During his first press call since taking over as Formula 1’s new CEO, Stefano Domenicali confirmed that the $200 million (£146m) ‘anti-dilution fee’ payable by new teams could be waived in certain situations.
Speaking in response to a question from RaceFans, Domenicali indicated a waiver could be applied in “cases that need to go deeper into the discussion without that money.”The fee, first revealed by RaceFans in September 2019, is designed to compensate existing teams for losses of earnings under the sport’s new revenue structure which rewards all teams, rather than only those that place in the top 10 for at least two years out of three. New entrants would take team tally beyond 10 and under the revised rules all teams receive pay-outs – potentially reducing individual teams’ earnings by 9% (11 teams) and 16% (12).
However Domenicali, who was Ferrari’s team boss from 2007 to early 2014, defended the clause contained in the 2021-25 Concorde Agreement, the covenant which governs F1’s commercial and regulatory obligations.
“The Concorde Agreement was a massive step because I knew about the difficulties of finding the right agreement that was good for everyone,” he told a select media contingent. “If you look at that amount of money [it] is really the value of the franchise of a team being able to compete. That was the thinking behind it”
The fee is known to have complicated the plans of numerous candidate teams, including Euro-Asian outfit Panthera, who are now investigating alternatives rather than pay a one-time fee that both heavily impacts on their cash flow during the crucial early stages, and indirectly strengthens the opposition.
“We welcome Stefano’s comments,” Panthera co-founder Benjamin Durand told RaceFans, “but we need to understand under which circumstances the fee could be waived. We are currently investigating other options, including investments in existing teams. This could alter that.”
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Domenicali added that, despite the challenging times faced by F1 due to the Covid-19 pandemic, F1 has received a number of new team requests.
“We are receiving a lot of interest from OEMs [original equipment manufacturers] who want to understand the future of Formula 1,” he said. “We are receiving – it seems strange from outside, but I’m very happy for that – some new requests for teams or other organisations that want to see if there is a possibility to invest in Formula 1.
“These are a sign that the foundation and ideas we have on the table are good for the benefit of a positive future for Formula 1.”
However Domenicali, who returned to F1 from a stint as CEO of Lamborghini after joining its parent VW Group with a specific brief to evaluate an F1 entry, admitted it is unlikely any additional teams or engine suppliers will join F1 “within two [or] three years” given sweeping new technical regulations are due to come into effect after this season.
Thus, any OEMs will be more inclined to wait until timelines for a subsequent set of regulations is published, currently slated for either 2025 or 2026.
“We are trying to put in place ideas that will be very attractive for new OEMs to be part of the business,” he explained, adding that costs of initial investment plus annual budgets would need to “make it attractive for any [incoming] OEM to either to produce an engine or to be part of an engine-plus-chassis production. So the cost will be the big equation on which we need to start the discussion.
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“That area is not [currently governed] by any kind of cost cap, so it’s one area we need to be very aggressive. Once we have more details about the discussions, these will be shared. Of course, we need to keep the attractiveness [of F1] for OEMs.”
Domenicali believes that full electrification “is not the only way for the [automotive] future. Therefore, the hybridisation we want to offer for the future must be the right platform on which they can present their product, they can invest and they can use the product they have in the smartest way possible. So, hybrid will be a diversified platform on which they can invest and promote the efficiency also of their power train.
“Carbon neutrality is the other element that is at the centre of our discussion. Eco-fuel, organic fuel, these discussions are at the centre of the equation. And the good thing is that all the [current engine suppliers], all the [current] teams, share this view together.
“I’m positive that we are attacking the right points, which will be fundamental to keep the interest on our platform also from the technological point of view. We need to ensure that we look ahead in order to keep Formula 1 as the pinnacle of motorsport, as we always said, in terms of technological challenges.”
Engine supplier Honda will leave F1 at the end of the year – citing costs of electrification – which leaves just three engine suppliers to service the current 20-car grid unless both Red Bull teams persuade the sport to adopt an engine freeze to enable them to continue using Honda power units. The energy drinks company does not have the expertise or budgets to develop these complex engines, hence their call for a freeze.
