13 replies to this topic

[Mickey]

In Friday's long press conference, there are a couple of quotes by Ron Dennis that I wanted to highlight. They are about how the money from the TV revenues are shared between FOA and the teams (and the FIA too, perhaps?), and among them, as signed in the Concorde Agreement.

The money is equal. It is equal in the sense that a restructuring of the finance took place between 97 and 98, which was far more equitable than it was before. And I completely support even making it more equitable in the future but the issue, the real issue, is not so much how we share the 23 per cent but increasing, which is the revenue share that we have of Grand Prix racing at the moment, but increasing that revenue share so there is more to go around.

If I understand correctly, the teams are awarded a total of 23% of the revenues, to be shared among them in the following manner:

I think there is probably a significant misconception about the fundamental mathematics of the Concorde Agreement which perhaps will not paint the larger teams in such a bad light. I doubt whether anybody actually knows what the distribution is, how it's distributed. But to give you a round figure, just round figures, the team who wins the World Championship - so not any specific nominated team, the team that wins the World Championship in the preceding year - versus the team that is the last in the World Championship of the preceding year, receives double the amount of money. And the money is not huge, in round figures $22 million to $11 million. You might not feel that that is particularly equitable but maybe you all will be quite surprised that the spread, and it's relatively equalised out in increments from the tenth team to the first team, I don't think that is aggressively disproportionate.

So, with the team that finished 1st in the WCC getting around $22M, and the 10th team getting around $11M, and knowing that the money is spread in roughly equal increments between each WCC position, we can try to calculate how much each team gets. Or at least how much they got last year, if these figures are correct and are referring to the 2002 season.

[b]Pos   $(M)	Team[/b]

 1.   21.9	Ferrari

 2.   20.7	Williams

 3.   19.5	McLaren

 4.   18.3	Renault

 5.   17.1	Sauber

 6.   15.9	Jordan

 7.   14.7	Jaguar

 8.   13.5	BAR

 9.   12.3	Minardi

10.   11.1	Toyota

Ron's words go to some way in confirming what Eddie Jordan said after the 2002 Japanese GP, when Sato scored two points to raise Jordan from eighth to sixth in the WCC:

Asked whether the two points were worth a couple of million dollars, he replied: "At least."

Indeed, the table above shows the difference between sixth and eighth being some $2.4M.

The sum of the money shared among teams was therefore some $165M. If that is indeed 23% of the total TV revenues, we can calculate that those revenues were about $717M.

I thought the money would have been more than that. I wonder how much it was before the recession started, say in 2000?

Comments?

[Mickey]

I just realized now that, while I referred to the money to be shared as being TV revenue, it could perhaps also include revenue from the circuit organizers who have to pay for the privilege of staging a Grand Prix at their venue. There could also be some other sources of revenue that I haven't thought about.

[FredF1]

Thanks for that.

I found the whole thing fascinating - the way the team owners actually brought up the subject of money.
Is Bernie losing his grip?

I recall watching Friday practise from Imola 1994 on Eurosport. It was before the session started.
John Watson & Co were talking to Rubens' dad - They asked him about some apparent argument between Rubens and Eddie Jordan.
His dad started to say something about 'Starting Money' and the presenters started shouting him down saying something like "Shut up! Shut up! Bernie will have us off the air if we mention stuff like that - they sounded genuinely frightened"
First inkling I ever had about the money issues in F1.

[tim]

I have to say that was the best press conference transcript I've ever read. Fascinating from start to finish, especially Frank and Ron's contributions. Frank was very eloquent and even Ron was interesting and informative.

Frank
Ron

[MarkWRX]

That transcript was fascinating! I have printed it out to re-read and analyse further. Ron Dennis was, as usual, trying to be very precise in what he was saying, and was not very patient with both the repetitive questions and the questions that seemed to want to pry too deeply into the teams' finances.

That the teams only get 23% of the revenue is, to me, unfair. They are the ones who do the vast majority of the work, they are the ones who take a huge risk. And the principles of the teams are usually heavily invested in their own teams. While it is not likely that McLaren or Williams could suffer a major financial setback in the next few years, if they did, both Sir Frank Williams and Ron Dennis would stand to lose a lot of money. The situation is much worse for Eddie Jordan and Paul Stoddard. They could lose just about everything.

