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Prize money shake-up puts more pressure on Marussia

NEWS STORY
29/04/2013

Since the start of 2013 one of the most frequently recurring questions in Formula One has been why Marussia is the only team which doesn’t have a commercial agreement with the sport’s rightsholder the F1 Group. The answer is revealed in an article by Pitpass’ business editor Christian Sylt in today’s Daily Telegraph. It is about a significant shake-up to the prize money system which has been implemented by Bernie Ecclestone and it puts even more pressure on Marussia to succeed this year.

We need to start by first looking at why the teams need commercial agreements in the first place. The reason for this is the expiry at the end of last year of the Concorde Agreement, the contract which committed all the teams to race in F1. The Concorde also set in stone F1’s technical regulations for the duration of the contract and it outlined the terms of the prize money received by the teams.

There are rumours aplenty about why the Concorde has not yet been re-signed but one thing that is for sure is it doesn’t endanger F1’s future. The next Concorde will run until the end of 2020 and one of the hurdles with getting it signed is that the teams, the F1 Group and F1’s governing body the FIA all need to agree to the terms in it. All it takes is one party to disagree and the contract cannot go ahead. It is far quicker for Ecclestone to agree terms with each team in separate contracts and this is exactly what he has done.

The commercial agreements with the teams commit them to race until the end of 2020 and, like the Concorde, they also outline the prize money terms. So why hasn’t Marussia got one?

In late February Ecclestone told Sylt that the teams are “all safe. We have got a deal with them all including Marussia.” It wasn’t clear from that comment exactly what kind of deal Ecclestone has with Marussia but there was no doubt that something is in place. Marussia’s sporting director Graeme Lowdon initially said that “we are in discussions with the commercial rights holder and we certainly expect to conclude something. This is not adversarial.” However, he didn’t stop there.

On 7 March a Marussia spokesperson said “we do not have a signed agreement” and 11 days later Lowdon spoke out again. This time he said “it does seem a little strange to treat one team so differently...The real question is: why us? We would argue we’re a pretty good team and we’re making good strides...The other teams have an agreement (so that) will come into discussions with sponsors...It unsettles them that we should be treated differently to other teams. There is a knock-on effect, there is no question.”

As Pitpass reported at the time, it seemed incredibly counter-productive for Marussia to broadcast that the lack of an agreement “unsettles” sponsors. It let brands around the world know that Marussia is not being treated the same way as its rivals and this could have influenced their decision not to contact the team about sponsoring it. Our article was entitled “Does Marussia know something that we don’t?” and it looks like we now know the answer to this question.

In March The Times asked Ecclestone why Marussia lacks a commercial agreement and he responded that “they have not been happy and they almost merged with Caterham, so that made me wonder what was happening.” If the teams had merged they would not have needed separate commercial agreements so this response made sense. However, of course the merger did not take place and Marussia is still without a commercial agreement. There is good reason for this.

Marussia joined F1 in 2010 under the name of Virgin Racing and it has finished outside the top ten every year since then. This is significant because F1’s prize fund is split between the top ten teams and to receive a full entitlement a team has got to finish within the top ten in two years out of three. It means that even if Marussia finishes this year in its current tenth place position it would still not receive a full prize money entitlement. So even though Marussia are currently in tenth place, they finished 11th last year and Ecclestone revealed to Sylt over lunch that they “don’t have a commercial agreement because they are not in the top ten.” That’s not all.

For the past three years, any team which finished outside the top ten received an annual fee of 6.4m ($10m). It was part of an agreement which Ecclestone made with former FIA president Max Mosley who decided to introduce three new teams in 2010 in order to reinvigorate F1 after BMW, Honda and Toyota pulled out during the recession.

It has given Marussia some money to fall back on despite not being eligible to share in F1’s prize fund as it finished outside the top ten. The 6.4m payment is far from inconsiderable to a team like Marussia as it comes to around 10% of its annual budget. It will have to do without this if it ends 2013 in the same spot as last year.

Ecclestone revealed to Sylt that he has shaken up the prize money terms and scrapped the 6.4m fixed fee to teams outside the top ten. “We pay the top ten, that’s what we do. For three years we did something different because we had an agreement with Max but from now on we will pay the top ten and that is it.”

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