(Motorsport-Total.com) – Formula 1 chief executive Stefano Domenicali has made the clearest suggestion yet that the cost of fielding new teams is likely to rise above current levels.
Formula 1 CEO Stefano Domenicali spoke about the new teams in Formula 1
The FIA started the application process for new teams in March, which is not yet complete and should lead to an outcome in June after all applications have been examined. Currently, if a new entrant is accepted, it must pay a $200 million “anti-dilution tax”, which is divided among the 10 existing teams.
Officially, this figure is meant to reflect the potential losses each team would incur if an additional team got a slice of the F1 income pie. It’s also believed to be tied to the approximate value of a team like Williams at the time of the recent Concorde Agreement signing, according to some sources, but times have changed.
A new sum of $600 million?
However, thanks to a budget cap, the success of the Netflix series Drive to Survive and a solid recovery from the COVID years, the sport is in a healthier state today than it was when $200 million and team values were agreed upon. increased accordingly.
Existing teams have been pushing for a new number to equal the cost of entry to an existing team’s theoretical value, with figures cited as high as $600 million. However, this could only be about the value of midfield teams, with resource-powerful teams like Red Bull, Mercedes, Ferrari or even McLaren potentially worth a billion dollars or more.
Dominicali: It is our duty to protect business!
Domenicali, who has always insisted that any new team must add value to the sport, emphasized that times have changed since the original number was set. “The FIA has started the process of acquiring another team,” Domenicali told F1 investors. “In our judgment, in our Concorde Agreement, there is an opportunity to do so.”
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“But the assessment has to be done together, to see if the new team brings any benefit to the league and the sport from a technical and sporting point of view, and to get the big picture. There will be a different site.”
“I want to go back to one point: the so-called anti-dilution payments were set at $200 million a few years ago. At that time, no one expected the value of the sport to increase so much. Today, the situation is completely different, that’s for sure. It is our duty Making sure we protect the business as best we can and get a bigger picture.”
What is the size of the financial loss?
In 2022, Formula 1 rights holder Liberty Media paid $1.157 billion for the 10 teams, with the teams getting different slices of the pie depending on their makers’ championship standings and historical bonuses.
However, assuming Liberty Media pays out $1.2 billion and splits the amount fairly among all 10 teams, each team will receive $120 million. If the 11th team is added, it’s only $109 million.
To protect against dilution, each existing team will receive a one-time payment of $20 million, but calculations show the effect has already evaporated after less than two years. Of course, this is a problem, especially for small teams that don’t quite work out or just work within budget.
Increasing the mitigation fund from $200 million to $600 million would extend the protection to five to six years, giving teams time to find future lost revenue elsewhere.
Liberty Media CEO: “The world has changed dramatically”
While the Andretti/Cadillac bid is the most popular, Domenicali notes that several potential entrants have expressed interest. “Today there are many who would like to come,” he says. “There are bands that are louder than others, and some that are quieter, but they show genuine interest.”
“Like anything in life, someone has to make that assessment. We’re part of that process, and we’re going to do the right thing at the right time this year.”
Liberty Media CEO Greg Maffei echoes Domenicali’s words, noting that the difference has increased in value: “back to $200 million,” he says. Manor was the 11th team. And just ahead of us [Ende 2016] Entered Formula 1, went bankrupt in the UK and sold for pounds. The world has changed dramatically.”
How much added value should be created?
When looking for an XI there is always a lot of talk about the ‘added value’ that needs to be created, but how high can it actually be? So, using the simplified math from earlier, how much does Liberty Media have to pay teams to keep all teams receiving $120 million? The solution: about $1.35 billion.
The XI will have to add so much value that Liberty Media can pay the teams an additional $150 million. Essentially, historically, half of Liberty Media’s revenue goes to teams, so the XI would need to make Liberty Media $300 million in additional revenue. Not an easy task.
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