Honda website
Honda website

JANUARY 18, 2002

Does the Formula 1 money supply need to be changed?

THE financial problems which have hit Prost Grand Prix and which appear to be threatening one or two other F1 teams have revived debates about whether the financial system of the sport should be changed to help the smaller teams survive. At the moment the teams get about half the revenues generated from the sale of TV rights. The Formula One group of companies, owned by the Kirch Group, gets most of the rest although the Ecclestone family keeps about 25% of that money.

The teams divide up the money using a system that favors those who score the best results. As an incentive scheme is a good idea but in effect it means that the strong teams are made stronger and the weak get weaker. Having said that, in the overall scheme of things, the money raised from TV sales does not amount to a huge amount, the general consensus being that teams get around 15% of the their budgets from this source of income.

Several small teams argue that it does not make sense to give the money raised to the people who need it least and that it would be better to give everyone an equal split of the money. This would have the effect of giving the teams at the back of the grid around $10m more than they get at the moment. This would be very helpful. In addition the smaller teams argue that if car manufacturers want to compete in F1 they should be made to supply a minimum of two teams for free. This would increase the costs for the manufacturers but would mean that the small teams would not have to scrape around to pay more than $20m a year for engines. This would enable them to operate on much more sensible budgets and would mean that money could be spent on development which would make them more competitive.

The change in the distribution of money would not have any effect on the Kirch Group but would hurt the big teams. The idea of free engine supply would also hit the budgets of the big organizations (notably Ferrari which raises about $40m from its deals with Sauber and Prost). With the sport now having seven manufacturers involved (plus Asiatech) there would plenty of engines to go around and perhaps a little bit spice in the racing...

Such ideas are good for the overall health of the sport but convincing the big players to care about the little teams is not an easy thing to do. The big teams argue that they need money as much as anyone and will only be worried about the health of the sport if a few more of the smaller teams disappear.

That could happen...