Formula 1 financial crisis: Is there any way out?


Prior to the recent US Grand Prix, the saddening news emerged that Marussia and Caterham had gone into administration and wouldn’t be competing in at least the next two races.

While they may not be the centre of attention each weekend, their current absence is indeed a cause for concern. Marussia in particular will be sorely missed as they have delighted us with some inspired racing this year. In Monaco Jules Bianchi scored the first ever points for the team.

The unfortunate truth is that teams at the back of the grid falling out of F1 is nothing new. The problem this time around is that it is not only these two teams that are facing crisis. Sauber, Force India and Lotus, the current back-markers during Marussia and Caterham’s absence, also appear unstable. There was even talk of a potential boycott of last weekend’s race by these three teams which did not materialise.

It is particularly infuriating that while a financial crisis has been brewing over the last few years, F1 has attempted to attract more fans through gimmicks such as standing restarts, double points, and the recent proposition of three car teams. These gimmicks merely add to the sense of a farce rather than achieve their goal of attracting new viewers. The idea that one race carries double the points value of any other belongs in a game of Mario Kart, not professional motor sport.

How are these gimmicks relevant to the current financial crisis I hear you ask? Graeme Lowdon, CEO of Marussia F1, summed up the problem prior to his team going into administration: “The fans don’t seem to be terribly impressed by the short-term tactical things like double points or not doing any running on Friday. The fans are not stupid.”

It is the short-term thinking of those in charge that reveals why this financial crisis has been allowed to develop. These gimmicks not only dilute the purity of the sport, but they mask the real problem and avoid dealing with the issue head on: making racing closer and more competitive cannot be achieved without teams on the grid in the first place.

With this in mind, Ferrari have been taking the wrong approach. Marco Mattiacci, the team principle, implied that F1 only needs top competitive teams while midfield runners are not essential and it may well be the case that certain fans agree with this. However, the answer is not to jettison those who struggle and maintain a select few. F1 needs a model that allows more teams to enter the sport and to become competitive in it. Competition is healthy.

Speaking to the BBC, Red Bull team principal Christian Horner expressed his belief that the situation with Marussia and Caterham should remain private so as to not hurt F1’s reputation. Unfortunately for the sport, a situation in which two teams have suddenly fallen off the grid cannot be kept silent. The sport’s reputation has already suffered and questions need to be answered. Horner is right in one thing; it is important to acknowledge the positives such as the fantastic quality of racing in 2014. However, the financial issues cannot simply be swept under the carpet behind closed doors. Of course spotting the problem is quite easy, while providing a solution is perhaps not. This writer doesn’t claim to have a comprehensive solution to the sport’s financial crisis. There is some very complex maths involved and I don’t have a calculator handy. Regardless I’m going to have a crack at providing a solution, and for me it is three-fold: get rid of the short term gimmicks, introduce a budget cap and share the sport’s revenue more evenly.

Ironically, Horner’s team was a key contributor to the problem that he now wants to keep private. Red Bull and other top teams such as McLaren and Ferrari have twice rejected the idea of a budget cap, something which could prevent the costs from continuing to spiral out of control. Marussia, Caterham and HRT were three teams that entered F1 in 2010 under the false promise of a budget cap. It is unsurprising that without the cap, HRT fell into the abyss of F1 history, while Marussia and Caterham look destined for a similar fate. The new regulations certainly haven’t helped. The new hybrid turbo V6 engines are ridiculously complex and expensive, compounding the problems of smaller teams. Of course F1 is the pinnacle of motor sport and rightly showcases cutting edge technologies, the new engines this year being a prime example. However to what extent and what cost can this continue? The sport is for the fans and they want to see competition. Solving this issue will not be achieved through silly ideas such as double points or by simply having 5 teams in the sport who are able to afford it. The long-term solution is to bring the costs down and help these struggling teams.

The other issue that needs to be looked at is the revenue share. The prize money from the commercial rights holders is not shared evenly. While around half of this money is divided up on account of performance at the end each season, the other half is kept separate and is given to the bigger teams simply because they are deemed important to the sport. It seems clear to most, except the big teams, that this model is unfair and that one half of the prize money is distributed unevenly.  Sponsorship is already a benefit which the big teams can continue to enjoy on top of the winnings and yet they refuse to consider redistributing the prize money fairly. Of course, solutions such as a budget cap or an even distribution of revenue will be difficult when the top teams refuse to agree. However, Bernie and those in charge need not look at gimmicks to improve competition, but instead must sit down with the greedy top teams and tell them that the situation needs to change in the name of the sport.

The only positive amongst all of this is that Gene Haas looks set to enter his new team into F1 in 2015. However, for how much longer will F1 be able to sustain its current teams, attract new ones and attract new viewers? There was definitely an empty feeling at the US Grand Prix, and that was only with two less teams than usual. Imagine that feeling with another 3 or 4 gone. That is the direction in which this sport is heading and it is time to turn around.


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