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Formula 1 will “take back” a bigger share of revenues in the future as earnings increase, Liberty Media president and CEO Greg Maffei has revealed.
Last year F1’s owner and the 10 teams signed a new Concorde Agreement governing the championship’s commercial rights, resulting in a fairer financial distribution among the teams.
That was part of a major effort from Liberty Media to turn the teams into sustainable operations that grow into valuable franchises – with the new-for-2021 cost cap also part of that.
The upshot is teams are already bullish about their financial outlooks with claims of all 10 teams making a profit in the near future and billion-dollar valuations being alluded to.
Maffei suggested in a conference call for Liberty Media’s third-quarter earnings that the teams are being supported with a more generous share of the revenues for now to help them become secure and profitable.
But once earnings reach a certain point more of the championship’s revenue will be directed to the rights holder.
That would leave the teams with a smaller share but of a bigger total pot, so they wouldn’t lose money in real terms.
“I’m very happy to see the teams do well, that was necessary for the success of F1,” said Maffei.
“The new Concorde Agreement has some incentives that as revenue and profits increase, we take back some of that which had been given over the last several deals.
“I already warned the teams: ‘expect more demands from us’, based on how much success they’ve had. And they smiled, so we’ll see how those negotiations go.
“But I’m optimistic that we can continue to have success with the teams, as we’ve had over the last couple of years, and will both benefit.”
Title-winning teams and teams that finished in the top three in the past decade are eligible for a special prize money pot rewarding historic success but this is derived from a percentage of F1 revenue above a certain threshold. Ferrari, Mercedes, Red Bull, McLaren, Alpine and Williams are eligible for this.
The rest of the pot used to be split into so-called ‘Column 1’ and ‘Column 2’ payments based respectively on participation (with each team getting an equal slice) and championship position – with more money awarded the higher a team finished.
Now teams will get a share of a single prize money pot with a sliding scale of less than 1% based on championship finishing position.
“One of the important things was to help the ecosystem and you’ve really seen the strength of the teams do so much better,” said Maffei.
“I appreciate all the kind words they now say about Liberty, and about Formula 1’s management.
“That’s because, guess what, the value of the teams has gone up dramatically.
“We knew that was necessary in the actions we took with the budget cap and the like and changing some of the payouts – all were designed to create health of the ecosystem.
“And that’s happened. So in many ways the teams have got that success because it was necessary to make them healthy for us to build to the next level.”
Maffei’s comments came after Liberty Media revealed its Q3 earnings that showed F1’s recovery from the financial impact of the COVID-19 pandemic continuing.
F1’s revenue in Q3 was $668m, an increase from $597m in the same period in 2020 despite three fewer races being held.
This is because more events this season have been held with full or restricted fan attendances whereas last year the vast majority of grands prix took place with no spectators and reduced race hosting fees were negotiated as a result.
That gave F1 a Q3 profit for 2021 of $80m, compared to a $104m loss in the same period last year.