As outlined in this week’s analysis of F1’s current power unit wrangle, a Formula 1 Commission meeting – Domenicali’s first in the hot seat, although he was previously Ferrari’s delegate – is scheduled for February 11th. Given the breadth of items to be discussed, the summit attended by the FIA, F1 and all teams will prove crucial to F1’s future: short-, medium- and long-term.
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2021 F1 season
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ColdFly (@)
6th February 2021, 8:48
Introducing the 200M franchise fee is one of the smartest things F1 has done to increase its perceived value.
Indicating you are flexible on that is a stupid move by the new CEO.
Don’t cheapen your product but make sure you start delivering against the price you put on it.
Pironi the Provocateur (@pironitheprovocateur)
6th February 2021, 9:04
It’s a silly monopolistic move with no added value that’s got a potential to make the sport a closed playground with no relevance.
ColdFly (@)
6th February 2021, 9:40
Nothing monopolistic about F1, just exclusive. Many other alternatives for racing and sports advertising.
And 200M (extra) is not big an investment to become part of this exclusive global opportunity.
All other exclusive items (art, real estate, classic cars, etc) are only increasing in value, even (more so) in these times.
S
6th February 2021, 9:49
So exclusive that I’m willing to bet that nobody new will join until they remove it.
Unless there are exceptions, of course… ;)
Sacha Gortchakoff (@gosac)
6th February 2021, 11:47
*support*
The Dolphins
7th February 2021, 16:31
If they really wanted to make it exclusive they wouldn’t even put a price tag on it. They would go as far as to say, “we don’t have plans of expanding the grid in the near term” and once they get a few interested parties they would announce, “we are open to letting one team join” and auction off the entry.
Zink
8th February 2021, 23:19
For the time the contract between Liberty and FIA is running F1 is THE ONE AND ONLY major single seater world championship with FIA approval. Therefore what Liberty/F1 got/is is a monopoly.
Sensord4notbeingafanboi (@peartree)
7th February 2021, 18:11
It is a move that adds value to current teams it ensures current teams have a way out of f1 if struggling financially.
JackFlash67
6th February 2021, 9:18
Yep. This.
S
6th February 2021, 9:19
I think introducing it in the first place was the most ridiculous move they could make.
Take the most expensive sport in the world with the slimmest chances of success for a new entrant, and then add an extra $200m fee on top that acts purely as a sweetener for your competitors…. It’s madness and makes no long-term business sense at all – except for the existing teams, of course.
If they wanted to scare new entrants away, they couldn’t have come up with a better solution.
ColdFly (@)
6th February 2021, 9:49
Read my reply about exclusivity above.
And there is a lot of interest to enter. I’m working with investors to find interesting opportunities (we even looked at F1), and $200M is not a big inhibitor, as long as there are some safeguards on keeping and increasing the value over time. Annual returns are no issue (negative interest) as long as it doesn’t bleed cash. Hence the importance of the budget cap.
S
6th February 2021, 10:10
We are always being told of the long list of new teams ready to enter F1, but where are they?
The only name that keeps popping up since Haas entered in 2016 is Panthera, and they publicly baulked at this additional payment.
ColdFly (@)
6th February 2021, 10:48
They’re not entering because F1 hasn’t delivered on a sustainable business model for the teams yet (I.e. budget cap and fair distribution of monies) and since they are wavering in important areas. Nobody will pay $200M knowing that the CEO leaves the door open for others to enter without paying.
S
6th February 2021, 11:21
They aren’t going to pay $200m when they could have done it earlier without the $200m fee either.
$200m is effectively 12-18 months worth of budget.
If they had the money and were really willing to enter F1, they should’ve put in their bid to be on the grid in 2021, saved themselves $200m and still had a $199m asset to sell once this anti-competition fee is introduced.
