Parc ferme, Circuit de Catalunya, 2020

$200 million charge for new teams to stop “random” entries like USF1

2020 Tuscan Grand Prix Ferrari 1000

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Formula 1 teams will charge new teams $200 million to enter the sport to stop failed championship entries like USF1 in 2010, according to McLaren team principal Zak Brown.

The proceeds from the new “anti-dilution” fee, which was first revealed by RaceFans in December last year, will be shared between the existing teams.

“What that 200 million is intended to do is to a protect the value of of existing teams,” Brown explained.

He said the recent sale of Williams to Dorilton showed the importance of ensuring existing teams have value. “As reported on the Williams sale, that’s less expensive and you get a lot more for your money that you’re starting a new team.

“But I think if you believe in the franchise value growth of Formula 1, you’ll get that 200 million back and then some at later date. Also the way the regulations are written there is the ability for Liberty and the teams to agree to adjust that number.

USF1 was one of four new entries which was accepted for the 2010 Formula 1 season. However the American-based project collapsed before the season began.

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“What we’re trying to do as an industry is stop what we’ve had in the past where a USF1 announces they’re going Formula 1 racing and they never get to the track. And I think the 200 million is intended to really make sure that if someone is coming into the sport that they have the wherewithal to do it.

“We don’t have what we’ve historically had, which is random announcements people are going to come in and then they never make it to the track. I don’t think you’d ever see it in other major forms of sport.”

RaceFans understands the new regulations for next year stipulate the payment must be made by a new team in the financial year before their entry into the championship. This will be distributed to the existing teams as a Prize Fund Anti-Dilution Payment in the first year that the new team participates in the championship.

The Commercial Rights Holder may waive the fee. However it requires the consent of the existing teams to do so if the new entry would increase the number of participating teams to more than 10.

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    45 comments on “$200 million charge for new teams to stop “random” entries like USF1”

    1. What kind of stupid rule is this? Does Formula 1 want more teams in the sport, or do they want to continue to kill the sport? What a moronic decision.

    2. Effectively cementing in an absolute maximum of 10 F1 teams indefinitely, then.

      1. They’ll quickly change their tune when team drops out.

        Hard to imagine that in the 80s there were so many teams that some turned up to qualify for the race and if they didn’t they went home!

        1. John, but that situation really wasn’t sustainable, as a lot of those teams didn’t have the resources, finances or competence to run a Formula 1 team – hence why quite a lot of those teams only really lasted for maybe a couple of years before declaring bankruptcy (some not even managing to last for a single season).

          To be brutally honest, some of them weren’t even particularly successful when they tried to compete in Formula 2 or Formula 3000 and were somewhat out of their depth in those series, let alone F1. In some cases, the quality of preparation of some of those cars was dangerously poor, such that you wonder why the FIA allowed them to race – cars being bodged together with components that were used far beyond their design lives (i.e. basically running something until it broke), or welding together old components because they couldn’t afford a new one, were a fairly common occurrence near the back of the grid.

          You had a lot of cars on the grid, but it was a situation that couldn’t last and indeed didn’t last, because you had quite a few teams who didn’t really have any long term plans for surviving in F1.

      2. I’m more optimistic than that.
        F1 with the Concorde Agreement and Budget Cap is now a worthwhile investment I dare to say; $200M doesn’t seem that ridiculous.

        If anything it seems that Williams was sold too cheaply.
        (Thet didn’t just get an entry worth $200M, but also the Fixed Assets (not sure if the building was included) and a ‘going concern’ organisation)

        1. And two spots at the rear of the grid.

    3. I’m not sure it was USF1’s fault… USF1 got chosen by F1 over other potential teams like Epsilon Euskadi and Prodrive… both probably would not have done any better than Virgin or Lotus in the end, but at least they were established and sucessful teams trying to make that final step towards F1.

      So, yeah, let’s give an entry to some random people with a highly ambitious idea of an F1 team based in Charlotte…

      Also this: “But I think if you believe in the franchise value growth of Formula 1, you’ll get that 200 million back and then some at later date.” while McLaren, one of F1’s and motorsport most famous and sucessful teams, is considering selling their HQ… suuuuure… you’ll see your investment back in no time, mate!

      1. To be fair to them all, the idea is that the incoming budget cap and maybe the performance allowance with the % for where you finish and being able to spend on aero @fer-no65 a team should be able to run at break even or be able to run a modest profit.

        1. @bascb I hardly doubt it. F1 isn’t a place to make profits… The whole idea of motorsports is already a big unknown going into the future, and paying 200 million without turning a wheel is the biggest risk ever.

