Analysis: The changes in store for F1’s prize money

2021 F1 season

Posted on

| Written by and

Tomorrow Formula 1’s 10 teams will hear the latest on Liberty Media’s plans to overhaul the championship in 2021.

For many, the mooted changes to the sport’s prize money structure will be one of the most important matters on the agenda.

It has been blamed for distorting the competition at the heart of the sport, handing vast bonuses to the biggest teams, increasing the gap between the front of the field and the back.

RaceFans has previously revealed how much prize money each F1 team is due to receive this year, based on Liberty Media’s current projections, and a new prize money structure for 2021 which Liberty Media proposed last year. How would that new structure change how much teams earn based on their latest income projections?

Which team currently gets the biggest share of F1’s prize money?

Formula 1’s prize money distribution is a major cause for concern for many teams. Looking at how the sport’s 2019 income will be shared based on where the teams finished in 2018, it’s not hard to see why.

Among the 10 teams, Ferrari claims by far the largest share, taking more than one-fifth of the pot. F1’s ‘big three’ teams – Ferrari, Mercedes and Red Bull – take more than half of the income between them.

Where teams finish in the championship only has a slight effect on how much money they receive. What really makes the difference is F1’s prize money bonuses.

Advert | Become a RaceFans supporter and go ad-free

How much difference do the bonuses make?

How much prize money each F1 team will receive to can be broken down into three categories:

  • Column one: An equal share paid to every team which finished in the top 10 in two of the previous three constructors’ championships
  • Column two: A share based on where each team finished in the previous constructors’ championship
  • Bonuses: Different bonus payments of different sizes paid to five of the 10 teams

The graph above shows how much of each team’s payments come from columns one and two, which every team can receive, and bonuses, which only some teams are currently entitled to.

The largest bonus payment, known as the Long Standing Team payment, is made to Ferrari alone. In 2019 it is estimated to be worth $73 million – more than several teams’ total payments.

See this earlier article for a detailed breakdown of each team’s bonus payments for 2019:

Advert | Become a RaceFans supporter and go ad-free

How does Liberty want to change the prize money structure?

As RaceFans revealed last year, Liberty Media presented their planned changes to F1’s prize money structure prior to the Bahrain Grand Prix. The graphs above compare the current 2019 prize money distribution and how the same income could be distributed under Liberty’s proposal for 2021.

Although the bonus structure would be largely eradicated, two other extra payments were proposed by Liberty Media last year. Each engine manufacturer would receive a $10 million bonus. Note this would include Honda, which does not have its own team. Ferrari would also receive a $40 million bonus but be required to take it as profit.

Does Liberty Media intend to stick to the changes it revealed last year or does it have further alterations to F1’s prize money structure in mind? The teams will find out tomorrow.

Video: How much prize money will each F1 team receive in 2019?

Go ad-free for just £1 per month

>> Find out more and sign up

2021 F1 season

Browse all 2021 F1 season articles

Author information

Keith Collantine
Lifelong motor sport fan Keith set up RaceFans in 2005 - when it was originally called F1 Fanatic. Having previously worked as a motoring...

Got a potential story, tip or enquiry? Find out more about RaceFans and contact us here.

48 comments on “Analysis: The changes in store for F1’s prize money”

  1. Michael Freeman
    25th March 2019, 8:47

    There appears to be $80 million that slips through the cracks in Liberty’s proposal comparing the last two charts

    1. If only that was reserved for 1-2 extra teams.
      But I’m pretty sure it’s the commission for Liberty (to pay for all the work they did to calculate this proposal).

      1. PS – part is the Ferrari bonus I guess.

    2. Chase Carey’s moustache wax bill ain’t cheap, yo…

    3. Part would indeed be that 40 million for Ferrari @coldfly, also remember another 10 millions is not in there because it would go to engine Manufacturer Honda, who is not listed amongst the teams. That still leaves a gap to wax that moustache though @joeypropane

      1. @bascb – I think you’ve nailed the reason for the gap – 40 mil for Ferrari, and 10 mil to each of the 4 PU manufacturers.

        1. Ah, right yeah, that would make sense and add up @phylyp

  2. I didnt get why Ferarri gets a 40mil bonus? I thought the whole point of the system is to remove strange bonuses ?

    1. It was meant to “sweeten the blow” of losing a lot of direct payments @maisch. It was not there in the first round of negotiations / consultation, but appeared to get Ferrari to be more likely to sign.

      1. I wonder what the other teams have to say about this, I hope they protest loudly. Because getting bonuses just because of the team name is just awful for the sport.

        1. I am sure they would object @maisch. Then again, as both Ferrari and FOM/Liberty will no doubt point out, currently Ferrari receive almost double that, so they are significantly reducing it even if not completely eliminating it.

          And in the future it will only be able to boost the companies bottom line, not go towards their F1 racing, something that also limits the competition distorting element this extra bag of money clearly is.

