How Is $1.28 Billion Prize Money Distributed Amongst the David & Goliaths of F1?

Ever since Mario Andretti showed interest in floating a team of his own in F1, existing teams resisted. One of the biggest concerns that came out was the issue of dilution of prize money sharing. Among the voices of dissent were Mercedes team principal Toto Wolff and McLaren CEO Zak Brown. But how is the prize money shared after all among all the constructors? Do they all get the same amount? Let us find out.

It has been a while since Formula 1 has been operating with 10 teams competing for the championship. While the drivers on the grid have remained restricted to 20, the number of deserving candidates for those seats has risen exponentially. Even after performing exceptionally well in feeder series like F2, IndyCar, many drivers cannot land a seat in F1. Moreover, the popularity of the sport has gone up lately and many constructors want to be a part of the sport. The exorbitant participation fee and other requirements, however, act as barriers to those entries.

What is a Concorde Agreement?

The championship operates under a contract between all teams, the Formula 1 Group, and the FIA. The latest contract that came into effect from January 1, 2021, for the first time had Liberty Media as well. All of the functioning, viewership revenue, and prize money sharing comes under the Concorde Agreement.

The current Concorde Agreement is the 8th iteration that replaced the 2013 agreement. The biggest changes included the introduction of the budget cap from the 2021 season onwards and the change in the distribution of prize money. It also includes the introduction of a $200 million fee for any team that wishes to enter the championship.

This is to make sure that the existing teams, who have invested an exorbitant amount of money over the years, are compensated appropriately.

How money was shared according to the earlier Concorde Agreement?

The previous prize money-sharing model divided the pie into two columns. As per column 1, all teams got an equal amount of money, i.e., 10 percent each. Column 2, on the other hand, divided the amount according to the position teams finished in at the end of the season.

Following is the percentage each team got as per their position in the constructors’ championship before the current agreement:

• 1st position- 19 percent
• 2nd position- 16 percent
• 3rd position- 13 percent
• 4th position- 11 percent
• 5th position- 10 percent
• 6th position- 9 percent
• 7th position- 7 percent
• 8th position- 6 percent
• 9th position- 5 percent
• 10th position- 4 percent

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There were some other bonuses as well, which were mostly shared among the heritage teams and the teams finishing in the top 3.

The 2021 Concorde Agreement reduces the disparity

The 2021 agreement will stay in effect until the end of the 2025 season. The current system has significantly reduced the gap of the percentage of revenue sharing among the teams.

Following is the percentage of the pie teams enjoy as per their position in the constructors’ standings:

• 1st position- 14 percent
• 2nd position- 13.1 percent
• 3rd position- 12.20 percent
• 4th position- 11.30 percent
• 5th position- 10.40 percent
• 6th position- 9.60 percent
• 7th position- 8.70 percent
• 8th position- 7.80 percent
• 9th position- 6.90 percent
• 10th position- 6 percent (Source: The Race)

As per Daily Star, F1 generated a sum of $1.28 billion.

The bonus Ferrari gets for being the oldest F1 team

As we know, Ferrari is the oldest team in Formula 1. They have participated in every season of F1 that has ever taken place. They also have a massive fan following of a whopping 400 million. Because of this, they enjoy a special bonus and also the veto power in various decision-making issues.

They already had these powers and bonuses before the 2021 agreement. However, the bonus amount is reported to have reduced significantly. That being said, the conditions in Concorde Agreement are highly confidential, therefore, most of the attempts at assuming the actual amount earned by a team should be taken with a grain of salt.

How F1 teams reacted to the terms

The teams with lower budgets well received the new revenue-sharing model, coupled with a budget cap of $145 million in 2021 and a further $5 million reduction.

Claire Williams, who was at the helm at Williams F1 back then, said, “The agreement is a major milestone in the development of Formula 1, and also represents a significant opportunity for Williams to continue on our journey back towards the front of the grid.”

Even higher-ranked teams like McLaren were happy with the conditions. Team CEO Zak Brown explained, “A more equitable sport is better for everyone: greater balance in the sharing of revenues among all the teams and clearer, simpler governance that cuts through vested interests and puts the sport first.”

Mercedes, however, for a very long time, were averse to signing the contract. Reuters quoted Toto Wolff as saying, “We are happy with a more equitable split of the prize fund, the way success is rewarded and possible for everybody, we agreed to. We are I would say the biggest victim in terms of prize fund loss in all of that.”

“Ferrari has maintained an advantageous position. For Red Bull it balances out with Toro Rosso (their junior team). So it’s us that are hurt the most.”

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With the current regulations in place, it will be interesting to see how long Andretti’s entry in F1 gets delayed. Currently, they are firm on jumping into the pool in 2024.