So, you are a race fan, but you don’t really follow the politics. It is a blur of acronyms, smoke and mirrors. You know that the Concorde Agreement is important because it holds the whole sport together, but how does it all work? And what is happening at the moment?
The Concorde Agreement dates back 32 years to 1981 when the first such structure was put in place. It has changed a great deal since then but there have been successive Concorde Agreements in 1987, 1992, 1997, 1998 and 2009. The aim is to have another to cover the period 2013 – 2020. At the moment there are 13 potential signatories to the deal: the FIA, which owns and regulates the sport; the Formula One group, which has purchased an exclusive right to exploit the commercial rights of Formula 1 from January 1 2011 until December 31 2110; and the 11 Formula 1 teams, who are quite incapable of working together and thus end up being exploited because they always allow self-interest to get in the way of sound commercial thinking. Some of them support the Formula One Teams Association (FOTA) when it suits them to.
For some time now, Bernie Ecclestone, the boss of the Formula One group, has been under pressure to float shares in that business on the stock exchange. There is no reason why he would want to do that because transparency and rule by committee are not his thing. There are other more complicated issues, such as dubious claims to F1 trademarks, but the primary risk factor for investors is that there is no binding agreement between all those involved. The shareholders in the business want that to happen, although they are a fairly toothless bunch when it comes to decision-making because it seems that the Ecclestone Family still owns the voting rights to the business and so the investors are only there for money.
Ecclestone has been working for some years to get a new Concorde Agreement in place. His first step was to split up the teams. He did this by offering the bigger operations more money and more influence and then whipped the smaller teams into line with a “take it or leave it” approach. However, the teams were still not willing to sign a full Concorde Agreement and only agreed to financial deals in order to ensure their short-term futures. They believe that they should get a bigger share of the money generated than is the case. Ferrari – the best-known and most popular F1 team – is really the key to the game and so Ecclestone first did a deal that got the Italians on his side. He then offered lesser incentives to the others at the front end. Down at the back, he did not even bother with the Marussia team. There is an argument that this is contrary to the competition rules of Europe but as yet the situation has not been challenged. It is an odd thing because traditionally Ecclestone has always wanted one more team than is needed in order to keep all the smaller operations hungry and thus have a sport without any “passengers”, but one supposes that the investors did not want to “waste” $10 million a year on the team.
Having got the teams settled Ecclestone then began discussions with the FIA. The federation has a problem in that a lot of the member clubs feel that the sport should provide it with more money. The sport is rich but the automobile clubs around the world do not see that cash. So Ecclestone had to make some concessions to keep the FIA happy without upsetting his investors. The FIA could at some point challenge the 100-year agreement if there is a change of control or if Ecclestone gets into legal trouble, so he needs to keep the federation as happy as possible. The deal struck last week was one that will give the FIA around $240 million over the term of the next Concorde Agreement, plus one percent of the business if the Formula One company is ever floated. In addition he has agreed that it is the right of the FIA to nominate single suppliers for such things as tyres and fuels. This is a potential source of revenue.
The key question now is what rights Ecclestone has won for himself in the course of these negotiations. There is a hint from the World Motor Sport Council that this might include more races (hence more profits) as it has endorsed a 22-race calendar for 2014, despite the fact that the rules state very clearly that there will be no more than 20 races. This is probably a negotiating ploy. The teams do not really want more races. Ecclestone has always believed that F1 should be pretty exclusive, in order to keep up its value, but at the same time he needs to keep the money men happy.
Extra races may mean more costs but for the teams it also means more earning potential, although this would need to be significant as teams will have to start rotating personnel if there are more than 20 races.
However, if the teams agree to sign up to Concorde, the calendar could – no doubt – shrink back to 20 events.
The other question is over the planned F1 Strategy Group, which will have only the top six teams involved.
Not surprisingly the smaller teams feel threatened by that and do not want to agree. This too is a position from which Ecclestone can retreat if the teams agree to sign Concorde…
The game continues.
joeblogsf1 
Joe, have you ever read one of the Concorde agreements? It seems to be more secret that anything the USA has labeled Classified. Surely some of the teams or owners who are no longer in the sport have copies, why has no one ever published or “leaked” one? Would be a mind-numbing legal read no doubt.
“The parties hereto agree to keep this Agreement (save for the Regulatory Provisions) entirely confidential and no party hereto shall disclose any aspects of this Agreement (save for the Regulatory Provisions) to any third party without the prior written consent of each of the other parties save as required by law or as necessary for the proper exercise of any rights or the performance of any obligations hereunder.”
I think that answers your question.
so have you signed the confidentiality agreement……………………….
I don’t know what you’re talking about…
I have read a story (perhaps here) that all copies of the agreement are unique (different punctuation, random changes), so that if any were ever leaked they would know who did it. Might be an old wives’ tale though.
Maybe. How would you know?
It’s such a well-kept secret that you actually have to Google it to find it.
Not the real one…
The 1997 Concorde Agreement that’s floating around isn’t real?
It’s 15 years out of date.