          If anything they should be letting people in no charge. Study their idea, accept their entries if they are competent, and let them race. If it ends up being a Minardi, it’s great news for the likes of Williams or Haas, that won’t be at the very back of the grid.

      2. So they don’t want to see any competitor who can spend 200 mln on a good car. Only they care is own pockets.
        Looks like that American fund relying solely on topical American strategy – marketing is everything, quality is nothing.

        1. F1 is turning into wwe. So is fom in the way they are going about things

      3. @fer-no65 the thing is, Epsilon Euskadi’s bid in 2010 really wasn’t credible as the team was in a major financial crisis. By October 2011, Epsilon Euskadi was declared bankrupt by the courts in Vitoria and went into administration – their hopes of entering F1 were about as realistic as USF1’s plans were.

        Prodrive’s first bid, which was to enter in 2008, was relying on the sport legalising customer cars, since the team was planning to run a customer McLaren MP4-23 chassis – something which was not going to happen given that Williams immediately launched legal action to block Prodrive from entering with a customer chassis, and which the sport was moving towards banning, rather than legalising. I believe David Richards has actually admitted that, in retrospect, being rejected probably was a blessing in disguise because an F1 programme probably would have ended up collapsing in the end.

      4. Keep in mind that USF1 entered on the basis of the optional $40million budget cap that Max Mosley wanted for 2010 that never happened thanks to existing teams complaining about the split in technical regs depending on if you kept to the cap or not.

        That and the whole Youtube sponsor “deal” which from memory wasn’t anything like as big as believed and about as workable as the Mastercard sponsorship deal of the 1997 Lola team.

        Clearly there were operational issues but using USF1 as a basis for setting a $200m fee that goes to other teams isn’t great (especially as Manor/Lotus/Hispania were all intending on using the same $40m budget cap and that not being applied gave them no chance to be competitive). That and it’s another massive increase that basically prevents new teams from entering and maintains the “franchise” value as Zac mentions (I’ll let that Americanism slide as teams regularly get sold and base of operations doesn’t really matter, even though most tend not to physically move).

        I can’t find older figures other than Hass paid a $20 deposit in 2014 – I assume they paid more to enter but can’t find anything to say that they did. If that’s accurate, that a 10x raise in 6 years which isn’t really a good look for the sport.

    4. This is no different from eating the children.
      This has essentially locked the present teams and will prevent any team from entering.
      Using USF1 as an excuse is just being creative.
      It is going with the current trend everywhere. No more starting a business and existing by the day.
      The vast majority who aspired to be F1 team owners may still make it as mechanics.

    5. Suddenly, the Williams sell became too cheap.
      First one will have to pay $200m in advance. Then facilities and machinery are required. Another $200, maybe? And after that, about 3 years racing to gain experience. Budget cap + drivers+team principal $200 x 3 years.
      It adds up to $1bn to form a racing team with enough track experience. And the investment group bought that for a mere $150m.

      1. It’s only a season’s budget. Hardly a massive amount in that context

    6. What? How on earth do they come up thinking this is a good idea?

      to a protect the value of of existing teams

      franchise value growth

      OK, for the first time in my life I am actually considering wether a breakaway series might be a good idea. They are actively conspiring against even the thought of independent teams. This does not only stop people who wouldn’t turn up, it stops everyone bar big manufacturers. Williams or Tyrrell, Zakspeed or Minardi, Hesketh or Andrea Moda, Wolf and Shadow, Coloni and Forti, Eurobrun and Eifelland, none of that could happen anymore.

      And to top it all of, refering to F1 as a “franchise” is just another kick in the guts for every fan of the sport.

      1. It’s not about good idea, it’s about greed.

      2. Also, we wouldn’t have had Haas in F1.. a team that has established itself well in just a couple of years..

      3. @crammond I’m scratching my head here. So what if a team never makes it onto the grid? So what if a team never makes it further than the back of the grid and collapses after one season? At least it adds another interesting element. How does this dilute the value of F1 or of any other F1 team? F1 has always been about “turn up and have a go if you dare”. Why change that? I would love to have an additional 6 rookies in an additional 3 new teams squabbling at the back of the grid. I’ve always loved the backmarkers. I loved the excitement of whether a driver would qualify within the 107% rule. Bring this all back and then I can start shouting, “Get rid of the blue flags!”. (I am not being sarcastic, in case you’re wondering.)

    7. Oh Europe. Is there anything you can’t ossify?

      1. England.

      2. @leejo F1 is owned by an American company…

    8. And this is the reason why dorilton is in f1. f1 helped williams but this is silly. Dorilton is hoping to sell the team for a fortune.

