The Belgian Grand Prix weekend was pretty much devoid of any real celebrity spectators, with the exception of Sir Richard Branson, if one considers him in such a light. There was, however, a lot of quiet talking going on as Bernie Ecclestone continues to try to nail down a Concorde Agreement, in order to have the financial structure of the sport solid between 2013 and 2020.
If he can do that then the sport will be a lot more stable and presumably the investors can then play games with their shareholdings and make themselves more money. The problem is that the Formula One Group is still trying to find a solution with Mercedes-Benz and with the FIA. All the other parties now seem to have been pinned down and are ready to sign. From what I hear, Ecclestone and FIA President Jean Todt are basically in a financial discussion, but they have very different ideas about how much the FIA should get from the sport. The federation did land around $300 million for the 100-year lease of the commercial rights to the Formula One group, about 10 years ago, but that money was locked into a foundation and the FIA does not get much of it.
The federation has considerable costs and feels that when its commercial rights holder is generating more than $1.1 billion in revenues from broadcasters, promoters and official partners and suppliers, there should be a little more money handed over to the FIA to help it cover its costs. With around half the money going to banks and investors; and the other half going to the teams, the federation is somewhat squeezed in the middle, but it has a significant involvement (being the owner of the sport) and has lots of good causes that need to be funded, notably road safety and environmental initiatives. This is not unreasonable, even if the FIA really has only itself to blame for allowing the commercial rights to have been leased so cheaply.
From what I hear, Todt has been asking for an annual lump sum of around three percent of the revenue, which would suggest a figure of around $40 million. Ecclestone is not interested and is believed to be saying that he will give the FIA one and a half percent, and the federation can get the rest from the teams. That is not really unreasonable given that they are getting about half the revenues. The teams don’t really have much choice but to do what they are told because the FIA owns, makes and polices the rules. Todt is rumoured to have come up with a structure that is designed to be a bit like income tax and he will charge the richer teams more than the smaller ones using the World Championship points as the deciding factor. The exact figures are not clear, but with the FIA looking to generate around $20 million from this exercise, it is logical to suggest that this would boil down to an average of about $900,000 per car. The current entry fee is about a third of that.
Using the 25-18-15-12-10-8-6-4-2-1 points system and working on around 20 races a year this means that there are 2,020 points available each year and to get $20 million, each point would have to generate something like $9,900. The problem is that when one considers that last year’s Constructors’ Champion Red Bull Racing scored 650 points, that would translate into an entry fee of around $6.4 million. Logically those teams that have scored no points would have to pay a basic figure in the hundreds of thousands.
This taxation system is not a bad idea, but obviously the big teams don’t like it. Some of them are also less than happy about the new 2014 engine regulations as they expect their engine bills to increase significantly as well, because of the federation’s desire to give the sport more industry relevance. This means that some teams may have to find as much an extra $10 million of budget in 2014. There is a sound argument that this is a good incentive for them to come up with cost-cutting ideas, but getting all the teams to agree to radical cost-cutting is very difficult because the big teams want to continue to enjoy budgetary advantages.
The hike in engine costs is also a good incentive to get the middle-ranking teams to get out there and either negotiate better deals with the existing engine suppliers, or find new automobile companies to come in and help them with their bills, while at the same time generating useful technology that the firms can then direct back into their road cars, in addition to the publicity value that F1 provides. The problem with this is that some car companies do not like F1′s image at the moment.
In any case, even if a project was agreed today, it would be 2017 or 2018 before any engines would likely appear from new manufacturers.