It was announced a few weeks ago in the Telegraph newspaper that due to expiration of the last Concorde Agreement and F1’s chief executive Bernie Ecclestone signing new agreements with individual teams, Marussia – the 11th placed team – will no longer be entitled to a portion of the prize money.

In the past 3 years, teams which finished outside the top 10 received $10million each as part of an agreement Bernie made with former president of FIA, Max Mosley.

While it is not yet clear if this is a “done deal” or Mr Ecclestone’s trademark headline-grabbing controversial comment, Marussia is set to put up a fight. The topic of sponsorship for smaller teams was addressed brilliantly by James Parrish in this article titled: “speed or sponsorship, which comes first?”.

280220131356

However, more recent events i.e. the “secret Pirelli-Mercedes tyre test” carried out after the Spanish Grand Prix at the Circuit de Catalunya track may be a blessing in disguise for some teams, Marussia in particular.

The 3 main sources of revenue for Formula One Group are 1) Race hosting fees which is said to contribute around $600m a year; 2) Broadcast Contracts, bringing in another $600m and 3) Miscellaenous deals including Hospitality, Signage deals, merchandising etc worth $300m a year. Therefore FOG annual revenues are about $1.5billion.

Column 1 money is 50% of the total FOG revenue, divided equally among teams who finished in the top 10 of the constructors’ championship twice in the past 3 years, and Column 2 money is awarded to the top 10 teams in the previous season (19% to the WCC and the other nine teams receive 16, 13 11, 10, 9, 7, 6, 5 and 4% respectively).

Ferrari gets a premium due to historical deals, McLaren and Red Bull also get special payments albeit less than Ferrari.

So an example from Autosport:

FOG EBITDA = $1500m – $300m = $1200m
$1,200m split 50:50 CVC:Team pot with both parties contributing $30m each to Ferrari’s premium.

Therefore FOG retains $600m – $30m = $570m, minus premiums paid to Ferrari/Red Bull ($70m each) and McLaren ($60m). Ferrari also receives $30m from teams so the Team pot also contains $570m and is split 50:50 into Columns 1 and 2 = $285m each.

Column 1 money is split equally among the top 10 teams = $28.5m (provided they have been in the top 10 for two of the last three seasons)
Column 2 provides for Championship winner to receive 19 per cent of $285m ($54m), 2nd placed 16pc, 3rd 13pc, 4th 11pc, 5th 10pc, 6th 9pc, 7th 7pc, 8th 6pc, 9th 5pc, and 10th placed team to receive 4pc ($11.4m).

Therefore for example, if Lotus won the constructors’ championship it would receive $82.5m ($28.5m + $54m).

TYRE-GATE

However, if Ferrari and Mercedes are deemed to have contravened the sporting regulations by participating in an unauthorised in-season test, likely punishments/sanctions the FIA could impose is to exclude both teams, a fine or “demotions”.

Therefore Ferrari and Mercedes could be classed 10th and 11th, and Marussia 8th and Caterham 9th. But owing to the aforementioned arrangements with FOG & Mr Ecclestone, a 10th-placed Ferrari could still receive circa $147m ($70m premium, $30m team contribution, $35.6m Column 1 and $11.4m Column 2). Note that the Column 1 pot would be shared by only 8 teams who have met the criteria (excluding Marussia & Caterham) and therefore amounts to $35.6m per team.

And Mercedes could receive $10m (a separately negotiated sum similarly to Williams, see Autosport article), and nothing from Columns 1 and 2. Marussia, which might be classed 8th, also miss out of a cut from Column 1 but would stand to receive 6% of Column 2 pot i.e. $17.1m.

So Marussia could be the biggest beneficiary of this saga. However this is just a hypothetical calculation based on a penalty that could be applied. In the meantime, the F1 world waits to find out the outcome of the International Tribunal hearing.

Advertisements