The Missing Contract That Holds The Keys To F1’s Future

The future of Formula One has raced into uncertainty over the past two months as the coronavirus put the brakes on almost half of its races. It has fueled concerns that some of its teams could hit the wall and led to F1 creating a revised calendar which it hopes will begin in July with no spectators. Even if it manages to get its season back on track, a bigger roadblock could be just around the corner.

F1 is listed on the Nasdaq with the ticker FWONK and is worth $7.2 billion. The driving force behind this value is that the sport’s parent company Delta Topco, which is owned by Liberty Media, is contracted to run the F1 championship until 2110. On its own, this isn’t enough to hold a championship. It also requires teams and, remarkably, F1’s contracts with the ten squads which are currently on the grid all expire at the end of this year.

None of them have signed new agreements meaning that, as things stand, no teams will be racing in F1 after the end of this year. This significant speed bump has been overlooked in all the chaos surrounding the coronavirus but it has been a hot topic for the past few years.

The contracts are together known as the Concorde Agreement, after the famous square in Paris where the first version was signed in 1981. The current contracts began in 2013 and give huge benefits to F1’s biggest teams with the top three taking home around 48% of the $1 billion annual prize pot. It has cemented their dominance and only Mercedes and Red Bull Racing have won the championship over the duration of the contract.

Liberty got the keys to F1 in a $4.6 billion takeover in 2017 and soon announced that it would shake up this status quo. Crucially, it said it would make the prize money more equitable and introduce a budget cap which would prevent the top teams from using their vast resources to win on track.

A $145 million spending limit is due to come into effect next year and is now more important than ever as the economic downturn has put huge pressure on team budgets. However, although all of the teams are understood to have agreed to the cap, none of them have actually signed a new contract to remain in F1.

In March one of the bosses told German publication Auto Motor und Sport that “before any team signs up for five years, we all need to know if we can survive this crisis.” As we revealed in The Guardian yesterday, Liberty has given them a boost as it is understood to be paying them their prize money in full even though they aren’t racing. There is no suggestion that the teams had to sign a new contract to get it so the matter of F1’s future financial regulations is still outstanding.

Before the onset of the pandemic, one of the team bosses told us that “on Concorde, things are dragging on. There is no contract in sight really.” He added “it has happened behind closed doors and is not being played out in the media. Meetings are quite tough. The big teams are saying that they are not on board and I can see a scenario where some of them may go into the end of the year with no contract.”

Another added that “if you ask the boards of the big teams, probably half will be in favor of signing and half will be not in favor. Signing is what everybody wants to achieve but you can only achieve a great contract if you are prepared to walk away from a deal.”

That seems unlikely as many of the teams have signed contracts with sponsors, drivers and engine suppliers beyond the end of this year. In fact, the threat of the coronavirus may have focused their attention as McLaren boss Zak Brown says “I think there will be a Concorde Agreement. We were very close to signing. A lot of teams were and there was a lot of paperwork going back and forth so it was very well advanced.

“It has obviously been parked in the short term because we are dealing with the crisis but I don’t see any reason why it can’t just be picked up where it was left off because 90% of it was already agreed so we have just got to kind of finish the last 10% and everyone was engaged on that so I think we will all be signed up by the end of the year.” With less eight months left until the checkered flag comes down, they are all in a race against time.