26/05/2012
NEWS STORY
Formula One boss Bernie Ecclestone's announcement in March that the majority of teams had agreed to sign the Concorde Agreement, the contract committing them to race, caught a lot of the F1 industry off-guard.
In previous years the teams had held out until the very last moment for more money from the contract and usually threatened to leave F1 if their demands were not met. This time round, nine months before the current agreement expires we found out that the majority of teams had agreed, with no fuss, to stay in F1 until 2020. Thanks to an article in today's Guardian by Pitpass' business editor Christian Sylt we know the real reason why they did this.
Sylt reveals that the teams will get a total of £115m ($180m) as a one-off signing bonus for signing the new Concorde Agreement with around 75% of this expected to be paid this year. "There's some signing fees for the teams of around $180 million," says a senior industry source and, during a recent meeting with Sylt, Ecclestone added "It's a good deal for the teams, it's great." The signing bonus is just the start.
The details of precisely how much money will be paid to the teams on an annual basis until 2020 is also laid bare. Under the current agreement, the top 10 teams get a 47.5% share of F1's underlying profit - known as earnings before interest, taxes, depreciation, and amortization (EBITDA) - with Ferrari getting an additional 2.5% exclusively. In addition, Caterham, HRT and Marussia, the three new teams which joined F1 in 2010, each receive £6.4m ($10m) annually. The teams got a total of $686m last year with Ferrari's additional share alone coming to £18.7m ($29.3m).
"The current deal pays the teams 50% of the EBITDA plus some extras which means it pays them about 59%. The new deal is basically 60% plus a little bit more so it is going to be about 63%," says a person with knowledge of the situation.
The new terms favour the best-performing and most loyal teams in several ways. The prize fund will stay at 47.5% but the top three teams from the past three years will get an additional 7.5% which will come to a minimum of £63.8m ($100m) every year. Ferrari will also get a further 5% annually due its historic status. Based on F1's financial results last year that would give the Italian manufacturer another £37.4m ($58.6m) so it is a nice little earner to say the least.
Indeed, to put it in context, when you average out the overall increase in prize money paid to all the teams under the new deal Ecclestone told Sylt that they "are going to get around £44.7m ($70m) more." Ferrari's additional share makes up the bulk of that although of course it previously received 2.5% so it is not a pure increase of £37.4m ($58.6m).
However, the one-off signing bonus will further increase its payout and, of course it will share in the £63.8m ($100m) from being one of the top three teams over the past three years. At the other end of the grid the new Concorde Agreement is no real change on the previous deal which puts a big question mark over how long F1's minnows will survive. The gulf between the rich and the poor in F1 has never been so stark.