F1's Unfair Prize funds, what will change?
Updated: Apr 5, 2021
Covid-19 has had sweeping effects across International Motorsport, not least upon Formula 1. The Global Pandemic has rocked the boat in such a way that the previously heavily disputed budget cap ruling, was brought swiftly into action. This came as a welcome addition to the rules of the sport moving forward, especially to the midfield runners (looking to challenge the sport's elite) and those at the back of the grid shouldering huge financial burden (the sad decline of Williams’ fortune comes to the minds of many here). The Budget Cap ruling aims to make the sport more competitive and provide financial stability for all in the sport. However, there is another avenue Formula 1 is hoping to take to better aid those who struggle to compete financially in Formula 1.
Back in May, F1’s Managing Director of Motorsports Ross Brawn, along with Liberty Media announced that there will be new Prize Fund Plans discussed to better aid parity across the paddock. For those who follow the sport closely, this is a very big deal. To understand why these talks could change F1 from top to bottom, it serves well to understand how the Prize Fund currently operates. Formula 1 generates huge revenue year on year. And this revenue is in part shared across the Teams in the Paddock in the form of a prize fund. Prize money is allocated in several ways. First off, a fixed slice of the revenue is awarded to Teams that have finished in the Top Ten of the constructor's championship in two of the past three seasons. This is then added to by a sliding scale of funds allocated to teams according to their standings the previous season. The percentage of profits received as a result of this varies hugely from top to bottom. Those at the top getting a huge slice of the profits, those at the bottom getting pennies in comparison (In 2019 Mercedes were reportedly awarded $66million for winning the Constructors Title, Williams earned $15 for finishing 10th.) There is also a series of other bonuses paid to teams due to some agreements made by teams in Previous years. Thanks to an agreement made in 2012 with Bernie Ecclestone, McLaren, Mercedes, Red Bull and Ferrari each receive a Constructors Championship Bonus on top of their standard Prize Money. Mercedes, Red Bull and Williams each receive another Bonus on top of this (these all vary in size, Williams receive the smallest Bonus of the three, no surprises there). And last of the big bonuses go to Ferrari, who receive a Long-Standing Team Bonus, which sees them receive the highest total prize money almost every year.
Not only do these agreements and rulings appear confusing and muddled, but they also represent the top-heavy nature of Formula 1’s power struggle. Even if you remove the bonuses out of the equation, there is an issue at hand. Whilst the best performing teams rightly receive the largest prize fund, they are often the teams that have the largest sponsorship revenue and the largest budget. There is also a large chasm between the funds awarded to those at the bottom and those at the top. So teams with the biggest budgets and sponsorship revenue unsurprisingly finish atop the standings and are given an even larger financial boost and those financially incapable to challenge stay that way. This first issue is the one that Ross Brawn, Chase Carey etc are looking to resolve. They aim to tighten the gap between the funds allocated to those finishing at the top, and those finishing at the bottom. So, Teams will still be rewarded on merit, but those in the mid and lower field will get a bigger cash influx to mount a better challenge the next season. It is also important to note that Formula 1 is ridiculously expensive to compete in. For those in the mid and lower field, it is always a threat that the money will run out, even without the Pandemic affecting things. Brawn has pointed out that the funds must be re-allocated in a way that benefits these teams, steers them toward profit and prevents them from dropping off of the grid.
The issue of the Bonus structure is a more murky and difficult web to untangle. Ferrari for instance is a huge attraction, they bring attention to Formula 1 in a way no other team can, with that comes the power and ability to receive their bonuses. If that bonus were to be taken away, you could expect threatening action from the Prancing Horse. The same is to be said for the likes of Mercedes and Red Bull. The ‘Power 3’ of Formula 1 were perhaps the most vocal in speaking out against the Budget Cap ruling, and it would be no surprise if they put up hurdles in the ruling of Prize Money and Bonus payments. Chase Carey of Liberty Media has not set a timeline for when the new Prize Fund Ruling will be finalised. However, these talks will shake up the Power Struggle in more ways than the Budget Cap, and prove the ability to change the pecking order, and present a profitable and sustainable solution for all teams. Written 21st July 2020 This article was written for the now defunct website Total-F1; "Dan consistently delivered high quality articles for Total F1, showing great writing ability and creativity. The articles were always delivered ahead of schedule and surpassed expectations". Connor Sutton, Chief Editor @ Total-F1