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Details of $175 million cost cap and new prize money structure for 2021 revealed

2021 F1 season

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With the FIA’s International Sporting Code stipulating that major regulation changes must be finalised at least 18 months ahead of introduction, the World Motor Sport Council meeting scheduled for 14 June provides the final opportunity for Formula 1’s 2021-onwards regulations to be ratified by the WMSC before the 30 June deadline.

RaceFans understands that the sport’s governing body circulated draft copies of the proposed technical and sporting regulations to all teams on 4 June, with follow-up meetings called in Montreal on Thursday. Further discussions meetings are expected to be held on Sunday morning.

Simultaneously, details of the proposed budget cap were distributed to teams, with a fixed cap of $175m per annum to be imposed on all competitors. However certain exclusions are expected to apply: The salaries of the team’s three highest-paid executives, driver remuneration, the first $15m of power unit costs, marketing/hospitality costs, and all race-weekend travel and accommodation costs.

Crucially, there will be no three-year glide path, as had been previously proposed. It is thought that the exclusion of race travel costs was at the behest of F1 commercial rights holder Liberty Media to enable the championship calendar to be expanded without increasing cost cap levels.

According to sources, a revised revenue structure will also be introduced from 2021, divided into four ‘columns’: Columns 1 and 2 will be similar to the current structure, with the first column comprising 50 per cent of the common prize ‘pot’, divided equally among all participants. There will be no initial exclusion periods for new teams, as is currently the case.

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Column 2 will be disbursed amongst the top ten championship finishers on a performance-linked sliding scale, although the percentages will be weighted in favour of performance. Whilst the top championship finisher in a given season will still earn 18 per cent of the ‘pot’, the bottom placed team will receive two per cent rather than the four currently earned – with all intermediate placings tightened up.

Column 3 replaces the current CCB structure, whereby championship constructors’ bonuses are paid to Ferrari, Mercedes, Red Bull, McLaren and Williams, based on their respective championship histories.

In its place a ‘top three’ bonus will apply, where income is shared between teams based on how frequently they have finished in the top three championship classifications over a rolling ten-year period. The pot will be shared will be based on how many points each team has earned during that time in a system awarding three points for a championship win, two for second and one for third.

Finally, Ferrari will retain its Long Standing Team (LST) bonus, but this is expected to be halved from its present level of around $70 million, and may not be used for performance purposes. Thus, the team may cover cost cap exclusions with the LST bonus or write the proceeds to profit, but not allocate the bonus towards the $175m annual cost cap.

As RaceFans revealed previously, Ferrari will also retain its power of veto over changes to F1 regulations. However this is expected to be redefined to ensure that it can only be triggered under specific circumstances.

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Dieter Rencken
Dieter Rencken has held full FIA Formula 1 media accreditation since 2000, during which period he has reported from over 300 grands prix, plus...

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  • 51 comments on “Details of $175 million cost cap and new prize money structure for 2021 revealed”

    1. Really disappointed about Column 2 only taking into consideration the top 10. How is any new team going to join in those terms. And the bottom teams earning less, while the top will still earn the same? How is that tightening the field?

      F1 had the chance to really change the structure, and consequently tighten up the grid while being able to attract new entries, but they’ve blown the opportunity

      1. Well, correct me if I’m wrong, currently new entries would recieve nothing out of Column One for straight three years. It’s a bit better now for newcomers, but I’m agree that they quite failed with all of this. But I had no another expectations tbh though.

      2. What is the optimal number of cars on the grid? I would say about 20. F1 will pay a new team if the number drops below 20 – ten teams – and not otherwise.

        1. Optimum would be 24 or 26 in my opinion.

          1. Quality matters more than quantity. Having 24 or 26 cars is just worse for f1 if the tail end teams are too slow (hrt, marussia, caterham). Even today williams is so slow that their existence during f1 race is worth merely a passing mention. It is much better to have, say, 18 competitive cars than 26 cars out of which 8 are total filler.

