MPH: Smaller teams dare to dream as rigged F1 deal is dismantled

Further changes to next year's F1 regulations should reduce the yawning gap between the smaller teams and the top three, writes Mark Hughes

display_e35f2226d3

May 25th 2020

Cost cap should give smaller teams a better shot of sitting at F1's top table

DPPI

The F1 teams agreed last week to two significant changes to the regulations from next year: 1) A cost cap reduced from the originally agreed $175m to an initial $145m in ‘21, sliding down to $140m in ’22 and $135m for 2023-25. 2) A sliding scale of permitted wind tunnel and simulation time – the further down the team finishes in the constructors championship, the more tunnel and other simulation resource it will be allowed.

Teams are currently subject to a blanket limit on tunnel time and CFD capacity but from next year will be allowed between 90-112.5 per cent of the nominal limit set for those resources. From 2022 that sliding scale will be more aggressive, with the champion team allowed only 70 per cent of the nominal limit down to 115 per cent for the last-place team, with 5 per cent increments all the way down.

There will invariably be criticism that the changes don’t reward the survival of the fittest

The top teams have agreed to this in exchange for a less severe cost cap than some were proposing that would have reduced the spends of Ferrari, Mercedes and Red Bull to close to parity with the smallest teams (once exemptions were made for driver salaries etc).

Although the initiative for the cost cap reduction has been the economic crisis caused by the coronavirus pandemic, it’s clear that Liberty and the FIA feel that this has given them the ‘shock doctrine’ opportunity to push through changes it wished to make anyway. Although the priority is to ensure the survival of every team, the changes can obviously be seen also as an attempt at creating closer competition, specifically to close the yawning gap between the top three teams and the rest.

With F1’s overall income potentially shrinking dramatically, controlling the top teams’ spend and redistributing the slices of what is going to be a smaller cake can be seen as a single integrated response. There will invariably be criticism that the changes don’t reward the survival of the fittest meritocracy that has previously prevailed in the sport.

But it could just as easily be interpreted as a correcting a game that has been unfairly rigged in the top teams’ favour since the 2013 Concorde Agreement was made. Back then, the sport’s commercial rights holder CVC was attempting to list F1 on the Singapore stock exchange at just the time previous contracts with the teams were coming to the end of their term. Those commercial rights were not worth anything if there was no contract for the teams to participate, especially with the GPWC group of teams threatening a breakaway championship – and so there was an urgency to get the teams to sign up before the floatation.

MPH: Six years of star chasing — speed gains in F1's hybrid era

In this enforced pause in F1 on-track activity, it’s as good as time as any to reflect on the first six years of the turbo hybrid formula from a competitive…

6th April 2020

By display_e35f2226d3

The big teams were obviously where the value to F1 lay, and hence they had the whip hand in negotiations with CVC’s representative Bernie Ecclestone. He countered that with the divide and conquer technique he invariably used in team negotiations – but rather than use his usual foil Ferrari, he induced Red Bull’s Dietrich Mateschitz to break ranks first by offering his team a much bigger percentage of F1’s take than before. With the team unity thus broken, the run was then on: teams scrabbled to do deals before there was only a small amount of cake left. Ferrari was able to negotiate an even more handsome deal. Mercedes initially not so much, but its deal became much better once it had met the stipulation of two consecutive constructors’ championships that had been used as the justification for Red Bull’s deal. All of which left the top three teams with 55 per cent of the total payments, the remaining 45 per cent shared out between the remaining seven – even before the results-based part of the payments were applied. Ferrari, Mercedes and Red Bull now took an average between them of 18 per cent each of the total. The remaining seven got an average of 6.4 per cent each.

There’s no question that Ferrari (especially), Mercedes and Red Bull brought more value to the sport than the smaller teams. But under the 2013 deal that became self-fulfilling and set in stone. Realistically, it was now impossible to cross the much bigger moat that now surrounded the top three teams. No longer was it possible for a Frank Williams to come along and burst through the established order to become a top team, as he did in the late ‘70s/early 80s. Or as Ron Dennis did with McLaren at around the same time. When those top three deals were paying over $100m each (before the results-based component) and the smaller teams were receiving only around $35m each, it cemented in place a static hierarchy. Competition needs the vibrancy of new blood coming in and challenging the established order. The 2013 deal prevented that. The latest changes go some way to addressing that imbalance. It isn’t this deal that is anti-competitive, it was the previous one.