Carmakers still issue veiled threats, suggesting that they may leave F1, but Joe believes it’s just that – a veiled threat or negotiating tactic, and no more.
With the rules and regulations for Formula 1 post-2020 now formalised, the attention in F1 circles is now turning to negotiations for the new commercial deal that needs to be concluded to cover the years ahead. Because it’s a commercial contract between the various parties involved (the Formula 1 Group, the FIA and the individual entrants), the details of the agreements are supposed to be confidential, but, over time, details have emerged.
We know, for example, that the next deal will be on ‘substantially the same terms’ as the current bilateral agreements, which are based on the original Concorde Agreement. We know also that the new deal will cover the period from 2021 to 2030. Thus, it requires a commitment for the next 10 years, and if it’s like the existing deal, it will include penalty clauses so that if a manufacturer decides to withdraw from F1, it will need to pay compensation. This reduces year-by-year in the course of the contract. It is designed to stop the carmakers treating the sport as they have done in the past, using it when they need it and then walking way when it suits them to do so. With such a deal, they become more of a partner in the business. Ultimately, this is what the sport needs and the currently commercial rights holders – Liberty Media – are trying to get away from the confrontational style that marked the Ecclestone years and move towards a sport in which everyone fights on the track, but works together to make sure that the F1 circus delivers the full potential for everyone involved.
However, the mentality of the Ecclestone years remains for the moment, and so one should not be surprised to suddenly be hearing lots of stories suggesting that the big players are going to leave. The parroting members of the F1 media – the copiers, rather than the real newshounds – happily spread such stories to fill the endless virtual space that the internet provides, but few of them take a step back and explain why this is happening and whether it should be taken seriously. You will also notice that Ferrari has stopped making noises about quitting (which is a ridiculous concept in any case, as Ferrari needs F1 as much as F1 needs Ferrari). We know that Ferrari has got the commercial deals it wants, retaining some of its unfair advantages. It is not as unfair as it was, but the other teams seem to have accepted that the ‘Longest Standing Team’ should be allowed certain advantages.
Mercedes, Renault and Red Bull Honda do not have such deals, and so it’s no great surprise that they are now expressing some doubts about their future in the sport. This is being done on purpose, in order to create some space to negotiate with Liberty Media, as it attempts to get everyone to sign the new deal. Formula 1 needs manufacturers to give it credibility, but it does not want too many of them because otherwise they tend to get together and try to find ways to get commercial control of the business. The reality is that, as long as they are not performing in an embarrassing manner, F1 is good for all those involved. Right now, Ferrari, Mercedes, Renault and Honda all have decent engines, and the longer the rules remain the same, the closer they will get to one another as knowledge seeps through the industry and research and development brings diminishing returns as the formula matures.
Renault is in a state of some internal upheaval, because of management changes and tensions within the Renault-Nissan partnership, but no-one really doubts that Formula 1 is good for the company, both in terms of positive publicity but also as a way to develop technology, a winning mentality and to foster company pride. Honda has always had that same kind of philosophy, while Mercedes would like to have a better deal after all of its success – but it also understands that F1 brings huge benefits. So while Toto Wolff said that it is ‘not a given’ that the firm will remain in the sport, Mercedes-Benz CEO Ola Kallenius told industry analysts that while the company needs to make savings of $1.5 billion by the end of 2022, it also understands the value of F1.
‘We have won the World Championship six times in a row,’ he said. ‘That is unique and has more than paid off in terms of marketing. So it has to be seen as a very worthwhile investment.’
It would be nice to see more manufacturers come into F1, but it’s still quite an undertaking. Carmakers have rushed into Formula E because it paints them as being green and environmentally-friendly (at a time when the industry has got itself into trouble by cheating emissions tests). Formula E was also cheap. But it gets a fraction of the coverage that F1 enjoys and the cost involved are going up and not everyone can win, so the number of manufacturers in Formula E will inevitably decline as the budgets go up.
I have little doubt that F1 will sort out the commercial agreements without too much trouble, but then the sport needs to start looking for new leadership. Once Chase Carey finishes the negotiations, his job will be done and he will step down. F1 needs a new leader to guide it through the 2020s. That person needs to be able to work with a company that is listed on the NASDAQ stock exchange, which must abide by the rules and regulations of the Securities and Exchange Commission. The candidate must be able to deal with top car industry executives, must understand the media landscape and how to deal with governments. He (or she) does not necessarily need to be passionate about the sport… but needs to have as little ‘baggage’ in F1 as possible…
Joe Saward has been covering Formula 1 full-time for 30 years. He has not missed a race since 1988.
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