    2. There will be no initial exclusion periods for new teams, as is currently the case.

      This alone already is a good one.
      On the other hand “top three bonus” is a huge shame. At least, for the past ten years it was the same Ferrari, Mercedes, Red Bull, McLaren and Williams, doesn’t change much.

      1. Brain Drain
        8th June 2019, 9:10

        Given that in the current situation it’s almost a forgone conclusion who the top three will be, it would have made more sense to make it a top four bonus and give the midfield a stronger reason to push for 4th.

    3. There will be no initial exclusion periods for new teams, as is currently the case.

      This is good to see. More tellingly, I think it might help Haas’ case for prize money.

    4. The two biggest wonders of the cost cap are policing and enforcement.

      How will the forensic accounting across multiple layers of multinational corporations and entities be accomplished, and by whom?
      And, who will pay the cost of the forensic accounting and analysis?

      Will the penalty enforcement for financial, expenditure or accounting violations be retroactive or future based?
      In other words, will there be retroactive penalties that affect previous on-track results for off-track (financial) violations?
      Or, will penalties be applied toward future competition? As in, possible grid penalties or other punitive result based penalties in future races/seasons?
      A third possibility for penalties could be financial penalties (fines) for financial violations. This method would obviously affect the less wealthy teams more severely than the wealthier teams.

      A cost cap may sound effective in theory, but is it really practical? Will it actually work to spend money on off-track forensic accounting to make the show better on the track?

      1. The two biggest wonders of the cost cap are policing and enforcement.

        @bullmello – I would like to believe that the current wind tunnel and aero simulation caps are being policed and enforced effectively, and would therefore also like to believe the same would apply to the cost cap when the number crunchers enter the picture.

        It might be worth pointing out that I’ve been wrong before. Several times :)

        A third possibility for penalties could be financial penalties (fines) for financial violations. This method would obviously affect the less wealthy teams more severely than the wealthier teams.

        This makes sense. And I would not have sympathy for less wealthy teams, it’s a matter of play stupid games win stupid prizes, in my opinion.

        However, your concern can be viewed the other way around – if the penalty is fixed, there is more incentive for the rich teams to risk breaching the rules as the potential benefits might be greater than the risk of a penalty (i.e. the Ford Pinto memo). Maybe the penalty should consist of a fixed amount plus a percentage of F1 earnings in the last few years prior to the violation.

      2. Liberty and the FIA are a joke and I said this from the beginning when everyone was saying how excited they were as they bought into the idea that they would totally transform F1. Liberty harped on and on and have mucked around for several years and in the end we see where the real power lays once again. The regulations, rules & financial aspects needed to be written without the teams involvement and put on the table to be asked one simply question… Are you in or are you out…? This was their one chance and they failed. My goodness they cant even force Pirelli to make a decent tyre that doesn’t have ridiculously thermal degradation.

        @bullmello – Your spot on the money. Nothing will change, they will just hide the money. The same teams will continue to dominate and have control over their sister B & C teams.

        @phylyp – I have asked many times how does FIA police this? Even if they try their hardest I believe sim & wind tunnels are running 24/7. They could even have secret underground wind tunnels with full 1:1 scales running 24/7 and nobody would know.

        Nothing will change. If Liberty and the FIA wanted an even playing field they would introduce BoP rules or fully standardized cars. None of which is in the DNA of F1 and will never happen as long as the powers of Ferrari & Merc are around.

        In 2021 we might get a slightly better show however I don’t hold my breath for the revolutionary changes we needed to see happen to make this sport great again.

        Fail!

        1. Wow, looks like someone has no management experience.

      3. I’m sure that within the details are rules on how money, parts and development is to be handled to make it easier to track.

      4. Imho there is only one option if competitors are caught cheating (i.e. spending too much money). Exclusion from the championship, and thus not getting any prize money. That is the only reason naking it not worth to cheat.

