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Ecclestone: Teams may have to pay to race

NEWS STORY
25/05/2011

F1 boss Bernie Ecclestone has escalated the war of words with F1's teams in the negotiations over a new draft of the Concorde Agreement - the contract which commits them to race. The negotiations surround the teams' share of F1's profits which currently stands at 50% but of course the teams want more. The only leverage which they have been able to use in the past is the age-old chestnut of threatening to leave F1. It is such a broken record that Ecclestone can safely laugh it off without a passing thought if it is wheeled out yet again. However, the teams certainly cannot be so sure that he won't follow through his own threats.

Writing in today's Express newspaper Pitpass' business editor Chris Sylt reveals that Ecclestone has threatened to charge the teams to race in F1 once the current Concorde expires at the end of 2012. "I don't even care if we don't have a Concorde Agreement. It makes no difference to us," he says, adding "what we might do is run the championship and ask the teams for money to enter."

The Formula One Group, which Ecclestone runs, currently levies no charge on the teams to race in F1. Their sole direct costs of getting a grid slot are registration and entry fees which only come to around 500,000 per outfit and are paid to the sport's governing body the FIA.

Once the Concorde Agreement expires Ecclestone could introduce the racing fees without needing consent from the teams and there is good reason why it is more than just a throw away comment. The years of empty threats of a new series have made any sane person realise that it will never happen. Car manufacturers and companies such as Red Bull are involved with F1 for marketing reasons, not to own the sport, and the majority of the other team owners simply don't have the funds to set up a series. Many teams most probably would not survive in a series whose revenue, and therefore prize money, was uncertain.

In short, the teams need F1 (and therefore Ecclestone) more than he needs them. It allows him to play hard ball with a strong hand and he is pretty blunt about his intentions. He says the benefit of charging the teams is simply that "it would put more money in our bank. If I want to enter a horse in the Derby I pay a whacking great entry fee."

The current Concorde Agreement was signed in August 2009, nearly two years after the previous draft expired, and Ecclestone says that, as is the case in other sports, it could cost the teams if they delay signing up. "If you are late with an entry in the Derby you have to pay a chunk of money to enter the horse."

The teams have little choice but to sign up or risk facing fees when the Concorde expires. It would take a brave man to bet that Ecclestone won't charge them to race. He recently rubbished the idea that they would get an increase in their prize money share and this is no surprise. The share is unlikely to tip even 1% over its current split since if the teams received 51% it would mean that they were getting more than Ecclestone and F1's majority owner CVC. It's a psychological point but for a businessman as seasoned as Ecclestone it is an important one. It is also underpinned by some solid logic.

Most business relationships which involve equal input from both sides set terms at 50-50. However, is it really fair to say that teams such as HRT, Team Lotus and Virgin and have invested as much in F1 as Ecclestone's company? We aren't talking about financial investment here but instead we are referring to the years of hard graft in making F1 what it is today.

It is thought that the motivation behind the phantom bid for F1 by News Corp and the Exor investment fund is to exert pressure on Ecclestone in the Concorde negotiations. It just so happens that Exor owns 30.4% of Italian car manufacturer Fiat which, in turn owns 90% of Ferrari. However, the phantom bid is just as laughable as the idea of a rival series.

As Pitpass has reported extensively, a takeover by News Corp is as good as impossible due to the regulatory hurdles. An even bigger problem comes from the fact that even though News Corp and Exor have not even made a bid yet CVC has already said that the sport is not for sale.

The moment that the phantom bid was reported by Sky News it lost its credibility since News Corp owns a 39% stake in the broadcaster. Sky News expected the public to believe that News Corp wants to broadcast its business plans to the world but the man on the street is not so stupid. As if that wasn't bad enough, its most recent 'exclusive' reports have promoted companies which may join the phantom bid. That could end up being a very long list because every man and his dog can say they might bid for F1. The real news is who will bid but Sky News has avoided that.

Despite a rival series being about as likely as Ferrari making a truck or a tractor, it hasn't stopped the teams talking as if they are the ones playing hard ball. Earlier this month Ferrari's team principal Stefano Domenicali said that CVC "must invest in F1 and develop." This was followed by comments from Ferrari's president Luca di Montezemolo who added that if the teams fail to agree on the Concorde terms they could "create our own company, like the NBA. Just to run the races, the TV rights and so." Ecclestone says this went too far.

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