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Liberty considers cutting Ferrari's 80m bonus

NEWS STORY
21/01/2017

This week Liberty Media's shareholders voted to take over F1 in a move which many see as being a new dawn for the sport. It might not appeal to everyone however, including Ferrari, as Liberty is considering chopping the Italian marque's prize money according to an article by Christian Sylt in US business magazine Forbes.

F1's eleven teams received 732.7m ($903.8m) of prize money in 2015, according to the sport's latest accounts, but it isn't distributed evenly. The eleventh-placed team gets as good as nothing which is what fuelled the recent collapse of Manor. In contrast, Ferrari gets the greatest share of the spoils and took home an estimated 139m ($172m) in 2015 even though it hasn't won the constructors' championship since 2008.

Around 81m ($100m) of that is a bonus paid to the team because of its historic performance and status as the oldest outfit in F1. Liberty's boss Greg Maffei says Ferrari should seriously consider taking a cut to its prize money which would then be redistributed amongst its rivals to balance out the teams' income. The aim is to make the races more exciting with the hope that it would help Ferrari get more sponsorship to offset its loss of prize money. The chances of it actually working seem slim.

"If you're Ferrari, you have enormous sponsorship revenue that goes directly to you. That's going to be impacted more positively by great races. So thinking about balancing the team payments, so they're a little more balanced and creates more fairness, has to be weighed, in Ferrari's mind, I would expect, by the fact that creating a great platform helps our sponsorship revenue, too, so there's give-and-take," says Maffei.

It isn't as simple as that because teams employ armies of staff to seek out new sponsors so they would need to hire more to secure a significant number of new deals. That would come with a cost whereas Ferrari's prize money bonus is basically a guaranteed cheque.

Ferrari gets at least 24.3m ($30m) annually based on the number of races it won in the four seasons prior to 2012, which is when this benefit was introduced. In addition it gets a minimum of 50.4m ($62.2m) every year for being F1's longest-standing team.

These payments aren't based on Ferrari's results and were handed out as part of plans to float F1 in 2012. The package included Ferrari signing up to stay in the sport from 2013 to the end of 2020. When this period is up Liberty could indeed chop Ferrari's benefits but it would be a big departure from previous contract negotiations when F1's boss Bernie Ecclestone carefully courted the Scuderia.

It remains to be seen whether races would actually be more exciting if the prize money was more balanced. Manor might have had a stay of execution but would Mercedes have had any serious challengers or would it still have outspent them?

The Forbes article points out that recently-reported plans for a budget cap could have been designed to address this problem. However, as one of F1's biggest spenders the last thing Ferrari wants is to be prevented from boosting its spending in a bid to win.

Unsurprisingly, last month Ferrari chief executive Sergio Marchionne said "I don't believe a budget cap can work." He revealed that despite numerous cost-cutting initiatives, from curfews to resource restrictions, "if I look at the last four or five years, we haven't saved a Euro. We have simply redistributed our spending to other areas."

A budget cap is the oldest chestnut in F1's book. It has been tried so many times and worryingly often ends up with teams going bust or threatening to walk out. So it is perhaps worrying that one of Liberty's first moves is to go back over this old ground yet again. So much for trying something new.

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READERS COMMENTS

 

1. Posted by NS Biker, 22/01/2017 23:53

"The current system for handing out money to the teams guarantees that the two at the bottom will always be on the verge of going broke. Always.
Does it make sense .... not a bit.
Will it change .... don't hold your breath.
The winners get the majority of the $$$, or and they seem to have control over how it is distributed, and not to the teams at the bottom.
In the past it was Mad Max that was messing up F1. Now BE has saddled F1 with contractual obligations that will take years to clear and the fighting hasn't even started yet.
The prize money system needs updating in a big way. It might happen, but guaranteed, it won't be fast enough.
"

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2. Posted by ryanhellyer, 22/01/2017 12:59

"I wish they'd just reverse the prize money. The least successful teams could receive the biggest chunk of the pie, thereby helping them catch-up with the frontrunners. The better you do, the less money you get. It doesn't have the ugliness of a budget cap, and is seamless and behind the scenes so that fans wouldn't even need to know about it. All they'd see is that the backmarkers slowly started to claw their way up the field and ended up on a more even keel with their obscenely rich competitors."

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3. Posted by NextDoor, 22/01/2017 12:31

"From the article:

'Ferrari chief executive Sergio Marchionne said "I don't believe a budget cap can work." He revealed that despite numerous cost-cutting initiatives, from curfews to resource restrictions, "if I look at the last four or five years, we haven't saved a Euro. We have simply redistributed our spending to other areas."'

His first comment is debateable and his second comment is undoubtedly true, but cost-cutting initiatives are NOT the same as a budget cap. An annual budget cap for each team would be that within an overall limit of $XXmillion, the team can spend on whatever they believe will deliver the best results. For example, paying more for a better driver, buying a more powerful engine package or investing in development work on aerodynamics.

I'm puzzled therefore by the article's final paragraph which starts:

'A budget cap is the oldest chestnut in F1's book. It has been tried so many times ....'

A budget cap may have been suggested many times, but, unlike cost-cutting iniatives, a proper budget cap has never actually been implemented in F1.
"

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4. Posted by Motorsport-fan, 21/01/2017 13:40

"Cannot see how this is going to happen, why not pay all teams start money of say 10 million per season if they compete / start all races, championship position would give them additional prize money on top of this, would not make much difference to the top teams, but would help the Saubers and Manors who at least would have a guaranteed income of a known factor to put into there budget. "

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