What is in the new 2021 F1 Concorde Agreement?

August 19th 2020

All ten F1 teams have signed the new 2021 Concorde Agreeement, which commits them to the series until 2025. The deal hasn't been published, but Chris Medland has been gleaning the details

In recent weeks, as the early sign-on deadline loomed, there were growing references to the Concorde Agreement, with the majority of teams publicly stating their willingness to sign and commit to Formula 1 for another five years.

And then Mercedes threw a spanner in the works in Silverstone, complaining that they hadn’t been treated properly.

So when F1 sources confirmed the initial sign-on deadline of August 12 had been pushed back by six days, there was a little bit of doubt that started to creep in about what was going to happen. Then the new deadline came and went, and all ten teams signed on the dotted line.

Quite frankly, that’s remarkable given the sport’s history of politics and self-interest.

What makes is more remarkable is because it’s a bit of a Robin Hood scenario. OK, it’s all relative, but the new Concorde Agreement is, on one level, about taking from the rich and giving to the poor.

Right now, you don’t make money running a Formula 1 team. And realistically you are never likely to.

Those teams that used to get additional payments will still get them, but that proportion is reduced and heading to the other teams – not that any of the parties will discuss the exact split; some weren’t prepared to talk about the agreement at all. Liberty Media outlined its desire for a more equal distribution of funds from the moment they took over the sport and they have delivered on that front with the first Concorde that they have negotiated.

But there are other, perhaps more important, changes that have taken place.

For one, unanimity among the teams is no longer required in order to push changes to the sport through. If it’s a topic that F1 and the FIA are aligned on that would be good for the sport, then only eight of the teams need to be in favour in order to proceed. Such a difference in the governance means one team cannot block ideas based solely on their own position, with the intention being to allow changes that benefit the sport to be made regardless.

There’s also a clause that says top executives at teams cannot immediately join F1 in a similar capacity for a number of years. That one does need unanimity to circumvent, but doesn’t mean the teams get a veto on who F1 wants to hire in certain roles if that person is coming in from elsewhere – it only applies to a team member potentially making that move.

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Where the big changes have been made relate to sustainability, which is a word we hear a lot in Formula 1 but don’t always get much background. On this front, there’s been some ring-fencing of the current teams in order to protect them as businesses.

Right now, you don’t make money running a Formula 1 team. And realistically you are never likely to. Teams are usually going to spend what they earn because it should give them performance, and they’re in the sport to deliver on track. Even where there are obvious commercial considerations for owning an F1 team, those considerations are only boosted by a more competitive car.

Previously, paying the entry fee was not particularly prohibitive. Any new team could do it whenever granted an entry by the FIA. But now the new Concorde has seen steps taken to increase the value of the existing teams.

The ten currently on the grid all have a licence to race in Formula 1, that licence now has a greatly increased value because the entry fee is much higher, in turn increasing the value of each of the teams that owns one. Therefore if anyone else wants to enter F1, any team already competing can be sold at a higher rate. That doesn’t mean new teams can’t be created and enter as a new entity, but by increasing the entry fee the aim is to protect the value of the teams that have committed to the sport already.

That’s not to act as a deterrent, either, because if you know you’re entering a sport where you have a more level playing field to compete on (in terms of the revenue distribution and the budget cap) then you’re more likely to want to invest. And that investment is safeguarded to an extent by the fact that securing an entry will provide you with a much more valuable asset to sell if you ever want to get out of the sport.

It’s essentially franchising, which is no surprise given Liberty Media’s background in American sports.

And the American influence is one that has been praised internally. Getting all ten teams to agree and sign is no mean feat, and Chase Carey has successfully negotiated the most political aspect of his roles as chairman and CEO.

McLaren Ferrari red Bull and Mercedes cars lined up in parc ferme after the 2020 F1 Spanish Grand Prix — Higher entry fee makes each existing team more valuable

DPPI

Speaking to various team sources, they each accept they were never going to get absolutely everything they wanted – you always want more – but then they are content in the knowledge that every other team is in the same boat. Liberty will also feel similarly, but they came into the negotiations with two main targets:

Address the unequal revenue distribution
Provide a more level playing field

They’ve achieved both: financially – with the Concorde terms and the budget cap – and with the new technical regulations. But they’ve also managed it all while taking power away from the teams as a whole.

What does it mean for the racing you’ll tune into from Spa-Francorchamps next weekend? Nothing. But teams can now plan longer-term with much more certainty, and the framework has finally been put in place that should improve the outlook for all teams from a business perspective, and for many from a competitive one, too.

The new agreement is a big step in the right direction for a healthier sport, and while the teams have all played their part, Liberty deserve real credit for making that happen.