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All 10 teams have signed the 2021 to 2025 Formula One Concorde agreement, which dictates spending caps, sporting rules and distribution of revenues.
The agreement between Formula 1, the Fédération Internationale de l’Automobile (FIA) and the racing teams was due to expire by the end of the year and marks the first one signed since Liberty Media bought the Formula 1 group, headed by chief executive and chairman, Chase Carey.
The historically confidential agreement includes a dramatically-lowered spending cap of $145 million (BD54.67 million), dropping to $135 million (BD 50.9m) by 2023.
This is supposed to level the playing field as commercial juggernauts like Mercedes can no longer hand out blank cheques for research and development. However, this is just the amount allotted to car performance and some team expenditures. It does not include driver salaries and costs, bonuses, marketing costs or the costs of the team’s three highest paid personnel.
The agreement also reportedly eliminates the unanimity requirement for rule changes. In the past, companies like Ferrari have vetoed rule changes that reduced their edge, but now, changes can happen with eight out of 10 votes.
Another notable change is the increase in entry license fees made under the preamble to increase team valuations. However, it dramatically increases the capital required to enter the race.
And finally, this agreement changes the way TV revenue and prize money is distributed. Titans like Mercedes stand to earn less as victors while others like Haas, will earn more, giving them more capital to build better teams and cars.
Both Haas and Mercedes had previously publicly wondered if rising expenditures made it worth it to compete in future years.
Carey said: “All our fans want to see closer racing, wheel to wheel action and every team having a chance to get on the podium.
“The new Concorde Agreement, in conjunction with the regulations for 2022, will put in place the foundations to make this a reality and create an environment that is both financially fairer and closes the gaps between teams on the race track.”
