Formula 1 would do well to take a look at the new five-year commercial deal that has been struck between Dorna and the International Road racing Team Association (IRTA) in MotoGP. This aims to create a business model in which the smaller teams can survive, despite the fact that there are now six factory teams in intense competition with one another. Honda, Yamaha, Suzuki, Ducati, Aprilia and KTM are all raising the stakes as they fight for victories, but the new deal means that they will get a smaller share of the money than was previously the case, while the smaller teams will get more. With revenues rising this does not mean a reduction for the big teams, but simply more of a plateau, rising in the years ahead as the sport grows in popularity. The logic is simple. A factory team can find sponsorship more easily because of additional success, exposure and B2B opportunities. Budgets are much smaller than in F1 but this means that the small two-bike teams will get around $4 million a year extra.
The logic is sound. If one pays the stronger teams more money they will create a bigger advantage, but paying the smaller teams means that they will be stronger and the competition will intensify, which ought to lead to more interest and more revenue. The factory teams did not much like this idea, but they agreed to it on the basis that they could get the money back by increasing their leasing fees to the customer teams. But, with the intense competition, the small teams have become useful because they help the factories with development, which is vital in such a competitive environment. This means that the customer teams can shop around for better lease deals and so the lease fees are coming down again. The better the team, the better the deal. Last year two customer teams won races so they can be useful when the factory teams fail.
The new deal requires manufacturers to make factory-spec bikes available to independent teams, with a maximum lease fee of $2.2 million per bike.
The system depends to some extent on the factories having similar performance, which has been achieved by using the rules to restrain exotic development and by introducing standard electronics, but the goal now is to keep the rules as stable as possible to keep down the costs. The factories will, of course, spend more as they seek an advantage, but the small teams can stay in business and can even triumph.
Scale this up to F1 budgets and one can see that there are some similarities. Mercedes has engine supply deals with Williams and Force India, Renault supplies Red Bull and Toro Rosso, Ferrari has Haas and Sauber, and Honda is currently without any customers, but will no doubt pick one up once the engine gets better. What F1 really requires is another manufacturer or two to spread the load, and for the performance to equalise more. Teams such as Red Bull and Williams still hope to find manufacturers to get them back to winning more, and young teams too want similar deals to help them become winners.
To achieve that, it is best to leave the rules as they are for as long as possible into the future, so that new manufacturers know what they are getting into – and to create a better cost control.
And to give more money to the teams at the tail of the field.