      1. So Dorilton knew what was coming

    9. I have felt for a while they should actually loosen the restrictions on entries back to what they were through the 1980’s.

      I know the rebuttal then tends to be how you need the tough entry rules to prevent ‘joke’ teams from entering, But firstly I think the cost’s involved in running a team now would prevent that from happening & secondly I think the regulations in terms of cash testing, safety requirements & of course things like the 107% rule would also prevent ‘joke’ teams in the style of Andrea Modena from getting near a racetrack.

      I also think they should allow single car entries again, I mean why not? I don’t really see a drawback in allowing single car teams.

      1. I think you are right on the cost for entry @gt-racer, seems to be a bit of a joke to even suggest that any team would just willy nilly come in and “profit” from F1 when building up a new team means bringing at least 2-300 million in to get started.

      2. @gt-racer I believe that, when Symonds was working for Manor F1 as a consultant, he was asked whether he thought that it might help smaller teams if they only had to enter one car. If I recall well, his response was that he thought it was a bit of a false economy and wouldn’t be a particularly helpful move.

        He noted that one of the largest costs that a team has is research and development for the car, and that will be largely fixed irrespective of whether you run one car or two cars (e.g. wind tunnel testing a new front wing design is the same either way).

        Whilst there are increased material and staff costs for scaling up from one to two cars, that is still a comparatively small increase in cost in the grand scheme of things – your costs do not go up by a factor of two, but rather by more like 10-20% at most (probably more towards the lower end).

        In the early 2010s, when the smaller teams were pushing more strongly for cost cutting measures, I believe that Sauber produced an estimate for how much it cost a team to develop, manufacturer, transport and operate the cars, which was around $120 million (excluding driver salaries, but including all other personnel costs for the team).

        Let’s run with a figure of $120 million for now – if cutting back from two cars to one saved, say, $10 million, then you’re still only dropping the budget from $120 million to $110 million, which is a reduction of only about 8%. It saves a bit, but it doesn’t drastically reduce the cost of competing when quite a few of the costs are the same irrespective of whether one or two cars are produced.

        Symonds then noted that, although you might have slightly reduced costs, the flip side is that you then also lose some of your advertising potential. Scaling back to a single car also scales back your presence on track and in the paddock, meaning you probably have to sacrifice some sponsor revenue – on balance, Symonds reckoned that the reduction in cost is probably about the same as what you would lose in potential advertising revenue, so overall there isn’t really much of a saving to be had.

        With that in mind, since a number of those small teams are also reliant on those occasional moments of luck to score a big result that puts their name in the headlines and maybe secures a point or two, it’s probably better to have two cars since it increases the chances that at least one driver will secure that fortuitous result.

        That trend does show up when you look at the sport in the late 1980s and the early 1990s – even though the teams could run just one car, most of those backmarker teams, even when in pretty desperate financial straights, would usually still try to run two cars, because overall it didn’t really make a significant difference to the net cost of competing whether they had one car or two, and in a number of cases the teams gained more in sponsorship than they lost in increased costs.

    10. This is an awful idea that has just priced every ‘independent’ out of the game. Unless you’re a car manufacturer, a billionaire, or a frankly huge organisation there’s no way you can afford to get into F1. That’s a shame, as we’ve seen in the past manufacturers and others are far quicker to throw in the towel than an independent, which really are the origins and life of the sport.

      Also it means that really there’s no chance of any new teams for at least the next 3-5 years. Which is terrible because to be honest the grid desperately needs at least another two, maybe three teams. There’s not enough seats.

      1. Perhaps next 20 years

    11. Can’t help but feel this has pushed through by the teams, or rather their owners, to increase the value of the teams. It guarantees a return on investment if they’d ever wanted to sell their team.

      I don’t see what’s in it for Liberty to set the bar so high. So what if a USF1 kinda team announces that they intent to enter F1 but fails to do so. That’s only free headlines for F1.

      And what about Liverty helping young drivers, promoting diversity and giving the opportunity to those who deserve it: this move guarantees that there will be no more than 20 seats in the forseable future. Meanwhile F1 is already saturated with deserving drivers, and current/recent as well as young drivers miss out of getting a chance to prove themselves.

      Greedy corporate owners won this time.

    12. Has there been something like this before?

      I have a feeling that in perhaps the noughties new teams had to pay a bond to the FIA or Bernie, I don’t think it was as big as $200 million but it was a significant amount of money.

      1. Roughly 50 Million initially which you get back after a few years.
        This was dropped to allow the last 3 teams that came in before Haas.

