Be sure to check out the first two parts of the series, which focus on the current way payments are slipped and the teams subsequently effected both positively and negatively by that.
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, past and present.
This week, Formula 1’s new owners Liberty Media take center stage as their proposals are broken down to analyze how it’ll effect the commercial reputation of the most Global Motorsport the world has ever seen.
According to the Financial Times, changes to the financial structure and the way prize money becomes distributed in Formula 1 is among Liberty Media’s plans for the future of Formula 1.
The prevalent ‘extra deals’ make it somewhat obvious the financial structure of the sport is biased toward existing manufacturer teams and Chase Carey did admit to the leading financial news agency, “We need to have a shared vision.”
It’s clear Liberty have already taken certain steps to addressing Formula 1’s monetary concerns as they introduced a major shakeup in the management section of the FOM earlier in 2017.
As of now, Liberty Media’s CEO, Chase Carey, has become the new CEO of the Formula 1 Management (FOM) and ultimate control over the sport lies with him. Unlike Mr Ecclestone’s reign, however, Carey has appointed two major players to help him rebuild and improve the sport.
Firstly, Ross Brawn, the former technical director during Ferrari’s dominance of the 2000s, and later team principal of the Honda, Brawn, and Mercedes outfits, has been recruited to help run the sporting side of Formula 1. In a simplistic sense, he controls the on-track action and makes decisions that’ll help the racing improve.
Secondly and most crucially for the monetary side of Formula 1, Liberty Media have recruited Sean Bratches to run the commercial side of the sport. This covers everything that happens off of the circuit and will even branch in to prize money, eventually.
“Eventually” is used because the current ‘extra deals’ the FOM previously did with existing manufacturers are valid until Formula 1’s infamous Concorde Agreement is up for renewal in 2020. This means the unfair financial structure of Formula 1 will not be changed within the next three seasons.
On May 18th of 2017, Chase Carey conceded to Autosport he plans to “bin” the existing Concorde Agreement and create a more “long-term” partnership that would be continuously changing – unlike the current arrangement, which fixes deals in for six to eight years.
“Our goal is to create much more of a long-term partnership, not a partnership that sort of has a point in time that you go out and renegotiate the next eight-year partnership, that there’s a continuum,” he admitted.
Sean Bratches, the newly appointed Commercial Manager of Formula 1, will be the man in charge of overhauling the current financial constraints of the Concorde Agreement when the time is right. His experience is vast and highlighted by just under thirty years of building the sporting empire of ESPN.
In an intriguing interview with Channel 4’s Lee McKenzie ahead of this year’s Australian Grand Prix, Bratches admitted his belief that “right now, [Formula 1 is] not a great business to own a team, so we’re going to try and change that.”
To understand what Sean Bratches means, take the British Premier League football competition as an example. The monetary structure of that tournament, as reported by The Telegraph, sees the payments delivered in a sequential order relative to finishing position within the league. This means, the higher a team finishes, the more prize money they receive.
Formula 1’s current system is different to this, however. For example, Ferrari’s extra bonuses meant if they had finished 10th and last in the 2016 Constructors Championship, they still would’ve received enough money to be the third highest paid team.
But this statistic looks set to stay this way for the foreseeable future, as Ross Brawn has revealed FOM will evaluate ways to cut competing costs in the sport before he discusses redistributing the prize funds.
“[W]e don’t want a situation where financial power enables a team to get a dominant position, as has happened in the last few years,” Brawn told Motorsport.com in June of 2017.
Brawn believes not presenting a stable and more bright future for Formula 1 before readdressing the payment will only upset teams.
“We’ve got to present how we see the sport going forward in terms of the investment that the teams make, because it’s substantial,” he said.
In July of 2017, McLaren’s current CEO, Zak Brown, pledged his support for Brawn’s proposal, in an interview with ESPN. But, when he was asked if other teams would be in favor of Brawn’s ideas, he admitted, “I doubt it.”
Brown said he is a firm believer that Formula 1’s revenue stream is “too out of balance,” which, in his opinion, is why “we have this out of balance race results.”
“But we are very opened minded to a clean sheet of paper approach and we are going to look at through the filter is this going to grow the sport,” admitted Brown.
The sense appears to be that Liberty Media is going to shake Formula 1’s monetary system up eventually.
Whether Ferrari is going to be particularly happy about making 68 million dollars less than previous seasons remains to be seen, though…
Tell us, do you agree with this third and final part of #TheMoneyStory? If you did, be sure you’ve checked out the previous two parts of this series, which can be found below.