New F1 Teams Have To Pay $200 Million Under Latest Agreement

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Image: FIA

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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.

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Image: FIA

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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. While 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, the general trend for televised sports has been down this year.

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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