        2. The whole thing would shut down if Ferrari left, so all of the other teams have to be okay with their bonus.

          1. No it really wouldn’t. Ferrari are 1 team. The sport will not disappear if they spit their dummies out.

    2. It does jar somewhat with the core message. also, they’ll get $10m for being an engine supplier, though I find this idea quite reasonable given the massive investment in the new power units over the last 5 years or so. part of me does feel that ferrari is owed some kind of prestige payment but it should be nowhere near $40m. additionally, mclaren have been in the sport for nearly as long and I don’t see them getting anything near this wodge. perhaps some kind of sliding scale relating to years in the sport would be more appropriate because it would reward teams loyal to the sport (essentially, ferrari, mclaren and williams) and it might encourage teams like red bull to stay a bit longer (i think they’ll stick around but seeing as the entire venture is a big marketing exercise there are no guarantees).

      the fact the $40m bonus is required to be taken as profit is a little crumb for those hoping the new payments will encourage better competition, but it’s still somewhat bitter tasting.

    3. It’s half of what Ferrari is getting now. So they should accept it, as Ferrari is not allowed to put that money back into the team (but only use it as profit)

      Protesting too loudly will probably mean that this proposal will not be accepted and the current distribution will remain, which is a lot worse.

      1. Ferrari Racing could invest that money into Ferrari Road Cars, and then Road Cars could easily contribute a portion of their budget to the racing team.

        Hypothetically, of course. :)

  3. How long did the teams had to say No Deal to upcoming offering?

    1. They should have made a TV show out of this.
      Then the jobless grid girls could have held the briefcases with the various offerings ;)
      @ruliemaulana

      1. I was picturing Theresa May and remainers, but I liked your proposal better. @coldfly

        1. I was picturing Theresa May

          @ruliemaulana – hey man, whatever floats your boat. We’re not the ones to judge ;)

  4. To provide a level development field shouldn’t Ferrari and Alfa be seen as one unit, Red Bull and Toro Rosso another?

    1. I’d rather that they keep teams at arm’s length.
      e.g. require that all you offer your ‘B-team’ should be offered to all other teams as well (similar for the PU’s).

      1. @coldfly I love this idea

    2. Ferrari and Alfa Romeo are two totally different companies, with different shareholders, albeit some common to both.

      The ‘Alfa Romeo’ you refer to is actually Sauber painted red and white and named after the car brand in exchange for money. The entrant licence is held by Sauber, not AR, and Sauber receives F1 revenues not AR.

  5. The proposal looks a lot better.
    But with the winner taking 133% more than the last team it is still a far cry from other revenue sharing systems. In the Premier league the difference between last en first is less than 60%.

    I’d rather see $750m split evenly amongst the teams, a sliding scale ($45-$0) for WCC position, plus a $25m bonus for the WCC title.
    The gaps are a bit smaller between positions, but as most of the team’s money goes to personnel, it is only fair that the variability between finishing positions is not too high.

  6. I think they should take the bonuses and give them out to the teams based on individual race and qualifying results, that way there is an incentive to always do the best possible regardless of grid penalties and the like.

    I also think that if the engine manufacturers are going to receive a share of the prize money that the teams should get their engines free of charge, because why should the teams continue to pay a lot of money for a supply of engines when the manufacturers are going to get paid directly from F1 itself. F1 surely needs to look after the smaller teams better and not keep rewarding the manufacturers like it has been up till now.

    1. rob91, I presume that the intention is to encourage additional engine manufacturers, both mainstream manufacturers and independent companies, to join.

      In the past, some independent outfits, like Cosworth, wanted to have at least some sort of guaranteed return on investment to cover their costs, given that it is likely to be difficult for them to turn a profit on engine sales alone. In that sense, I suspect that the bonus is supposed to act as an incentive to those sorts of companies, given that it offers them a way of potentially offsetting at least some of their costs against a guaranteed minimum level of income.

      Whether it will work in practise is another question, and that is something I am less sure about – not least because companies like Cosworth seem to be moving more into automotive electronics rather than engine manufacturing. Across the wider motorsport sector, the number of independent engine manufacturers has fallen – the WEC is probably one of the few areas where there are a number of independents, though even then the most successful one (Gibson) is being partially protected by the ACO mandating that all LMP2 cars must use the same standard Gibson produced engine, giving them a guaranteed workflow.

      1. Anon even though ICE are not dead* it is unlikely that anyone will be taking on the task of developing a new ICE at this point in time. There is no future in an engine that runs on fossil fuels. The majors are not investing in new ICE they’re just dressing up the old stuff. Cosworth looks to have made the right decision.

        *Before the end of the next decade car manufacturers will need to make decisions about what tech they are going to use after fossil fueled ICE, ten countries so far have made the decision to ban traditional ICE including India and China, the dominoes have started to fall.

    2. Yes they know all that but remember that they need to keep the big teams (or at least Ferrari) happy. Ferrari having a lot of fans and brand power that bring to the sport.

