On one side of the debate is the FIA, which is pushing hard to expand the grid beyond the current 10 teams, as it sees nothing but benefits of the Andretti-Cadillac deal.
However, this push is opposed by the teams, who believe that an eleventh team will not bring any tangible benefit.
Additionally, they worry that sharing prize money with another team risks bringing financial uncertainty to teams that just three years ago were on the brink during the COVID pandemic.
Halfway there, but clearly lukewarm to the idea, is FOM, which has clearly stated that it will only grant Andretti a commercial deal if its analysis shows that this will be beneficial to F1 as a whole.
While the current teams have no say in the FOM’s final decision, their resistance will likely be a key factor in influencing F1 CEO Stefano Domenicali’s final opinion on the matter.
Furthermore, the negativity towards Andretti is due to some teams’ fears that adding an eleventh team to the grid could put their future at risk.
Williams team principal James Vowles made it clear at the recent Qatar Grand Prix that teams like his are still on a knife’s edge when it comes to financial matters, so losing prizes and value would not be a good thing.
“My responsibility is to the 900 employees of my company,” he said. “If you go and look at Companies House, you can check for Williams because we have introduced it now, you can see we are at a loss. We are very much at a loss.”
“In fact, if you compare the data from ’21 to ’22, you will see that the losses are in the order of tens of millions more. If you compare the data with that of ’23, which you will not see, I guarantee you that is multiple.”
But will Andretti’s arrival and the consequent reshaping of commercial rights revenue really have such a strong impact on making things worse, especially if he first pays the $200 million dilution fund?
Let’s analyze the numbers involved to get a more precise picture of what’s at stake.
Photo by: Alfa Romeo
The start of the race
Premium Payments
The exact distribution of Formula 1’s prize money is secret and its details are contained in the commercial element of the two Concorde Agreements which effectively govern the series.
However, using information available in the public domain – including the published financial statements of F1 teams and owners, Liberty Media – it is possible to get a fairly good idea of how the commercial prize money is split.
The best estimate is that, under the terms of the Concorde Agreement, the teams’ prize money is made up of 50% of the overall profit from the commercial rights generated by the sport.
However, it is clear that after a certain revenue threshold, the percentage share of FOM shifts upwards, so as to retain more than half from that figure onwards. This means that teams don’t always receive 50% of the money.
In 2022, for example, with F1 generating $2.57 billion in revenue, team payments totaled $1.157 billion, which equates to around 45% of total revenue.
These payments, however, are not split equally among all teams.
First, Ferrari continues to have an extra payment for its historical importance, which is believed to be 5% of the total.
Teams that have achieved success in the constructors’ championship in recent years also qualify for a simple bonus (for winning one title) or a major payment (for winning two or more).
There is also a separate fund based on extra payments for teams that have finished in the top three places in the constructors’ championship in the previous 10 years.
Currently this includes Mercedes, Red Bull, Williams, Ferrari and McLaren.
Photo by: Andy Hone / Motorsport Images
Esteban Ocon, Alpine A523, Daniel Ricciardo, AlphaTauri AT04, Fernando Alonso, Aston Martin AMR23, Lance Stroll, Aston Martin AMR23, Zhou Guanyu, Alfa Romeo C43, at the start
It is estimated that all these bonuses represent approximately 25% of the total prize money distributed to the teams.
Once these payments are made, the rest of the money is distributed among the teams on a sliding scale, with the first team receiving 14% and the last 6%.
Since F1 earnings are expected to increase by around 8%-10% per year, payments to teams can be expected to amount to around $1.25-1.3 billion in the coming years.
The impact of the 11th team
If Andretti were to make it to the starting grid, the impact would only be on the amount of money that is distributed after bonuses for the top teams.
So, for simplicity’s sake, if we consider that the final prize pool is $1 billion with the extra bonuses that have already been taken away, here’s how the payouts would change with an 11th team on the grid.
Based on a 10-team grid doling out $1 billion, payments would be as follows based on constructors’ championship position.
Prize money for 10 teams is based on a $1 billion fund
Position | Percentage | Prize money |
1 | 14% | 140m |
2 | 13.1% | 131m |
3 | 12.2% | 122m |
4 | 11.3% | 113m |
5 | 10.4% | 104m |
6 | 9.5% | 95m |
7 | 8.7% | 87m |
8 | 7.8% | 78m |
9 | 6.9% | 69m |
10 | 6% | 60m |
If an 11th team were to arrive, the numbers would shift slightly, reducing the percentage of everyone at the plate. This means that those who have obtained a larger share of the pie will be the ones who will lose the most.
Projection for 11 teams based on a $1 billion distribution
Position | Percentage | Cash prizes |
1 | 13.3% | 133m |
2 | 12.5% | 125m |
3 | 11.6% | 116m |
4 | 10.8% | 108m |
5 | 9.9% | 99m |
6 | 9.1% | 91m |
7 | 8.3% | 83m |
8 | 7.4% | 74m |
9 | 6.5% | 65m |
10 | 5.7% | 57m |
11 | 4.9% | 49m |
Comparing the two tables, it is clear that Andretti’s arrival – if the prize money does not increase – would cause a loss of 7 million dollars for Red Bull, constructors’ champion.
The fifth-placed team would lose $5 million, while the tenth-placed team would go from $60 to $57 million, a drop of three million per year.
This loss of commercial revenue for all is why the 2021-2025 Concordat included the famous $200 million dilution tax, intended to cover any loss of premium revenue for several years.
Photo by: James Sutton / Motorsport Images
The cars of Lando Norris, McLaren, pole man Max Verstappen, Red Bull Racing RB19, Oscar Piastri, McLaren MCL60, in Parc Ferme after Qualifying
At a basic level and distributed as an upfront payment of $20 million each, the dilution fund would offset the TV losses of half the grid for some time.
And that’s before taking into account potential revenue increases, which could still increase 8% annually based on FOM’s success.
Furthermore, in financial terms, an upfront payment of $20 million is worth more than a payment spread over several years.
This is especially true when it comes to the so-called discount rate that accountants use to balance the value of current income against what will arrive later.
There is still resistance
But if the year-on-year losses for the teams do not seem so dramatic, what is not taken into account is the element of greatest concern, linked to the impact that Andretti’s arrival would have on the value of the teams.
With the current price of an F1 team hovering around $1 billion, Andretti’s entry into F1 for just $200 million could set a precedent that could cause the value of current teams to plummet.
It is therefore not surprising that there is talk of an increase in the dilution fee to $600 million or more in 2026, when the new Concorde Agreement will be concluded.
Photo by: Motorsport Images
Mike Krack, Team Principal, Aston Martin F1 Team, Zak Brown, CEO, McLaren Racing, Toto Wolff, Team Principal and CEO, Mercedes-AMG, Guenther Steiner, Team Principal, Haas F1 Team, in the Team Principals Press Conference
This might seem excessive in terms of impact on the prize pool. But for the current teams it makes more sense to stabilize the value of those involved in F1 at the moment.
As Red Bull team principal Christian Horner recently told Sky F1: “I think if you look at the way Audi entered the sport, acquiring an existing team, why should it be any different for others?”
“I believe that Liberty and the FIA need to get together and find a collective position. Because you can’t have one rule for one and another for the others.”
“Obviously money makes the world go round. And that’s what every team will be very sensitive to, the dilution of the value of the team. Suddenly you go from 10 to 11 players. So, obviously, the interested parties, the shareholders of each individual team they will be worried about this.”
The key thing for Andretti is to understand whether these concerns are enough to convince the FOM not to grant the deal it wants.
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