On one facet of the talk is the FIA, which is pushing laborious to increase the grid past the present 10 groups because it sees nothing however positives from the arrival of the Andretti-Cadillac operation.
Opposing that push, nevertheless, are the groups, who assume that an eleventh squad will convey no tangible profit.
Moreover, they concern that sharing the prize pool with one other staff dangers bringing monetary uncertainty for operations that simply three years in the past have been on the brink in the course of the COVID pandemic.
Sitting someplace within the center, however clearly lukewarm to the entire thought, is FOM, which has acknowledged that it’ll solely hand out a business deal to Andretti if its evaluation reveals it might be accretive to F1 as a complete.
Whereas the present groups haven’t any formal say on what FOM’s ultimate choice shall be, their resistance will seemingly be a key think about swaying F1 CEO Stefano Domenicali’s ultimate opinion on the matter.
And, vital to the negativity in direction of Andretti, is the concern from some groups that including an eleventh squad to the grid might threat their very own future.
Williams staff principal James Vowles made it clear on the current Qatar Grand Prix that squads like his have been nonetheless on the knife edge when it got here to funds, so shedding prize cash and worth wouldn’t be factor.
“My duty is to 900 staff inside my firm,” he stated. “When you go have a look at Firms Home, you possibly can go look it up for Williams, we have submitted it now, you possibly can see that we’re lossy. We’re very lossy.
“In truth, examine it from ’21 to ’22, you will see that losses are within the tens of thousands and thousands extra. Examine it to ’23, which you will not see however I will assure you, it is multiples above that.”
However would Andretti’s arrival and the next reshuffling of the business rights revenue actually have that a lot of an affect in making issues worse, particularly if it stumps up the $200 million dilution fund fee first?
Right here we have a look at the figures concerned to get a greater image of what’s at stake.
Picture by: Alfa Romeo
The beginning of the race
Prize cash funds
Formulation 1’s actual prize cash break up is secret, with its particulars enshrined within the business aspect of the 2 Concorde Agreements that successfully govern the collection.
Nonetheless, utilizing data that’s obtainable within the public area – together with the printed accounts of each groups and F1 house owners Liberty Media – it’s potential to determine a fairly good thought of how the business pot is break up up.
The very best estimation is that, in response to the phrases of the Concorde Settlement, the staff prize pot is made up of fifty% of the general business rights revenue that the collection generates.
Nonetheless, it’s understood that after a sure level of income, FOM’s proportion share shifts up so it retains greater than half from that determine onwards. It means groups don’t at all times get a straight 50% of the cash.
In 2022, for instance, with F1 producing $2.57 billion in income, staff funds totalled $1.157 billion, which equates to roughly 45% of the overall revenue.
These funds should not shared equally amongst all of the groups, nevertheless.
Initially, Ferrari continues to have an additional fee for its historic significance, which is believed to be 5% of the overall pot.
Groups which have achieved success within the constructors’ championship in recent times additionally qualify for a easy bonus (from having received one title) or an even bigger fee (for profitable two or extra).
There’s additionally understood to be a separate pot primarily based on additional funds for groups which have completed within the prime three of the constructors’ championship within the earlier 10 years.
Picture by: Andy Hone / Motorsport Images
Esteban Ocon, Alpine A523, Daniel Ricciardo, AlphaTauri AT04, Fernando Alonso, Aston Martin AMR23, Lance Stroll, Aston Martin AMR23, Zhou Guanyu, Alfa Romeo C43, initially
It’s estimated that every one these bonus funds account for round 25% of the overall prize pot distributed to groups.
As soon as these funds have been made, the remainder of the cash is distributed among the many groups on a sliding scale foundation, with the highest staff getting 14% and the underside squad getting 6%.
With F1’s predicted earnings anticipated to rise by round 8% – 10% yearly, it implies that staff funds totalling round $1.25-1.3 billion will be anticipated over the following few years.
The eleventh staff affect
Ought to Andretti arrive on the grid, then the affect will solely be on the pot of cash that’s distributed after the bonuses for the highest squads.
So, for simplicity causes, if we choose that the ultimate fee pot is $1 billion with the additional bonuses which have been taken out, right here is how the funds would shift with an eleventh staff on the grid.
Based mostly on a 10-team grid distributing $1 billion, the payout can be as follows primarily based on constructors’ championship place.
Group prize cash payouts for 10 groups primarily based on $1 billion fund
|Place||Proportion||Prize cash ($)|
Ought to an eleventh staff arrive, then the figures would shift barely, with everybody’s proportion of the pot being lowered. Which means that those that acquired an even bigger slice of the pie will stand to lose essentially the most.
Projection for 11 groups primarily based on $1 billion distribution
|Place||Proportion||Prize cash ($)|
Evaluating the 2 tables, it reveals that the arrival of Andretti – if the prize pot didn’t enhance – would set off a $7m loss for constructors’ champions Purple Bull.
The staff that completed fifth would lose $5 million, whereas the tenth positioned squad would drop $3 million per 12 months.
This lack of business revenue for everyone is why the 2021-2025 Concorde Settlement included the well-known $200m dilution price, which was supposed to cowl any such losses in prize revenue for a number of years.
Picture by: James Sutton / Motorsport Images
The automobiles of Lando Norris, McLaren, pole man Max Verstappen, Purple Bull Racing RB19, Oscar Piastri, McLaren MCL60, in Parc Ferme after Qualifying
On a fundamental stage and distributed as a straight upfront fee of $20 million every, the dilution fund would offset TV losses throughout half the grid for a while.
And that’s earlier than considering potential will increase in income, which might go up by 8% every year anyway, primarily based on FOM’s success.
Moreover, in monetary phrases, having a $20 million upfront fee is value greater than having it unfold out over a number of years.
That is very true when speaking about what is called the low cost price that accountants use to stability the worth of revenue now versus it arriving later.
However whereas the year-by-year losses for groups don’t look that dramatic, what they don’t consider is the largest aspect of concern, which is expounded to the affect that Andretti’s arrival would have on the worth of groups.
With the present price ticket of an F1 operation being across the $1 billion mark, Andretti moving into F1 for simply $200 million is one thing that might doubtlessly set a precedent in dropping the worth of the present squads.
It’s little marvel then that there’s speak of the dilution price being raised to $600m or extra in 2026 when the brand new Concorde Settlement comes out.
Picture by: Motorsport Images
Mike Krack, Group Principal, Aston Martin F1 Group, Zak Brown, CEO, McLaren Racing, Toto Wolff, Group Principal and CEO, Mercedes-AMG, Guenther Steiner, Group Principal, Haas F1 Group, within the Group Principals Press Convention
That will appear extreme when it comes to the prize cash affect. However, for the present groups, they consider it makes extra sense to stabilise the worth of these concerned in F1 proper now.
As Purple Bull staff boss Christian Horner advised Sky Sports activities F1 lately: “I feel that whenever you have a look at how Audi has come into the game, they’ve acquired an current staff and an current franchise, ought to it’s completely different for the others?
“I feel that is the place Liberty and the FIA have to get collectively and are available to us with a collective place. As a result of you possibly can’t have one rule for one, and one other for others.
“Clearly, cash makes the world go spherical. And that is what each staff shall be acutely delicate of, and the franchise worth being diluted. Immediately you go from 10 to 11. So, after all, the stakeholders, the shareholders of every particular person staff may have a priority about that.”
The important thing factor for Andretti is whether or not these considerations are sufficient to persuade FOM to not give it the deal it desires.