Hypocrisy over Andretti: The F1 teams waging war on 11th team entry

F1

Andretti's bid to set up a new F1 team has been approved by the FIA but now faces the much tougher task of securing a commercial deal. As Chris Medland writes, current teams are hesitant to share a piece of the F1 pie

F1 grid forms up at 2023 Singapore Grand Prix

Space for more: F1's current regulations allow up to 12 teams on the grid

Dan Istitene/F1 via Getty Images

There was rarely a dull moment over the Qatar Grand Prix weekend, and the range of storylines emerging from Losail quickly overshadowed one of the biggest ahead of the event.

Max Verstappen’s title aside — which in itself was failing to make huge headlines simply based on how inevitable it was — the major talking point on Thursday and Friday surrounded the FIA’s approval of Andretti Cadillac’s application to join Formula 1 in future.

That approval had looked to be on its way for a number of months and all it has served to do is officially move the process onto negotiations with Formula One Management (FOM), an aspect that was always going to prove the biggest hurdle.

Opposition from FOM was also not unexpected given the comments made by teams and Stefano Domenicali ever since Andretti publicly announced its plans to set up a new team. But as you might have picked up from the post-race diary, what really stood out to me was the hypocrisy of some teams, as they outlined their resistance to the bid.

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Heightening the sense that they were clutching at straws was that they were each making different points that failed to back up the others’ arguments.

Now, I get it. If you’re in charge of a team you’re hardly going to turn around and say ‘Sure, I’d love to split the prize money 11 ways rather than 10, and give away a few million pounds to another team that is only trying to enter now F1 is booming’.

Not only is it booming in terms of interest, but the cost cap ensures teams have a very good chance of being profitable, with Red Bull team principal Christian Horner admitting last year that the prize money received by the top teams exceeds the cost cap amount, and those at the back of the grid have “70-80% of their costs covered by the prize fund”.

Against that backdrop, the irony around James Vowles’ comments in a pre-race press conference was certainly not lost.

The Williams team principal tried to explain that the constructor is financially unstable — as if Formula 1 is not in a position to definitely sustain the existing 10 teams — and he then completely undermined that by revealing that the instability comes from the fact he has convinced team owners Dorilton Capital to invest “hundreds of millions” into trying to make Williams more competitive.

James Vowles

Vowles says Andretti must boost F1’s revenues to share in its riches

Getty Images

“It becomes very clear why we’re very careful about diluting what we’ve already got – because it’s just more losses on the table,” he said. “Now, we’ve been clear from the beginning, [we’re] more than happy to bring in new entities, but the pie has to grow as a result of it, not shrink, and so far it’s just shrinking.”

Those comments sidestep the fact that the pie has already grown significantly, with teams sharing around £950m in revenues between them in 2022, or comfortably over a billion dollars based on Liberty Media’s reporting. That’s a 27% increase in four years.

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Ferrari’s Fred Vasseur questioned what Andretti would bring to the sport. Perhaps he missed what Vowles had just said in the very same press conference, when the Williams boss spoke of a desire to work with General Motors, which is planning to enter F1 in partnership with Andretti.

Others struggled to make a convincing case for the “instability” that Vowles had raised. “I think what is stability?” said Haas team principal Guenther Steiner. “In F1 you always need to invest, you cannot say we don’t need to invest anymore. Some teams make profit now but the profit is not hundreds of millions. The big teams, some of them make profit, but everyone is still working hard to put as much investment as possible into it.

“Wherever the money comes from, if it is the shareholders, sponsors — but for sure a big part of it is the FOM income — and all of a sudden if you lose 10% of that one you have to find it somewhere else. Is it an investor? Is it a sponsor? But it’s still work we have to do [that] otherwise we wouldn’t have to do.”

Haas team owner Gene Haas and boss Guenther Steiner 2022 British GP

Guenther Steiner (right), with team owner Gene Haas, says that splitting prize fund with an 11th constructor would leave a hole in its budget

Haas

Steiner isn’t wrong about Haas not being hundreds of millions in profit, but some teams certainly are managing to benefit from the situation, with Mercedes reporting pre-tax profits of £41million in 2022.

And fans don’t support a sports team based on its ability to make money. I feel pretty safe in saying no Mercedes fan is wildly celebrating that profit figure and £75m of dividends going to Mercedes-Benz AG, Toto Wolff and Ineos. Instead, they are concerned with when Lewis Hamilton and George Russell might have a car that lets them challenge Max Verstappen for race wins and championships.

But let’s just do the simple maths on Steiner’s point. Teams receive prize money on a sliding scale, but rudimentarily equalising it out equates to £95m per team with ten constructors. If Andretti had been on the grid and getting the same share as the rest, then that number drops to just over £86m per year, or a loss of £8.6m per team.

At that rate, Andretti’s anti-dilution fee payment of $200m (£163m) would cover such a loss for each team for two years, but by having that £16.3m in the bank ahead of time it could extend a little further than that. And that’s without calculating the impact that Andretti’s arrival would have on boosting F1’s revenue with additional interest from fans and sponsors.

Try and make the anti-dilution payment $600m (£489m), as has been suggested, and teams will be compensated on current terms for around six years.

Grid 2023

‘The survivors’: current grid struggled through Covid, and some aren’t keen to share the rewards now F1 is booming

Red Bull

The latter figure tallies more with Steiner’s view that he wants: “Not a massive dilution fee, an appropriate dilution fee based on the value of a team now.”

That value has skyrocketed. Earlier this year, Alpine sold a stake in its team, which valued it at around £700m. The frontrunners are likely to be worth closer to £1bn.

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What teams are really trying to protect is their franchise value, despite F1 not being a franchise business model; it’s a sport where the FIA can also approve entrants and the rules allow up to 12 teams to be on the grid.  

Given the team principals’ comments, it’s not really surprising that there’s now talk of trying to close that to ten under the next Concorde Agreement, with Steiner suggesting the current constructors deserve to be the only ten for surviving the Covid-19 pandemic. 

“We have just got an opinion — most of the teams I think — why would we dilute what we’ve got just to get somebody else a team when F1 is booming, because who knows what [it looks like] in three or four years?

“It’s only 2020 when we were struggling to stay alive as F1, because if four teams go out only six are left. Why would we make it weaker now if something [similar] comes up again? We need to be as strong as we can, the ten teams that are here, who got through the hard times.” 

It’s a survival of the fittest argument: that only those teams who made it through the Covid shutdown should play a part in F1’s future. Does that mean forever? 

Michael Andretti’s smiling Headshot

Andretti has cleared the first hurdle but now faces the judgement of FOM

Alamy

There’s also the old adage of making hay while the sun shines. F1’s boom is an opportunity to strengthen the field even further. The good times may not last forever, and if one or more teams were in financial difficulty in future, then what? It’s not a given that previously interested parties would want to come back to a less-lucrative series, especially if they have been shunned before, and F1 could find itself — and that all-important pie — shrinking. 

It’s obvious that this is about making as much money as possible in the short term, and not wanting anyone else to benefit even if they all do. Liberty Media’s mantra — often repeated by former commercial director Sean Bratches — was “all boats are lifted on a rising tide”, and that the fans are central to what they want to do. 

And that’s because the fans watching lead to big broadcast deals that go into F1’s revenues, that also feed the desire for more places to host races because of the viewership they reach, that then leads to sponsors increasing their spend because they want to hit markets in those regions… You get the point. 

Multiple polls have found that 80-90% of fans want to see an 11th team. So who will be listened to? The teams sitting on their bulging valuations, or the spectators who actually provide that value?