Budget caps are not the solution
class society in terms of what is spent by teams. You should have an opportunity for underdogs to win.”
These are noble sentiments; hugely philanthropic, even. But dig deeper, and the message is clear: Liberty intend driving down the costs of competing, in turn reducing the nancial pressures on teams and thus their need to demand increased slices of F1’s (soon to be) $2bn annual income.
By implication, therefore, Liberty clearly intend to maximise their take on behalf of shareholders. This is, of course, the primary duty of any publicly traded entity, and it leaves zero doubt as to where Liberty’s control will take the sport.
Indeed, Carey made that point himself, shortly after the deal was announced: “Of course, prots are important, but realistically the primary goal of the business that I have been in has always been to build long-term value. So the goal is not what can be achieved in the next 12 months, but where you are going to be in three to ve years.”
While fans can draw solace from Liberty’s focus on the long-haul, unlike outgoing majority rights holders CVC Capital Partners, who sought a quick in-out, listed companies face quarterly audits by the markets. Hence the company will be sure to scan the bottom line on a regular basis, taking corrective action when it is necessary.
The rst question that arises, however, is whether a commercial rights holder should have any say over the sport’s technology, or sway over how teams wish to blow their budgets. That surely is down to the technical and sporting commissions of governing body the FIA, both of which are currently framing cost-saving initiatives. They, surely, are better placed to make these judgments than new rights holders whose fuller understanding of the sport was gleaned after the purchase.
If, though, Liberty are sufciently concerned about F1’s ‘two-class society’ – and, as a USbased entity, they surely understand better than most that inequality exists in all walks – then they would do well to study the root cause of F1’s current scal imbalance, and thus the reasons why ‘underdogs’ cannot currently win.
At the heart of the matter lies a revenuedistribution structure devised by removed outgoing majority rights holders CVC at a time when the venture vultures needed to snare bigname teams ahead of a planned-but-aborted listing on Singapore’s exchange. CVC managed to entice them by offering, for example, non-performance-linked annual bonuses that enrich Ferrari annually by twice the amount that Force India spend per season in total.
These bonuses were introduced as effective for 2013, and disbursed during 2014, with the main beneciaries being Red Bull, Ferrari and Mercedes. It can be no coincidence that the last grand prix won by a team other than a member of this trio, was 2013’s season opener, which Kimi Räikkönen won for Lotus. That very team subsequently folded under the stress of competing on unequal terms against ve ‘bonus’ teams (McLaren and Williams receive more modest sums).
The fact of the matter is that underdogs have won races and championships against betterfunded operations since the inception of the F1 world championship in 1950 through to 2013 – but not since. That is where F1’s true inequality lies, not in any lack of notional budget caps – a concept that has been rejected time and again due to its inherent impracticality.
The moral is simple: sort the revenue structure by paying like money for like results, and the rest will largely sort itself.