Liberty Media on collision course with F1's top teams over decision to slash prize money payments

Exclusive: F1’s ten teams received a total of £800.9m in prize money last year but the division is far from equal - the sport's new owners are set to unveil plans to change that

Liberty is set to present its blueprint for the future of F1 (Getty)

Formula One’s top teams could be on track to lose up to £155m in prize money under proposals drawn up by the sport’s new owners Liberty Media.

Liberty bought F1 for £3.7bn in January and has yet to make any major changes to the sport. It will begin to outline its plan today when it unveils the engine specification it hopes to introduce from 2021. This will be followed by details of its blueprint for the future of F1 which the teams are due to discuss at a meeting in November

Force India team boss Bob Fernley said in September “we’re nine months down the road, you’d have thought we’d have been firming something up a bit more now...at least a skeleton of where we’re going but we’re getting nothing at all.” Haas F1 team owner Gene Haas added “I think everything’s positive but I think now we want to see some concrete plans.”

Although the teams have yet to receive the final plan, Independent Sport has seen a list of proposals for the development of F1 which have been drawn up by Liberty. Some of them could pit it in a head-on collision with F1’s most famous name, Ferrari.

The document was produced over summer and the proposals are listed under the heading ‘Opportunities for future growth’. The first is to “complement free-to-air with competitive pay services.” It dashes fans’ hopes that Liberty will back out of Pay TV deals like the one in Britain where Sky will become F1’s exclusive broadcaster from 2019.

F1 recently announced that it intends to launch its own streaming service next year though Britain is unlikely to benefit as it is believed that Sky’s contract prevents it. The service will will stream F1 directly to subscribers which is known in the industry as going ‘Over The Top’ (OTT) of traditional broadcasters. It is reflected in the second proposal for developing F1 which is to “monetize content across digital platforms, including OTT.”

Under the heading about races is the plan to “increase number, optimize mix and enter new markets.” Next year the F1 calendar will equal the record of 21 races with the return of Grands Prix in France and Germany. However, the sport’s contracts allow up to 25 and Liberty is already laying the foundation for this.

Teams could be hit hard by the new proposals (Getty)

Earlier this month F1’s motorsport boss Ross Brawn revealed that he is considering scrapping practice sessions on the Friday before a Grand Prix to save the teams money and allow them to attend more races. He added that “we are working with all the teams now to look at budget control for the future and I think that is the way forward...this creates a sustainable Formula One. The other important thing it does is it makes everyone more competitive because the difference between the guys at the front spending what they do at the moment, and the guys who are spending much less further down the grid, is reduced enormously.”

Figures recently reported by the BBC show that Mercedes, which won the 2017 championship at yesterday’s Mexican Grand Prix, spent £274.9m last year. At the other end of the spectrum is Haas F1 which currently lies in eighth place and spent £94.9m in 2016. The more a team invests in car development, the greater its chances of success which is why Fernley recently said that “what [a budget cap] will do is bring us closer.” A figure of £122m ($150m) has been suggested and this is in line with the proposal for “cost controls to encourage competition.”

The less a team is allowed to spend, the less it needs to receive in prize money and this is at the heart of the final, and most controversial, proposal which is the “review of revenue distribution to teams.”

F1’s ten teams received a total of £800.9m in prize money last year but the division is far from equal.

Liberty are set to propose significant changes to the prize money system (Getty)

The bulk of the prize money is equivalent to 47.5% of F1’s profit. This amount is divided into two with one half split between the top ten based on results. The other half is split evenly and only goes to teams which have finished in the top ten in two out of the past three years.

A further 7.5% of F1’s profit is handed to Ferrari, McLaren and Red Bull Racing as they won the most races in the four seasons prior to 2012, which is when this bonus was first introduced. It comes to at least £81.3m ($100m) annually and is guaranteed regardless of the teams’ results.

In addition, Ferrari gets a dedicated prize money pot comprising 5% of F1’s profit which comes to at least £50.6m ($62.2m) annually. It is a benefit of the Italian squad being F1’s longest-standing team having been racing in the championship since it was launched in 1950.

All-in-all Ferrari gets around £83.4m in prize money before a single race begins. Furthermore, even though it finished behind Mercedes, its prize money haul last year outstripped that of the German team by a staggering £42.8m. McLaren and Red Bull Racing made £74.8m and £98.4m respectively thanks to their bonuses. These four outfits combined earned an estimated 55.7% of last year’s prize money. Their payments come to £446.2m but if the total was balanced evenly across all teams it would reduce to £291.2m which is a combined fall of £155m for all four. It remains to be seen if Liberty will adopt any the proposals but it seems to be heading in this direction.

Earlier in the year its boss Greg Maffei said that if Ferrari’s prize money was more in line with its rivals it would make for better racing and in turn this would boost its sponsorship income.

The grid is set for a significant shake up (Getty)

“If you’re Ferrari, you have enormous sponsorship revenue that goes directly to you. That’s going to be impacted more positively by great races. So thinking about balancing the team payments, so they’re a little more balanced and creates more fairness, has to be weighed, in Ferrari’s mind, I would expect, by the fact that creating a great platform helps our sponsorship revenue, too, so there’s give-and-take.”

According to recent reports, the teams are heading in the opposite direction and are unhappy with F1’s spending accelerating under Liberty as it reduces its profit and their prize money. At yesterday’s Grand Prix the podium was on a giant turntable with a DJ behind it whilst at last weekend’s United States Grand Prix the drivers were introduced by boxing ring announcer Michael Buffer in a move which was panned by fans.

“If they want to turn F1 into a nonsense, a shopping channel, then I’m not the slightest bit interested,” said Ferrari boss Sergio Marchionne recently. “There is a very noble aspect to F1 beyond the things that happen on track; it’s a sport which is truly different from the others and we can’t over commercialise it. If they do that, we are off; no interest.”

Even the tracks are waiting to see what happens. The races in China and Singapore recently extended their contracts but only until 2020 when the current agreements with the teams expire. “We wanted to thoroughly evaluate the medium-term prospects for F1,” said S. Iswaran, Singapore’s Minister for Trade and Industry.

F1 is approaching a crossroads and although it is unclear how it will emerge it is likely that over the next few years the manoeuvres off track will be just as fascinating as those on it.