Robbie (@robbie)
6th February 2021, 15:03
@coldfly I absolutely hear you on your perceived value point, but as we see from the article this might only be waved in ‘certain situations’ and I took that to mean for example if an entity were to buy into an existing team, let’s say with enough investment that they are even changing the name and considered a new team on paper, but in fact it has really just been a takeover, then they may not have to pay the same amount as a wholly new entrant to F1. A wholly new entrant would be diluting the prize money pool such that the existing teams would want compensation for that, whereas a team being taken over would not be doing that as they haven’t added a team to the grid, just retained one.
As to the 200m, yeah I’m with you there and it doesn’t shock nor dismay me. This makes me think of the philosophy BE had which was one of the things I agreed with, that being…You want to be in F1? Ok then step up and prove to us you deserve to be there and why. Come fully prepared financially and with infrastructure, because this is the pinnacle. Don’t think you’re going to enter the pinnacle on a shoestring budget and immediately start holding your hand out for help. Come prepared to sustain yourself and grow yourself into something competitive. To me that’s the exclusivity of which you speak, and yes I agree that is important.
ColdFly (@)
6th February 2021, 15:45
You don’t have to pay the $200M when taking over an existing team (as a going concern). That’s already included in the agreement between the teams and FOM.
@Robbie
I personally think FOM is in discussion with a PU manufacturer to enter the sport (and maybe accomodate RBR), and they want to lure them by offering an entry ‘for free’.
But that is still wrong IMO. As soon as you show you are not willing to defend the value of an entry to one, then other (serious) investors will be scared off.
They can offer to ‘finance’ the $200M by allowing a repayment over 10years deducted from the price money, or the could even offer to pay a new PU entrant independent if they bring in a team. But you should never offer to discount an exclusive scarce product. Just work on the product so investors can see the value and remove the uncertainties (annual cash drain, and risk of others to buy the same product cheaper later on).
Robbie (@robbie)
6th February 2021, 16:32
@coldfly If it is already written into the agreement that taking over an existing team waives the $200m fee, then I can’t think of an instance when an entity should have this waived otherwise. Although…see below…
As to your theory of a pu maker being wooed, I wouldn’t have thought a new pu maker would have to pony up 200m as they are not entering a wholly new team but just supplying pus. Why would they have to pay what a new entrant would have to pay, when they haven’t diluted the prize money pool by putting a 21st and 22nd car on the grid?
Now if a new entity wanted to come in with a team of their own and 2 cars added to the grid, but also were now using their own pus and supplying their pus to another team or two, then I can see where they have added something extra to F1, would not be just there diluting the prize money, and in which case I can see the 200m being waived or certainly reduced some in order to entice them given they would be making up another pu manufacture whose pus will be another option for teams going forward…even other potential new entrants. So perhaps in SD’s eyes there’s a difference between an entity coming in and needing someone’s pu vs an entity coming in with new pus that other teams could use too. But I certainly can’t see why a new entity that is solely a new pu maker supplying another option to the teams would need to pay 200m to do that.
Sacha Gortchakoff (@gosac)
6th February 2021, 11:48
*support*
Sacha Gortchakoff (@gosac)
6th February 2021, 11:53
if only ONE teams drops out, they are facing a HUGE problem.
When applicants don’t line up (which was noct the case in the last decade), then I would not install an extra-barrier.
When too many stakeholders have a say — and too many of them have to obey the principle of Minimisation (fear of risk), instead of pure sportsmanship / MAXIMISATION …
Alianora La Canta (@alianora-la-canta)
6th February 2021, 13:18
@coldfly I think Stefano has discovered that people simply can’t afford to pay the anti-dilution fee, at which point the value it delivers is irrelevant.
Euro Brun (@eurobrun)
6th February 2021, 9:22
I presume it will be waived for any manufacturer proposing to become an engine supplier, and probably any other genuinely factory backed manufacturer that is not bringing an engine.
It would be nice to see it also waived to any F2 constructor who has won a drivers or teams championship in the last 5 years. It would still be a massive step up, but at least they would have a motorsport background, rather than a whole new team setup by randoms.