        Other penalties, like financial or grid penalties might make it worth it because of the possible performance gain.

    5. Column 3 replaces the current CCB structure. In its place a ‘top three’ bonus will apply, where income is shared between teams based on how frequently they have finished in the top three championship classifications over a rolling ten-year period.

      Nice – linked to recent performance.

      However, do we have an indication of numbers for column 2 vs. column 3? Given the trend of successful teams tending to stay successful for multiple seasons within a regulation window, it feels like the top 3 column 2 earners (and almost certainly the top 5) are most likely to sweep up the column 3 prize money. Maybe Liberty could have cut down the 18% for the column 2 winner? Again, it depends on what is the relative proportion of column 2 vs. 3.

      1. @phylyp I really don’t see how we ended up with MORE damn columns! Surely the whole point of this operation was simplification: ONE column, championship order, sliding scale of prize money from the pot. Plus Ferrari’s bonus, if we really must.

        I’m sure this is more equitable. But they missed a fantastic opportunity to make this sport look significantly more like an actual sport.

        I’m still frustrated.

        1. @gongtong – true 🙂 We need only two columns, one for participation and one for performance. The rest is rather like putting lipstick on a pig.

          1. @phylyp I think participation and performance can be covered in one single column. I mean, they’re contractually obliged to contest every round of the championship. Which means that to qualify for a performance based prize relating to championship standings, they need to participate. Ie. miss a round and they’d be kicked from the standings anyway, right?

            I guess it’s typical of our sport to take something simple and make it as complex as possible though. It’s what we demand of them really.

    6. Something else I heard today is that teams were presented with a proposal where cars would be under into parc-ferme conditions as soon as they pass tech inspection on Thursday in what’s been dubbed the ‘Run what you bring’ rule in an effort of ‘spice up the show’.

      This will essentially prevent teams from making big setup changes over the weekend with them been limited to tyre pressures & front wing angle as well as what the drivers can adjust in the cars.

      Unsurprisingly I gather there was a lot of pushback against this idea from teams.

      1. @gt-racer – that’s an interesting proposal. It would definitely push the focus of FP into those variables you mentioned, plus just figuring out tyre life to calculate a pit strategy. I think a secondary (possibly unstated) goal might have been to reduce the amount of FP running, since there’d be lesser data to gather.

      2. And rightly so. Toto Wolff criticized this proposal a lot and I find myself strangely agreeing with him. It’s nonsensical. We’ve already got testing banned, so further restrictions on car changes and possible development experiments are actually against the idea of converging field, against everything. I hope this gets scrapped as soon as possible.

        1. @gt-racer, @phylyp, there was an AMuS article (in German) posted yesterday that detailed that too; I note they also have an article up now about the financial structure. So I guess that makes it indeed likely to be the plan.

          I too see problems @pironitheprovocateur, though especially for the less well resourced teams, I think it will make it harder to fix problems with the car (this year: Red Bull again having needed improvements to the car after first races; Williams hampered in trying to actually fix the car, Racing Point not getting on top of Spain update; Renault stuck with initial way too low Friday df package). Let’s hope the teams can adapt. Or maybe be stricter with teams leading WDC, abd WCC?

          1. Renault: talking about Baku

        2. I’m on the fence on this. I don’t think I’m convinced that it would necessarily have a huge effect in the long term, would it?

          @pironitheprovocateur you reference the testing ban, but other than young driver seat time and a positive affect on cost reduction, has it really changed much for better or for worse? (a genuine question of people’s opinions).

          1. IMO the testing limit is a good idea in principle to reduce costs, but it’s been taken much too far. Simulations are a big cost too. It would make more sense to have varying limits depending on performance, so weaker teams could do more testing than top teams. Say, a day of testing on the Monday after each race, for the five teams at the bottom of the constructors’ table.

            F1 has a lot of things upside down at the moment. Empower the smaller teams to take development risks and they have more chance t come up with something new that works. You never know, we might even see Ferrari and Merc buying parts from smaller teams instead of the other way around, and that would really help spread the money around.