Bernie recently folded his Digital TV enterprise, laying off (or rendering redundent) a lot of people, and reducing the costs associated with hauling them and their equipment around the world. So that means that Bernie gets to put even more money in his pocket. How much is enough?

They need to review the Concord Agreement with a view towards giving the teams a greater percentage of the revenue and with more equitably spreading that revenue amongst the teams, keeping in mind that performance should be rewarded as well as length of service.

Mark

[madmac]

I think as Ron says it casts the bigger teams in a better light, WCC winning team gets double what the last team gets, which I think is pretty equitable when you look at prize money for other competions. Like Mark says only 23% for the teams is pretty crappy considering, looks like F1 is a pretty perfect capitalist model, the ones doing the hard work get less than a quarter of the wealth ;)

[Viss1]

Thanks for the analysis, Mickey. I agree that the $717M figure sounds low. At the same time, it makes you realize why the smaller teams consider it crucial - it's probably more than a quarter of Minardi's budget!

[Sir Frank]

Excellent post Mickey

To add something useful, it is estimated that RTL Germany have paid about 85 millions for the TV rights, which is a huge increase since Sat1 was also bidding this time around. Last years rights are believed to be in the 40million region.

[random]

There are quite a few sources of revenue to the sport. There's the 10 to 20 million charged to each venue for the privilege of hosting a race. The signage at the events is controlled by one of Bernie's minions, not the track owners. The product sponsorship rights paid by companies to be the "official" whatever of F1. I'm certain there are other revenue sources as well. I actually just read that the German rights just went for $91 million a year.

I estimate that the total F1 take by Bernie's various organizations is in excess of 1 billion dollars a year, of which the teams get a very small slice, probably just over 200 million.

If the Billion dollars were split between the teams using the existing formula as given by Ron Dennis, I think it would pay a fair portion of nearly all the teams budgets. Probably all of the budgets of the smaller teams. 150 million for the world champion and 75 million for the last place team.

A more even split of the income would greatly improve the stability of the sport by reducing the teams reliance on current economic conditions and the vagaries of corporate sponsors. Which would be a very good thing for the sport as a whole.

[lukyluke]

so much money and i can´t even see frydays qualifying :/

[Jardins]

Originally posted by tim
I have to say that was the best press conference transcript I've ever read. Fascinating from start to finish, especially Frank and Ron's contributions. Frank was very eloquent and even Ron was interesting and informative.

Frank
Ron

It was fascinating! Interesting interaction between the teams. Frank obviously has a lot of respect for Ron. Todt was very quiet. Stoddart seems to regret some of his recent comments (Ron's little chat must have worked ) Ron had a lot to say. Even Eddie had a bit of a dig at PS with his "performance related" clause.

I wish more of the PCs were like this even if it did go on forever.

[tim]

I think there's a lot of mutual respect between Frank and Ron. They've been in the sport since the 1970s in one form or another and both know and trust each other.

Berger was pretty quiet as well, which is a first. Perhaps Frank and Ron are treated quite reverentially by the rest of the bosses as they've been around the longest and been through the most (ups, downs, driver deaths (Senna, Courage), engine deals, losing engine deals, working from a phone box (Frank), etc, etc, etc).

Needless to say, I doubt the post-race press conference will be quite so interesting. I'm sure Michael, Rubens and DC will be full of interesting snippets of information for us .

[The Tiger]

Two thumbs up for your post Mickey! Great perspective and analysis...

To be honest, I would have never imagined those kind of figures... It seems as though Bernie is screwing all the teams, and not the usual suspects (Ferrari, McLaren, Williams) srewing the small teams. I actually thought that was the way things were, but seems I was a bit blind, to say the least.

Wow, all of a sudden my views are changing from one side (Bernie's) to the other (FOM's). I use to give Bernie alot of credit due to the incredible spectacle he has made out of F1, but now that you guys mention it, F1 is Minardi, Jordan, Ferrari, McLaren, Jaguar, BAR, Sauber, Williams, Toyota, Renault and FOA alltogether, not just Bernie, hence I definately support the renegotiation of the Concorde Agreement, PRONTO!

Thanks...

[chester316]

Originally posted by madmac
the ones doing the hard work get less than a quarter of the wealth ;)

that is usually the case in life also