aspirated engines. The number of cylinders and their configuration should be determined by the engine maker.

          Budgets should drop even further than planned – $100 million a year at most. Can’t work with that? Then leave. Or create entries in other racing series – like sports prototypes or IndyCar.

          The FIA could also use an enima.

          Whenever I post messages like this on F1-oriented sites, the fanboys pile up on me. F1 can do no wrong. F1 is the ultimate. But it doesn’t change reality. F1 is now only the ultimate when it comes to burning up cash that might be used more wisely for other purposes.

          The world has too much serious stuff to deal with to be wasting its time and money on this multi-billion dollar flea circus that grows more complicated, more boring and more niche with each passing year.

      • 0 avatar

        IndyCar isn’t going anywhere in terms of popularity IMHO. Indy 500 is the only thing going for it. If you look where ex-Formula 1 drivers ended up, most of them are in Formula E.

      • 0 avatar

        Most likely, they’re trying to boost the value of the current teams. Only a few years a go, Sauber, Willions and Force India were near bankrupt and worth a song. Caterham, HRT, and Marussia/Virgin all ended up going belly up, but with this decision, a bankrupt mediocre “worth nothing” team is now worth almost 200 millions.

      • 0 avatar

        Actually in the US, tv ratings for F1 (despite many races at 6am west coast time) are better than for Indycar. And the demographic is much younger.

  • avatar

    Until you have races like this past Sunday when it was “F1 tries to do the Daytona 500”. Two red flags, three starts, and in the end it was Hamilton all the way.

    • 0 avatar

      Formula One was going great when the had drivers like Schumacher. There aren’t any larger-than-life racers like Schumacher, so apparently they’re trying to manufacture one.

      • 0 avatar

        There aren’t? What about Vettel, Hamilton, Alonso, Verstappen? You gotta be kidding. I give Schumacher credit for starting the “baby racer” trend back then (before him, F1 drivers used to come into F1 at the ages of 20-something, mid-20s more like it), and also for being the best F1 driver of his time. But Hamilton has already surpassed Schumacher as a better driver. For one, Hamilton hasn’t been involved in potentially championship deciding collisions.

      • 0 avatar

        Schumacher was when the whole thing started going downhill – one driver wins ever race. Every few years the rules changed just enough to allow a given team/driver combo to suddenly become unbeatable. The last interesting season was when Brawn and Button came out of nowhere. In the last 20 years just 4 drivers: Schumacher, Alonso, Lewis, or Vettle have won multiple titles in a row. Before that no single driver dominated, they swapped around more.

    • 0 avatar

      > F1 has lost nearly 130 million viewers since 2008.

      It’s gained 119 million since 2017 and is up again this year, as well as with social media engagement stats. Also no coincidence that this was when Liberty Media took over. A lot of the gap between 2008 and 2017 can be chalked up to Lewis and Seb winning everything, but viewership didn’t rise during the 2012 season, which is universally regarded as one of the best and most competitive seasons in F1 history, nor did it rise during the hotly contested season of 2016 when Nico beat Lewis. A lot of that is down to the old regime. F1 fan engagement is on another planet with the Liberty Media era.

  • avatar

    This is a typical type of “design by committee” bad decisions that Formula 1 authorities make once in a while. Nothing about it makes any sense. First of all, 200 millions is more than 1.3 times the current budget cap. So for a team to enter the sport, they have to spend tens of millions or more on facilities and equipment, +100 million budget on the inaugural season, _and_ pay 200 million euros no top of that. What kind of new player would invest circa one third or half a billion euros just to enter a ridiculously expensive and unpredictable sport? Nobody. They would just purchase an existing team, which clearly explains what’s going on. This decision alone massively boosts the market value of any existing formula 1 team. In fact we know the amount of this boost, up to 200 millions. F1 teams used to go bankrupt and disappear. But now, a near bankrupt team can be sold for say 100-150 millions because that’s still cheaper than paying 200 millions to register a new team.

    Overall, this is a very bad decision. F1 needs more teams. They should bring the number of teams to 13-14. In fact, that could actually make the qualifying sessions meaningful again. Remember there used to be races in 1980s and 1990s when certain cars failed to qualify for the race on regular basis? In the past 10 years, I don’t recall if there was even one time when some car did not qualify.

  • avatar
    Tele Vision

    I still watch the ‘old’ F1 races: the V8 and V10 era. Glorious sound with some fantastic races and drivers. Brundle and Coulthard were the best combination in the talk box, I opine. Walker was too shrill for me ( mad respect for that man, mind ) and Pollard/Bollard was a moron who used the word ‘crucial’ for utterly everything. Worse, he’d cut Brundle off so as to use his favourite word about a car going around a corner when Brundle was explaining a little-known nuance about aerodynamics or suspension. That clot made me mute the audio the moment he opened his word hole.

  • avatar
    SCE to AUX

    As with all organized sports money, the sky’s the limit as long as the fans are willing to pay for it.

  • avatar

    Formula One needs to replace all the hybrid crap. With making a simpler engine more engine builders could supply the teams. Also they need to include the drivers salary in the cap. They also need to get rid of the boring tracks looking at you Monaco.

  • avatar

    The real Formula 1 died with Ayrton Senna.

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