            Of course the budget cap removes all justification for testing limits.

            1. Dave, the problem, though, is that it is often those smallest teams are the ones with the least amount of resources to dedicate to running those tests to begin with, such that there is the question of whether it would be that effective when those smaller teams might not be capable of utilising that opportunity anyway.

          2. @gongtong, on the other hand, what benefit does such a proposal bring about either?

            I could understand the logic behind, for example, restricting the number of new parts that a team could test during the practise sessions as a cost reduction measure or a “spicing up the show” method. However, the idea of restricting the set up so that even the sorts of small and common changes that a driver might request – say, changing a front anti-roll bar setting or adjusting a spring rate setting – are off limits seems rather extreme.

            As @phylyp notes, the question is whether the real long term intention is to use this as a justification for axing the Friday practise sessions altogether, which is what some teams have suggested.

      3. @gt-racer That would be against everything as Toto pointed out, and I thoroughly agree with him. Furthermore, restricting the teams to that extent given the restrictions on testing that have been in place for ten years already, etc., limiting them from making changes to their cars for the entirety of a race weekend would/could potentially even be a safety risk, so I thoroughly hope this suggestion doesn’t get through as didn’t the qualifying change proposal. Who comes up with these genius ideas anyway?

      4. So it’s essentially whoever has the best simulator wins? I feel like F1 has already gone too far in that direction – see Mercedes dominating and barely ever being caught out. I would say that the cost cap would help alleviate that, but whatever infrastructure they have in place is already paid for, so that advantage would carry over while other teams would have to eat into their allowance to catch up?

    7. Neil (@neilosjames)
      7th June 2019, 23:42

      Strongly dislike Column 2 only applying to the top 10, and I don’t like the fact Column 3 exists at all. Same for Ferrari’s bonus.

      I really should have learned by now that optimism over anything financial in F1 only ever leads to disappointment.

    8. Hello, thank you for the article. Could you please explain why Renault is not included in the Column 3 bonus as they won the constructor’s title in 2005 and 2006. Thank you

    9. Column 1 and 2 is fair and thats how it should be – end of story. Everyone recieves something for even making it to F1 and a sliding scale distribution based on performance.

      Why column 3 and 4 exist is the “problem” with F1 if there ever was one. The top 3 teams incl Ferrari can just dump this straight back into driver salary and facilities and voila. Inherent advantage.

      Even if a team manages to work their way into the top 3 one year the team they just beat will still be getting a lot more money. It’s just not right.

      1. @skipgamer, yes column 3 and 4 exist only to prop up the criminal excess that was the profit share kept by Bernie, 50% of profit for negotiating contracts, while 10/13 teams that had to design, build and run 2 cars at every race, and only got to share the other 50% between themselves. This is the root cause of all that is wrong with F1.

        1. @hohum,@skipgamer yeah, that part is a remaining problem. I can suppose that they needed it to keep those teams on, but that still doesn’t make it right, nor does it fail to disappoint.

          I am happy though with a 175 M$ budget cap, without gliding path to that (hm, as a trade-off, had they made the column 3 stuff a glide path, that would have been okay to me, but this way it just means those who have more, keep more, doesn’t it!)

          1. Wait, no, I did not properly count up the extra bits, which mean the big teams might still have about 250 million to spend, when small teams can barely reach 175,since they will struggle to make 100 from the FOM money. Sigh, Renault have clearly been spending too little so far; and Williams ‘ let’s hope for 2021 Renaissance’ is very idle hope.

        2. Rofl. The teams repeatedly signed up with Bernie voluntarily because he could make them the best offers. He got very well paid for herding an extremely unruly mob of cats, but never anything like 50% of the revenues.

          1. DAVE, I said 50% of profit. How much do you want to bet I’m wrong?

    10. Crucially, there will be no three-year glide path, as had been previously proposed

      I believe this is because the MGU-H will continue to exist.

