money 2022 f1

Parc Ferme: The Formula 1 “Discord” Agreement

money 2022 f1

Formula 1, the Concorde Agreement, and the sniping involving the parties involved in it have been the subject of my reflection while taking a break over the festive period.

The most recent “episode” being the FIA non-investigation into the Wolffs (Toto and Susie) that was pretty much concluded before it was even opened.

This was, of course, just an extension of the ongoing War of the Entrants being fought between team “let’s have more” and team “let’s not”.

Play nice

The structure of F1, on the face of it, should work well. The regulatory body (FIA), together with the commercial rights holders (Liberty Media AKA FOM) and the competing Teams, are bound together by the “Concorde Agreement”.

Effectively,  a contract stipulates the parties’ obligations and how the derived commercial income is divvied out. It should be a happy arrangement since one party is nothing without the other two.

The cupboards bare

However, the FIA no longer gets a share of the commercial pot. In 2001, the EU Commission required the FIA to relinquish this income stream, stating that it was a conflict of interest to act as the sport’s regulator and benefit from its commercial operation.

Consequently, the FIA sold the commercial rights of F1 to FOM for a period of 100 years for $360-Million.

Unfortunately, what initially seemed a good deal at the time has now been diminished by inflation and F1’s exponential value growth.

Team “Let’s have more”

Michael-Andretti-gm general motors

The FIA want more Entrants (Teams on the grid) as it generates more revenue for them. At first glance, this may seem no more altruistic than Team “Let’s not”.

However, it should be remembered that for the FIA to grow the sport, it needs money. It also requires funds to do its job as a regulator effectively. The expanded race program and the strict expenditure caps no doubt require additional personnel.

Team “Let’s not”

However, for Team “Let’s not” more means less. Additional entrants on the grid would mean the commercial purse being divided between more parties, ergo less money for the incumbents.

This conflict of interest has effectively turned a tripartite agreement into a bipartite one, with the FIA the minority shareholder.

Formula 1 past and present

I’ve seen Formula 1 morph from a blazer-wearing niche sport of the late 1960s to the billion-dollar global entertainment platform it is today.

Unfortunately, the new reality is that F1 is just a backdrop for a party and a reality TV show. A global behemoth that generates volumes of social media content and money. However, more competitors on the grid will improve the racing side of the spectacle. Something which may turn out to be its savior once the “soap” side of the equation starts to soften.

Liberty is in danger of killing the goose that lays the golden egg by barring new entrants. For the good of F1 and the sport et al, I’m with Team “Let’s have more” on this one.