    13. Smacks of elitism.

    14. Maybe a refundable deposit after 2 years would be reasonable, but this is just abhorrent.

    15. Seems a completely pointless decision – if they want to protect against teams getting a spot and then never turning up, they should take the £200m as a bond and once you complete the 1st season, you get the money back.

    16. Two hundred million!! What!?

    17. This guarantees that no new startup teams will show up. And come to think of it, 200M even for a large car manufacturer is not peanuts.

    18. On the face of it this seems to go against the message Liberty have been pushing. But then again we need to remember that Liberty are in this for the money, so it will be interesting to see what other changes they bring in.

    19. Bernie messed all this up back in the day. He made it nearly impossible to get into the championship for USF1. Ferrari was getting all the money for just showing up and other teams were getting hush money, I mean historical payments.. There was no budget cap in place even though there were some notion of putting one in place which Bernie used as bait to get teams to sign up to get their application money. This idea of building value in a team by artificial means is not a great business model. The market should determine what a team is worth. If you have a rundown bankrupt operation that’s what you’re going to get in market value. Paying 200 million up front in bribe money to other teams for permission to join their club is not remotely possible in the covid economy we live in now. This now makes F1 a closed market for others seeking to join. Now it’s like the NFL or Baseball, the only way in is to buy out an existing team at an exorbitant price.

    20. At a time when there are no fans in the seats, many of the existing tracks are not available, there is only one (consistently) winning team (and power unit) and the environmental lobby is getting stronger with the goal to totally eliminate F1 … this is a really stupid idea.
      Surely these folks are smart enough to identify the real problems and get on with solving them. One can only hope.

    21. They should give 200m instead to anyone brave enough to enter, after they survived their first season. We need teams, not fewer..

    22. This 200M$ reminds me the 800M$ buyout clause of Messi. Great great, but quite unlikely. I guess buying bankrupted teams is more likely then.
      Actually football and top tiers of motorsport had similar inflation in the recent years.
      I used to check transfermarkt sometimes for fun, and as I remember there was a stat expressing the annual growth of players’ estimated price (considerable players at the top few championships), and it was something like 10-20 percents yearly. Feels quite bubble-like and unsustainable in the long run.

      How likely it is to put down 200M$, what is more than what the cost cap will allow to spend as annual operational cost? This sounds bad, and only can be paid by factory backed teams, and having only factory teams and teams supplied by them and this can be quite restrictive in many aspects.

    23. What an absolutely horrendous idea

    24. While I understand there is value in having some sort of guarantee for teams to have value in order to have teams turn up with a plan, this policy shows a lack of understanding of both USF1’s entry and the point of the guarantee.

      USF1, like all the other 11 would-be new entrants to the 2010 world championship, applied because they were initially promised a cost cap of $40 m. Granted, there was reason from the start to believe that Max Moseley could not deliver his promise, but Max should have known that as well – and the rest of the FIA should have corrected him had he failed to grasp this himself. However, F1 was about to split into two and Max was facing a F1 with perhaps three teams if he didn’t get alternative teams on the grid quickly.

      Had the $40 m cap been adhered to, Virgin would most likely have been in profit every year and never needed to sell to Marussia, Stephen Fitzpatrick or anybody else, Caterham would have stood a chance of getting a credible buyer after Tony Fernandes lost interest (instead of a dodgy buyer who apparently couldn’t even get a purchase of a F1 team right, let alone anything else) and USF1… …would have failed anyway, because they got in through slick presentation, one very strong backer who “bought” the presentation and a commitment to use Cosworth engines. Hispania would likely have failed either way, but this time due to the other teams getting its sponsors, not from having an impossible sponsorship target to meet in the first place.

      Of the four 2010 teams, the two strongest were only in want of a series that kept its promises, Hispania would likely have collapsed regardless of the system and USF1 would simply have paid the transfer money across and keeled over.

      Also, the traditional way to keep random teams out of F1 is the entry bond. $48 m, returned over time as the team proved its ability to exist. This gives both team and organiser incentive to keep the team alive. Making it a charge raises suspicion that a serious entrant would be subject to trickery from the organisers, in the same way that tripped up the 2010 entrants and appears to have since been attempted with Haas. So teams that expect the organiser to conduct themselves fairly (such as most, if not all, serious teams) would be apt to forego F1 in favour of other series, where there is perception of trustworthiness.

      In short, this charge would still have random teams like USF1 showing up. It just means no serious teams in between. We’ve already had one team announce and then not make it to the grid (Panthera, who were most likely stopped at the stage when the FIA scrutinised their team plan).

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