Sacha Gortchakoff (@gosac)
6th February 2021, 12:35
full support, Euro Brun ! [cool name — best Group C squad aside of the Porsche fatcory team]
Would be cool if the best F2-teams would have an outsight of stepping up.
(Something like the best team from the last 5 years being donated machinery + time in windtunnel and for CFD. And an old chassis. Anything would be better than nothing, if you wanna help something.)
anon
6th February 2021, 14:20
@eurobrun as Dieter has commented before though, whilst you use the term “Formula 2 constructor“, the teams in Formula 2 are not independent constructors – they run cars produced out of house by other companies, and lack both the manufacturing capacity and technical knowledge to be able to develop a car in house without having to invest significantly.
It’s not to say that it couldn’t be done, but I am not sure if there are many teams that would be capable of doing so and would want to do so – ART Grand Prix is the only team that has put together a credible bid in the past, but even then they dropped the idea.
Not George
6th February 2021, 9:49
Can we expect a Renault version of the “Haas model” shortly?
Gusmaia
6th February 2021, 12:48
If 2022 didnt bring victories – or at least frequent podia – to Renault, I will be surprise they keep a team after 2025.
Retired (@jeff1s)
6th February 2021, 9:57
Nobody new wants to enter our sport so let’s make ‘nobody new’ pay 200M to finish in 21st position.
Clever. Very clever.
S
6th February 2021, 10:12
Does that make it a success, or a failure?
Sacha Gortchakoff (@gosac)
6th February 2021, 13:10
:-)
Sacha Gortchakoff (@gosac)
6th February 2021, 13:09
(so enjoyable to follow you folks)
Napier Railton (@napierrailton)
6th February 2021, 10:41
This is good news, more teams would be better.
Simple fact here, more cars = more action!
Jere (@jerejj)
6th February 2021, 11:46
@napierrailton More doesn’t necessarily always mean more action, nor even a more competitive field as 2010-2012 backmarkers illustrate.
t1redmonkey (@t1redmonkey)
6th February 2021, 12:08
It was pretty bad how uncompetitive some of those teams were yes, but it did at least give additional drivers more of a shop window and a training ground, since other teams were able to get a better gauge of who could take the next step up (e.g. Riccardo and Bianchi).
You always hear complaints these days over there being too many drivers and not enough cars, so having an extra team or two also allows drivers to stay ‘fresh’ rather than having to leave the grid entirely if they can’t get a full race contract (like Ocon a couple years ago for example, also maybe someone like Vandoorne would’ve gone to a lesser team rather than Formula E, or someone like Albon this year).
S
6th February 2021, 12:40
Those 3 teams were also lied to in regard to the state F1 would be in when they began racing.
They had their own interesting battles with each other, which is no different than what we are left with right now, except in the midfield rather than at the back.
AFAIC, they had earned a place in F1 and they would possibly be in a better place now if F1 hadn’t screwed them over.
Apart from the fact that they provided additional seats for new (and not so new) drivers, there are many viewers who prefer the smaller and less successful teams and they did bring their own followers along with them. Just as was the case with other smaller teams such as Minardi, Jordan, Arrows etc. before them.
Sacha Gortchakoff (@gosac)
6th February 2021, 13:19
Yes, and the underlying problem of dying small teams before that were not due to stupid people at these teams, but came from an awfully unsportive distribution-model of the prize pot.
In a perfect sport, everybody is being supported / funded in the same way, at least prize-money-wise.
Addions via extra income from sponsoring & merchandising for the winners is totally fine. Whereat a hefty 180m cheque for Ferrari in comparison to a 40m for P10 was the opposite of a smart move. And Bernie knows it, admitted this major fault.
anon
6th February 2021, 14:37
S, some of those teams were not exactly in the best state even then – when Kolles was placed in charge of HRT, he made it clear that Campos was completely and utterly out of his depth when it came to running an F1 team and, even if the lower budget had come in, Campos had nothing beyond his entry rights and would have folded pretty much immediately. There’s a good reason why Campos was bought out and booted out…
StephenH
6th February 2021, 10:47
More teams would be nice but more urgently Formula One needs more power unit suppliers.