Question, what would happen to a team such as caterham if they finish in 11th position next year and say WIlliams have another complete shocker and Marussia finish 9th via a high attrition race? Would Caterham now be the one getting no money or would they get some money as they have a deal with Bernie.
Under the terms of the old Concorde Agreement, one of the payments schedules is based on the last season and another is based on the last three. So if Caterham get beaten this year the team will lose some but not all of the TV money.
How can a SPORT be run in such a sinister and secretive way. I understand that its beneficial to the sport to have reconisible teams – so awarding some money based upon the length of time a team had remained as a consitent entity in the sport is justified to a point e.g. Ferrari. However eveything else should be based purely on results.
I also can’t see why top teams don’t want a situation where the prize money covers the costs of running their team and then any sponsorship deals are pure profit for them (i.e. allowing a budget cap to be introduced). Plus if they are winning a lot of the time but not all of the time there will be more interest in the sport.
Red Bull’s dominance this season is a case in point. Your giving the best team so much more money than the rest and then wondering why everyone is so annoyed that Vettel is winning constantly. Its not even a case of self interest its total stupidity! I and a couple of friends have been diehard fans for years, I wouldn’t miss watching a race live unless it was for a very, very special reason. This year I’ve watched the highlights rather than the actual race a couple of times and often have been doing other things when the races have been on, so they haven’t got my full attention. One of my friends hasn’t watched many of the races this year the other has been complaining about how boring the racing and results have become. If that is what fans think then how are you supposed to increase the sports popularity.
WAKE UP F1! Is there any chance the FIA will step in and do something about this?
Well I think this season is a case point for the top teams not to want a budget cap. Red Bull have spent a lot of money investing in talent to get ahead, and the easiest way anyone else can catch up is to spend more. Whilst a budget cap is logical in theory, it does mean that at the time “the music stops” it will become harder for any team to catch up, as they will have less resource to do so and so any team that is not winning (and wants to) is unlikely to agree to it unless they are feeling particularly altruistic.
In other sports the teams have joined together and taken control, but in other sports winning isn’t always everything, and the people making the business decisions are generally removed from the playing side. In F1, these are generally the same people and so they loathed to let go of any potential advantage they may have or think they will have in the future.
Yeah, but when you close the gap in performance it costs more and more money to find even more gains. So its true to suggest that to begin with the leading team will have a benefit, but at the moment Red Bull can spend silly money finding small but still significant gains. If they couldn’t spend the money to do so it allows everyone else the chance to catch up. Over time and some rule changes you would have a much more even grid I would have thought.
The other benefit of a budget cap is that a smaller team with £30,000,000 in F1 revenues can go to sponsors and say if you invest a certain amount of money we will have perhap 80% of the budget of Red Bull or Ferrari. Thats a much more interesting option for a sponsor or investor than the current situation of “we have a fraction of what the big teams spend so if you give us a lot of money we will still have nothing close to those teams overall budget which is very high but we’re not even sure how high”.
I understand that much… can you do a 102… followed by a 201, 202, etc.
(I am not joking… honest.)
Thanks for the insight, very interesting.
Hi Joe.
When did the FIA assume ownership and control of F1 ??? Also is the “TV” revenue the most significant for all concerned??
The FIA had owned F1 since they invented in the 1940s.
Regarding plans to float F1 on the SG Exchange, I am unaware of anyone offering a plausible explanation how the F1 Group,and BCE, wouldn’t face prosecution under the Singapore Prevention of Corruption Act,Section 37, for bribery of public official outside Singapore — if the IPO occurred, as long as the court cases in the various jurisdictions are still pending.
Wonderful stuff! You can keep Game of Thrones!
Joe, are you not surprised that some disgruntled party has not leaked the substance of what it says? Doesn’t the notion of complete secrecy strike you as a wee bit bizarre?
(Or have they leaked it, and the smart insiders keep their mouths shut?)
p.s. Perhaps a xerox might somehow ID the source, but a set of bullet points about its content would not…would it?
You have your answer in the question. Anyone smart enough to have Concorde is smart enough not to tell the world that. The one that appeared on the Internet was one that came from a journalist who is not in F1 and has not been a regular at any point in the 25 years I have been there. It is also 15 years out of date.
The exclusive supplier arrangement seems like a masterstroke from Bernard. The oil companies have very deep pockets. Instead of the teams getting the sponsorship, the FOM can pocket this revenue itself by selling the rights at the highest price.
The FIA chooses.
“Down at the back, he did not even bother with the Marussia team.”
WHY was Marussia not a signatory to the new CA? Marussia opted not to play or BE didn’t care about them at all?? Seems very strange crafting global agreements to include all participants of a business but one???
Thanks.
They have not been offered a deal, as I understand it.
If you put on your Bernie-think hat, how might that fact make any sense?
He wants a smaller field? He wants the poor teams to be even poorer? He wants the Caterhams to be able to waddle around at the back without any interference while they finish last? What?
(Not saying it doesn’t make any sense… just saying that evidently I’m no good at this kind of thing, and thus seek your help in (possibly) understanding it.)
This is why I read this blog. Good article.