  7. @Keith Collantine

    Do any of the bonuses include payments for components supplied to the FIA to be used by all teams, such as Mclaren’s ECU & steering wheel display?

  8. I’ll answer that one: no, the commercial aspects of such contracts are between team and supplier, just as with Pirelli. The mere fact that a company owned by the same group as owns an F1 racing team is coincidental.

    Note: It’s not even McLaren Racing that supplies the components under FIA contract, it’s McLaren Advanced Technologies.

    1. Something that makes huge sense. Since companies like Magneti Marelli and others often have at least some kind of partnership or even shareholding from car companies (I think FIAT, who own AR who sponsor Sauber in MM’s case), it would be really hard to untie the knots if they would be included.

      For a budget cap it is far easier to count them as just money spent (with some provisions for the pricing level used in such cases)

  9. There should be only Constructor and Driver Champ bonuses of max. 25m $. Total prize money share difference should be like 200m $ for the first place in WCC and 100m $ for the last. That’s it. No pedigree or long term apperance bonuses. Teams should get money based only on their results. End of story.

    1. Yes but the whole sport collapses if Ferrari leaves, like it it not they are a big reason on why a lit of people tune in. Ferrari knows that and uses that as leverage. I don’t like it either but thats the reality.

      If they didnt, they would have gotten rid of it a long time ago.

      1. the whole sport collapses if Ferrari leaves

        You don’t know if it is true and you obviously wouldn’t have the balls to find out if it would be true, so shut up.

        1. Shut up? Such politeness, anyway it looks to me like f1 viewership is already dwindling, so letting ferrari leave sounds like a deadly blow, I guess f1 teams agree, or they would protest these bonuses.

  10. Michael (@freelittlebirds)
    25th March 2019, 12:25

    At first glance it seems to benefit the midfield. Upon closer inspection, though, it is actually pretty fair.

    The top 5 teams make 61% of the prize pool under the draft 2021 proposal – that’s just 11% over the 50% they’d be entitled to if the money was split evenly. There’s a reward for being on the podium but it’s nowhere near what it is currently where 3 teams take over 50% of the pool and 50% is left for the other 7.

    The bottom 3 teams make 21% under the new proposal. – that’s 9% short of the 30% even split so it’s lower but not terrible. The situation doesn’t change drastically for the last 2 teams although even their slices have gotten larger which will help them.. somewhat. Their problems can only be marginally helped by the proposal, they are not meant to be solved by offering unlimited access to funds for ending up last in the championship.

    The biggest changes come for the teams in P8 through P5. Their slices really increase – this should be great for the sport.

    1. Well argued @freelittlebirds, and well said

    2. Good to see it put in that perspective @freelittlebirds. And yeah, I guess for the 2 teams in the middle the biggest benefit of this is that they will have a somewhat more equal chance of fighting the top 3 since in the new proposal the 3 on top won’t be able to outspend them by as much.

  11. Would I like to see a more equitable distribution? Yes. However, I am glad to see that Liberty is finally starting to address the issue. Didn’t happen under Bernie!

  12. I had once a proposal which would be more equal. The historical payments would still be there. All teams would be eligible from second year onwards as the formula would include years competed, won WDCs and WCCs.

    I had this based on 2017 season where Ferrari would have had 29,3 million while Haas settling for 0,6 million.

    All-in-all, my format had 75% of the money being shared equally (which would award each team around 70,5 million), 12,5% historically and 12,5% by the season. For the season part team would need points to earn money, and basically every point would count.

  13. Why don’t they just split it evenly? Especially since the word sport has seemed to disappear from the vocabulary of anybody that runs F1. If it is a show pay all the entertainers the same.

    1. Yes but the whole sport collapses if Ferrari leaves, like it it not they are a big reason on why a lit of people tune in. Ferrari knows that and uses that as leverage. I don’t like it either but thats the reality.

      If they didnt, they would have gotten rid of it a long time ago.

    2. To use your entertainment example, it would be as if you are paying the all the actors the same in a movie. The bigger and more famous actors have more leverage and use it in to negotiate because they know people come to see the movie for them. Same for Ferrari.

      “Should” they get this bonus, I agree that they shouldn’t and its bad for the sport. But again that’s why its called leverage, cos they know they can cause damage if their demand aren’t met.

  14. If this much more reasonable distribution of F1’s pot is actually applied with a budget cap of $150m then this is a very positive development for the sport.

    Looking forward to seeing what Liberty’s other plans for the sport are tomorrow.

  15. So at the end of the day, Williams will still be f@$ed?

  16. F1oSaurus (@)
    26th March 2019, 5:01

    So according to this guesstimate, the only teams that truly benefit from this change are Racing Point, Haas and Renault. And it actually increases the difference among these teams’ prize money payments. Even more so to the teams lower ranked.

    Which means the backfield gets left even more behind and the midfield gets spread out further than it is now.

    So that’s a dud.

    1. Think you misread, look at the amounts: both alfa and toro rosso will get more money too!

Comments are closed.