Balue (@balue)
6th February 2021, 12:00
A bit off topic, but I wonder what Porsche’s position as an engine supplier is now. They were very close to join before with practically an engine ready to go, but I believe pulled at the last minute (VW emission cheating fine?).
anon
6th February 2021, 14:56
@balue by the sounds of things, whilst Porsche did have an operational prototype, it wasn’t “practically ready to go”.
Porsche’s racing operations had designed a V6 engine for the World Endurance Championship, but then the senior management decided to withdraw from that series in 2017. Porsche’s senior management then decided to test whether the engine could be downsized to meet F1’s engine regulations, and set a small development team to work on that (out of the original team of 40 developing the engine for the WEC, it seems around 20-25 continued working on the F1 spin off engine in 2017).
However, it is worth noting that the engine Porsche tested wouldn’t have complied with the current regulations. There were a few technical working groups back in 2017 looking at possible options for the engines, one of which would have seen the MGU-H deleted – and, since the WEC banned the sort of MGU-H that is used in F1, the engine that Porsche developed for the WEC wasn’t designed with it in mind.
Porsche seem to have decided that it was worth spending a bit of money on bench testing the spin off engine as an engineering exercise to see what they might be able to do if they redeveloped that engine for F1 and if F1 dropped the MGU-H requirement. The fact that Porsche cut the original project team in half when it came to converting that engine over to F1 use suggests it wasn’t a high level priority, and more of a technical evaluation.
The idea for dropping the MGU-H never came to anything, given that the current F1 manufacturers – Honda particularly – complained about the idea of dropping it. With that, it seems Porsche decided that it wasn’t worth spending anything further and they stopped the project.
Balue (@balue)
6th February 2021, 20:43
Ok, but with an ICE already built that’s quite close to ready in my book. https://f1i.com/news/365099-porsche-reveals-just-how-close-it-came-to-entering-f1.html At least it was for Honda.. ;)
anon
7th February 2021, 21:49
@balue the impression I have had was that it was more like Cosworth’s efforts with the V6 engine they developed at the start of the current engine cycle and undertook limited bench testing on, or maybe akin to Honda’s RC100.
In other words, it was a development engine intended to gather information about the technical challenges associated with the current rule set, but an exercise that was limited in scale and not intended to go into full production (i.e. it was only ever intended for internal development).
Sacha Gortchakoff (@gosac)
6th February 2021, 13:25
Porsche cancels F-e and opted for the cheapier, standardised class in WEC / IMSA / Le Mans.
Sounds as they would follow the usual route of corporate “nothing can be cheap enough”.
(I hope F1 did everything possible to lure them in. But if you have to consider the votes of Daimler, Renault, Ferrari … unlikely that they welcome Porsche … another reason why democracy does not work in sports …)
H67
6th February 2021, 14:43
This is the most confusing writing I have seen on this site in over ten years. I tried to read it but after the third attempt I just gave up. Is this a threat or a blessing?
Sometimes this kind of writing just cause people to nod off. How about a more interesting topic or rewrite it so many of us fans might begin to care??
Nick T.
7th February 2021, 3:02
A child could see F1 is facing an existential crisis if they want to rely on manufacturers competing and building PUs for a series’ whose power unit type is formally being phased out within 5-10 years by all the biggest makers in the world. In this world, a $200m entry fee is comedy. Even speculation of this or that maker exploring an entry has been basically dormant for years. 10 years ago news of a different maker poking around came every week.
Esploratore (@esploratore)
7th February 2021, 3:51
Agree, looks like almost everyone is against the 200 mil entry fee on here.
S
7th February 2021, 8:42
F1 should be paying new teams/manufacturers $200m to enter.
Even then, very few would take the offer up. F1 simply isn’t attractive any more.
anon
7th February 2021, 21:54
S, that proposal makes it sound like you’ve created the motorsport equivalent of the central plot line of “The Producers” though, where it could actually be more profitable to put in the minimum effort required, let the team fail at the end of the season and pocket the difference between the $200 million payout and your initial spending.