Liberty Media needs to share F1 money out more fairly for strength in depth
For all the positive noises being made by Liberty Media about the future of Formula One, the company that owns the sport has been positively reticent on one of the most important issues they must address. Behind the spectacle, the sound and fury of a thus far largely successful reboot, F1 is still generating huge amounts of money and as it prepares this weekend, the disparity in how it is distributed is again under public scrutiny.
On track, the heightened competition at the front of the grid between and has been enthralling. But where they are at least on a par in performance terms, how the teams are rewarded across the grid could not demonstrate a wider divergence. There is finance aplenty in F1 and any hope of moving on from the current structure of the big three effectively racing in a different class to the rest is dependent on finding a way to better apportion it.
Payments to the teams from the 2016 season were published by motorsport.com earlier this week and they have a very familiar air. F1 had an estimated turnover of $1.83bn in 2016, of which revenue was $1.38bn, 68% of which, $940m, is distributed among the teams. The way it is shared out is subject to various adjuncts that skew that division however.
still earned the most, with $180m. This consists of its participation payment – divided equally between all teams classified in two of the previous three seasons – and the sum earned based on classification in 2016, a total of $77m. Uniquely, they also receive a long-standing team payment of $68m, then a further $35m as a constructors’ championship bonus (CCB) – a fee paid only to the Scuderia, McLaren, Mercedes and Red Bull.
Ferrari finished third in the constructors’ championship last year, one place in front of Force India, who received $72m. Mercedes earn the CCB and an additional $35m having reached an agreed target of two world championships, while Red Bull also receive the same sum for being the first team to sign the current agreement. The former received $171m and the latter $161m. McLaren, despite their poor performance, also receive the CCB bonus, while Williams have an additional heritage team payment of $10m.
Both finished below behind Force India in 2016 but received $97m and $79m respectively.
Below them the payouts drop significantly, from Toro Rosso on $59m to Haas on $19m. None of which is any surprise. The current financial agreement is set to run until the end of 2020 and the figures are very similar if a little down on those of 2015, due to Liberty Media investing more in its marketing outlay. But the numbers are a stark reminder of just how far F1 must go to present even a vaguely level playing field.
In January the president of Liberty, Greg Maffei, said Ferrari’s payment was something the company would be looking into as part of a consideration of restructuring the financial model for 2020. But almost nothing has been heard since then.
Yet action is needed and it must result in a positive, more transparent and less arcane system for the good of the sport. Fairer distribution will not suddenly bring the grid together, without budget caps which seem to be unworkable, the big teams will still outspend their rivals. But three teams have gone bankrupt since 2012 and the long term security of those that remain should be of prime interest both to Liberty and to the major players. More cars, closer competition and a grid where the midfield have at least a chance to vie for victory all adds to the spectacle.
Revenue for teams from sponsorship has been falling since 2010. Sauber (income from 2016: $49m), who have a complaint lodged with the European Union on F1’s unequal distribution of funds, feature a celebration of the team’s 25 years in F1 on their car’s fin. It is part of a striking and attractive livery but one which emphasises the lack of a title sponsor. The shortfall has been made up for by an increase in prize money, largely from the sale of TV rights to pay-to-view channels. The teams further down the grid are least likely to attract sponsorship, making distributing that revenue of even greater import.
Both Management and Liberty would not comment on the figures, perhaps stung by a warning from Ferrari’s president, Sergio Marchionne, who pointed out swiftly after Maffei’s comments that even a discussion of changes would be “unwise”. He has 180 million reasons to adopt a hard line but F1 needs to be equally determined to fight for a long-term solution and if necessary face down the major players.
It is a sensitive issue and difficult to resolve – agreeing to a fall in income is not something any team will succumb to willingly. So along with the other encouraging notes perhaps the new owners could take a real step and voluntarily increase the prize money from their share, with the additional funds allocated to the smaller outfits. It would be a sure sign that things have genuinely changed from the Bernie Ecclestone-CVC era and proof that all the noise coming from Liberty is not just hot air.