      I recall Liberty offering a glide path as a sweetener for the teams to give up the MGU-H. Seeing as there are no new PU entrants, and the MGU-H remains (yay!), it stands to reason there was no need for the sweetener.

    11. Has anyone got a table of what teams spend v’s the Cap of 175m – seems awfully low.

    12. DAllein (@)
      8th June 2019, 9:12

      Hm… surprisingly this doesn’t sound that awful.
      But I still can’t see how exactly they will “sell” this to teams, who will have to fire half of their stuff for 2021…

      And as before (and already mentioned above by many) – how on Earth are they going to monitor this?
      Geez, Football associations can’t properly monitor top Clubs’ spending sprees, and here FIA is somehow going to monitor multilayer organizations…

      1. It does seem like Liberty are complete idiots, doesn’t it? What on earth did they pay Bernie all that money for, when they haven’t bought his dealmaking ability?

        You’re quite right that this will be impossible to police. That’s why the idea was laughed off every time it came up in the past. It’s bizarre.

        1. Couldn’t disagree more with you two.

    13. I was expecting worse also. At least there is a cost cap and starting teams get some pay-out immediately.
      But one question: until when is this structure valid? 2031?
      Because eventhough column 3 and 4 are still a joke, they open up for further adjustment over time.
      Like @phylyp is saying, we don’t know yet how much money is in the column 3 pot. But Liberty can reduce that over time, depending as i said, until when this agreement is valid. At least, except of course column 4, it’s not directly connected to a team. Makes it easier to play with.
      And the parc-fermé proposal? I hope that is a giveaway for the coming negotiations…

    14. Personally I don’t like the idea of a cost cap as I feel like costs could be controlled by putting the emphasis on mechanical grip, moving away from exotic materials and in some cases moving back to older technology, like a manual gearbox.

      The thing that bothers me most about the 175m cap is it means either an end to technical innovation or hiding the cost of innovation under entities other than the race team. Which as others have pointed out will lead to a lot of forensic accounting and constant claims of cheating.

    15. I wonder how much money liberty media will be paying themselves….. I can almost guarantee they’ll be getting a bigger share of the money than they get now. As this is what it’s always been about liberty media getting as much money out of f1 as possible

      1. Don’t they get the same as CVC did? 50%, so 1 billion USD.

        1. @phylyp, eventually Bernie had to relinquish some of his take, it’s now something like a 63/37 split.

    16. Wrong direction.

      Want to make F1 more interesting? I’ll give you not one, but two recipies, free of charge:

      A) Unlimited budgets and unlimited testing. Let those tobacco giants advertise their new “lower-risk” products, let the teams have that money, so that they can test for thousands of laps to play catch-up between the races. This way, the champion at least isn’t obvious after the first race.

      B) Spec-everything except the engine. This will make the sport more exciting and attract new manufacturers. And it will be a lot cheaper than the current formula. Positive side-effect: we might finally see technical failures again as everything depends on the engine being as powerful as possible.

    17. In its place a ‘top three’ bonus will apply, where income is shared between teams based on how frequently they have finished in the top three championship classifications over a rolling ten-year period.

      Finally, Ferrari will retain its Long Standing Team (LST) bonus, but this is expected to be halved from its present level of around $70 million,

      Ferrari will also retain its power of veto over changes to F1 regulations

      Pathetic, appalling, and disgusting. Ferrari gets half its budget for doing nothing whatsoever. For putting together championship capable cars/drivers for a few years with 10-20 year gaps between them. And the other half of having enjoyed all that corruption money in the past and having finished near the front often.

      Also they retain the power to corrupt rule changes to their liking.

      Also, they essentially fix the top three teams by giving them extra money.

      They should do the opposite, give more money or leniency to backmarkers. Allow them more testing and such. Create a negative feedback loop. The more successful you are the more restricted you are.

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