Liberty considers cutting Ferrari's 80m bonus

21/01/2017
NEWS STORY

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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Published: 21/01/2017
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