Parc Ferme: The fight for Formula 1

Parc Ferme: The fight for Formula 1

Since Max Mosely succeeded Jean-Marie Balestre in June 1993, apart from the odd differences, the two power brokers of Formula 1: FIA and FOM, have been two hands on one stomach.

However, that comfortable arrangement seems to be coming to an end, and as such, there are two core issues in dispute now.

The first is about the money of course. In 2006, the FIA ratified a deal that gave SLEC Holdings, the commercial rights to Formula 1 from 2010 for the next 100 years.

Without going into details, we can consider FOM and its majority shareholder, Liberty Media as owning those rights in 2023. The consideration given to the FIA by FOM was a one-off payment of circa $300-Million plus $10-Million annually for the duration – a lot of money back then, but a mere pittance to what F1 now generates.

The financial crystal ball was at the repairers…

Understandably, the FIA now feels that the family silver was sold off too cheap and wants to, at best renegotiate the deal and at worst, improve on the annual payment. We can also presume that the current FIA Presidential incumbent was elected to their position on the mandate of being someone who could deliver this.

I’m the boss, see

The other elephant in the room is who really controls Formula 1. Whilst the FIA own the series from a sporting perspective, FOM has the commercial rights and copyrights to a number of F1 symbols and names.

Conventional wisdom has it that FOM is the driver and that FIA rides shotgun, signing off the regulations, thus creating a plausible separation between competition and financial activity. It should be a symbiotic relationship, but it appears that the FIA want more driving time.

My train set

SPA, BELGIUM - AUGUST 26: Stefano Domenicali, CEO of the Formula One Group, Mohammed ben Sulayem, FIA President, and Markus Duesmann, Audi CEO, walk in the Paddock prior to practice ahead of the F1 Grand Prix of Belgium at Circuit de Spa-Francorchamps on August 26, 2022 in Spa, Belgium. (Photo by Dan Mullan/Getty Images) FIA ben sulayem

The FIA insist that they have the right to accept new entrants to the Championship (They generate revenue from this). Whereas, FOM and the Teams say no.  The imperative here is money again.

There is a portion of FOM’s annual hefty profit that is divided between the constructors at the end of each season. Simple arithmetic demonstrates that adding an eleventh team will either: A. reduce the amount each team receives, pro rata or B. FOM has to finance the difference themselves.

On top of this, there is the simple supply and demand of economics. Barriers to entry are financially good for raising the value of any incumbent team, should someone want to sell that is.

No, my train set

The other outcome of course is that FOM say, “Sure THEY can join YOUR series, … but not OUR table.”  Not being a financial benefactor of the FOM pot would surely render the entry pointless. And it is this space where any ensuing legal battle will probably be fought. The commercial rights holders are limiting the FIA’s ability to raise revenue.

Ding, ding, round one

With the FIA announcing they have accepted the Andretti Formula Racing bid and they will become the 11th on the grid, the gauntlet has been thrown down. For the fans and racing, this is an undoubted plus. However, it will be interesting to see how this all spins out. Will the FIA get a backroom deal from FOM to assuage their bank account? Will FOM tell the FIA “Thank you for your service” and adopt another regulator? Who knows.

However, I would remind both parties about what happened to the king of Lydia in ancient times. He asked the Delphic oracle (the equivalent of taking legal advice in those days), what would happen if he took on the Persians.

The answer was suitably ambiguous: “If you take on the Persians, a mighty empire will fall.” Encouraged by this response, he went for it. Unfortunately, for him and the Lydian empire, he forgot to ask “Which one”?