The Money Story – Part 1: Legalized Corruption

legalized_corruptionWelcome to ‘Legalized Corruption’ – the first part of Green Flag F1’s new and groundbreaking three-part series, The Money Story.

This story aims to give an in-depth look into the current system of team payments in Formula 1 and the subsequent effects it has had on constructors and teams both past and present.

In this week’s exclusive first edition, Green Flag F1 has broken down how team payments were distributed across the grid in 2017 – from Sauber to Mercedes, there’s certainly a few wee shocks along the way.

It’s hard to believe, but despite dominantly winning both Formula 1’s Constructors and Drivers World Championships in 2016, Mercedes-AMG Petronas Motorsport received 9 million dollars less in prize money than Scuderia Ferrari; and they had just endured one of their worst seasons in recent history.

Since the modernization of Formula 1 in the 1970s, Bernie Ecclestone has run a monetary system that seems to benefit the big players, notably Ferrari and McLaren (who are the only current Formula 1 teams that were in existence during 1970), whilst new, smaller teams struggle to make money.

This is because of special, ‘extra deals’ that allocate the manufacturer teams more money. Currently, Ferrari receives a ‘longstanding team’ payment worth 68 million dollars – which is, in itself, more than what Toro Rosso, Renault, Sauber and Haas made individually last year.

This graph shows the range in team payments for 2016. Haas was the lowest rewarded with just 19 million, whereas Ferrari were lucky enough to be on top, despite not recording a win all season, with 180 million.

As of the current Concorde Agreement, which is set to expire in 2020, only Ferrari, Red Bull, Mercedes and Williams receive ‘extra deals’ payments – coincidentally, all four teams were among the top five in the 2016 Constructors World Championship.

These deals skew the system and consequently there is no major consideration for each teams respective in-season performance when splitting up the pot. Because of this biased system, teams in recent times, such as HRT, Caterham, and more recently, Manor/Marussia, have been forced to drop out of the sport.

In 2016, Haas F1 finished an impressive P8 in the World Constructors Championship but, according to a report by Autosport, received just 19 million dollars in prize money, 30 million dollars less than the next highest earner, Sauber F1 Team.

The difference in prize money was so large because one part of the payments can only be received by a team who have competed in Formula 1 for three or more seasons. For 2016, each team, except Haas, were given, at the minimum, 36 million dollars for achieving this.

Surprisingly, Haas’ owner, Gene Haas, stated ahead of the 2017 Canadian Grand Prix he was still in support of a payment system that favored the top teams.

Gene Haas (right) pledged his support early this year for the system of payment which skews massively. Although he’s not fully in support of the current system, he doesn’t want the order to change substantially.

“[S]ince we’re the newcomers in this business, our revenue stream from Formula 1 is nothing, so anything we get will be greatly appreciated,” Mr. Haas admitted to Autosport.

These comments were immediately met with hot opposition from Dr. Vijay Mallya, Team Principal of Force India F1.

“Anybody looking at the income distribution pattern of F1 will immediately, without even being prompted, realize how lopsided it all is,” Mr. Mallya said in reaction to Mr Haas’ comments.

Force India achieved a record finish in the 2016 Constructors Championship by defeating arch rivals, Williams-Martini Racing, for P4. Frank Williams’ historic team, however, still trumped over Mallya’s team in the payments because of their extra 10 million dollar “heritage payment.”

More alarming that that though is the gap between Force India and Ferrari. The historic team from Maranello finished third and thus just one place ahead in the Constructors Championship, yet, Ferrari’s payment was 108 million dollars higher than that of Force India.

“I think [Chase Carey] made it clear that the independent arrangements that various teams made with Bernie were not good for the sport, and actually prevented a level and competitive field,” felt Mallya.

After making these original comments, Mallya tweeted on June 3rd 2017: “Wonder if I should have been running a football team. Sunderland earned £93 Million finishing 20th more than us @ForceIndiaF1 finishing 4th.” The tweet has since been deleted.

Vijay Mallya is no stranger to Formula 1’s current payment system; he is the largest shareholder in Formula 1’s most successful, active privateer team. And to add to that, he currently represents the top performing team which receives absolutely no bonus from FOM.

McLaren’s, Fernando Alonso, is reportedly the highest paid Formula 1 driver in the paddock. How does a team which finished a mere 6th in the 2016 Constructors with no wins nor podiums fund this? Well, they’re the fourth highest paid team in Formula 1 due to their ‘extra deals’.

And that’s why Mallya’s angry. Because, realistically, car manufacturers who have large pockets, like Mercedes and Ferrari, are the only ones who stand a chance of winning the Drivers and Constructors World Championships these days.

That’s certainly true as the last team to win a race and championship without backing from FOM was back in 2009 when Ross Brawn hit the jackpot with his ‘double diffusor’ in the new 2009 technical regulations.

Even still though, it’s been eight full years since a team which isn’t backed financially by the commercial rights holders of Formula 1 has won a Grand Prix.

That is perhaps the greatest testament to what this sport is: legalized and biased corruption.

Tell us, do you agree with this intriguing first part of #TheMoneyStory? If you did, be sure to look out for ‘Part 2: Murdered Teams’ when it releases on the 13th of August, 2017.

Posted by

Steven Walton is an 18-year-old Journalism Student at the Ara Institute of Canterbury. He previously attended St Andrew's College in Christchurch, where he excelled at History and Classical Studies. Steven is the Editor-in-Chief at Green Flag F1 and spends most of his days living, breathing, and immersing in the Formula 1 world.

6 thoughts on “The Money Story – Part 1: Legalized Corruption

  1. Do you think National will win the election again this year or do you believe Jacinda Ardern will breathe new life into the labour party to swing them over the line with a coalition? speaking of coalition whats your thoughts on a labour/New Zealand First party government with Winston Peters? Kind Regards

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