New F1 Teams Have To Pay $200 Million Under Latest Agreement – The Truth About Cars

Interested in joining Formula 1? We hope you have $200 million handy because thats the amount you have to pay to enter a new team under the sports seventh Concorde Agreement. Signed by the Fdration Internationale de lAutomobile (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 thats 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 youll 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 were trying to do as an industry is stop what weve 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 dont have what weve historically had, which is random announcements that people are going to come in and then they never make it to the track. I dont think youd 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 wed see another factory added to the grid.

I think having a Formula 1 team that can be competitive, that isnt a money pit, which is where Formula 1 has been if you want to be competitive then its a money pit, and thats not attractive to now, I think Formula 1 has set on a journey with fairer revenue distribution, tighter rules, budget cap, theres no reason why other racing teams wont start to look at Formula 1 and see that its a viable business model. So I do think well see more teams but I think its a few years away, Brown said.

From our vantage, the fee probably will discourage smaller teams from entering but thats kind of the point. Formula 1 doesnt want to see any existing teams drop out and has tried to make the sport fairer without turning anybody off. It also isnt all that unique for upper echelon sporting leagues to charge giant fees for the privilege of owning a team. But were not certain its a wise decision when tons of people seem to be snubbing sports across the board. While we normally harp upon NASCARs cratering viewership, F1 has lost nearly 130 million viewers since 2008. 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. Regardless of the causes, the general trend for televised sports has been down this year. Way down.

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 its 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 wasnt 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]

Related

More:

New F1 Teams Have To Pay $200 Million Under Latest Agreement - The Truth About Cars