With the Formula One teams now in Qatar and setting up for the second Grad Prix to be held in the Arab state, the weekend off track will be dominated by the news the FIA have approved Andretti Formula 1 to join the sport as an 11th team. The wall of silence on social media from the teams has been deafening but they will now face intense scrutiny as to their position on the FIA’s ruling.
McLaren’s Zak Brown has indicated he supports the American project and believes that it will create a “bigger pie” of commercial opportunity for the sport and so Andretti fit there “added value” criteria FOM and certain team bosses have demanded.
Much has been written about the process now going to FOM/teams approval but this is not in fact required and whilst Andretti will attempt to strike a commercial deal, they could just pay the $200m entry fee, join the sport and compete without one.
Teams squabble over entry fee
However this amount would only compensate the existing 10 for the loss they would suffer for one year should the prize money be reallocated.
It should be noted that the teams signed this agreement less than three years ago but since the advent of the Andretti application have begun to argue from precedent that the figure should be higher.
The amount of $600m has been propounded by some included Gunther Steiner which is drawn from comparisons to the cost of getting new franchises in US competitions like Major League Soccer ($325m) and the National Hockey League ($650m).
Reacting to the news that the FIA have given Andretti the green light, ex-F1 driver and Sky presenter Karen Chandhok tweeted his approval of an 11th Formula One team.
Team boss leaks amount of lost cash
“Would like to see them on the grid! More cars is good for F1 & young drivers,” he wrote.
Chandhok then appears to support the demands for a $600m entry fee claiming a current F1 team boss has revealed the extend of reduced funding they will now suffer.
“Told by one TP that existing teams would lose $11 million per year by slicing the pie 11 ways. If Andretti are willing to put in the $600 million to compensate the teams, that covers them for 5 years.”
But gone are the days where F1 teams not in the top three are losing money each year and in a constant desperate hunt for sponsors and their cash.
F1 teams now in rude health
Alpine this week reported an profit of £36.6m with an improved margin of 37% for the year ending 2022. Revenues were up also from £201m to £249m and this despite Renault cutting back their marketing budget for the team by £20m.
The headcount at Enstone also rose from 820 people in 2021 to 871 the following year as the team continued its expansion.
These numbers demonstrate the rude health with Formula One finds itself in a present and the days when teams lifeblood was found form their prize money are over.
Further the need for the teams to be compensated for five years via a $600m anti-dilution fee is an illusion. Andretti only need to compensate them for the 2025 season before a new Concorde Agreement will be reached.
Brown accuses others of “short sightedness”
Under this new contract the teams merely need to ensure Liberty Media is upping the prize money from the abundance of riches they receive each year to reflect the new reality that F1 has 11 competitors rather than 10.
Yet not all the teams are resistant to a new additional competitor as Zach Brown from McLaren has backed the Andretti outfits inclusion in the sport.
“I’ve found some Formula 1 teams are very short-sighted in their view on not taking a longer-range view of what are things that can grow the sport, and they kind of think about the here and now,” he said earlier this year.
“Unfortunately, I’m not surprised some of our competitors are quite short-sighted in their thinking.”
F1 pie is growing
The Current regulations in fact allow for up to thirteen teams to compete each season, though this is often misquoted as just twelve.
The McLaren boss believes with the backing off General Motors, the Andretti inclusion should increase the finances flowing into the sport and this should be something to be embraced.
“I’ve always been focused on how can we make the pie bigger, – less focused on how can I get a bigger piece of a pie that’s not growing,” said Brown.
“And so as long as a new team is additive, helps us get better TV deals, helps bring awareness that drives more sponsorship, pays an appropriate franchise entry fee that’s in line with what the value of Formula One is today, then we’re very supportive of having up to a 12-team grid.”
No deal for Andretti
As of yet there has been silence from the F1 teams following the FIA’s approval of the Andretti outfit, though it will be the hot topic in and around the paddock this weekend in Qatar.
Worst case scenario is Andretti cannot agree a commercial arrangement with FOM/Liberty Media, though this could backfire on the current 10 teams’ futures.
Given the health of Alpine’s recent financial revelations, companies particularly in the USA, are falling over themselves to partner with Formula One teams.
In December 2022 the latest research from SportBusiness Sponsorship revealed the volume of US brands agreeing deals with Formula 1 teams has increased by 66 per cent in the last two years.
Andretti flushed with cash – “F1 establishment worried”
The Andretti name, its current backers and the global reach of General Motors should easily be capable of raising the funds required for the team to compete in Formula One without requiring a share of the prize money.
This year Front Office Sports reported that the Andretti Global Group had received backing from the private equity firm Guggenheim Partners, who have $285billion in assets under management.
The $200m new facility in Indiana was fully funded as was the F1 entrance fee – whatever that number would be.
Will Buxton who is the face of Netflix Drive to Survive and long standing F1 journalist claimed this year of Andretti: “They could pay the entry fee as chump change. And in a non budget-capped era have funding to make the top 3 wince. No wonder the establishment are worried.”
Were FOM to refuse Andretti a commercial deal and the American outfit team prove a team can compete without these funds, this then lessens the bargaining power for the remaining 10 F1 outfits when they come to negotiate the next round of prize money allocation for 2026 and beyond.
Andretti join paying no fee at all
The wording in the Concorde agreement which binds the teams, the FIA and FOM is vague concerning the entry fee. If the teams and FOM fail to agree a commercial agreement with Andretti it is questionable whether they would have to pay anything to join F1 at all.
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