What does it take to enter a new team into F1?
So let’s picture the scene! You’re a billionaire, probably with more money than sense, and you want to start a F1 team and join the current grid! Sounds great! But there’s going to be some challenges that come with that. Allow us to explain…
It certainly isn’t the actual rulebook that’s the problem here. As it stands in 2023, F1’s grid can be a maximum of 24 cars on race day, and because 1-car teams aren’t allowed in F1 at present, we could in theory have 12 teams take the grid for a race start. This used to happen a lot in the 80’s and 90’s, with the field being thinned down to 26 via pre-qualifying or the 107% rule, which is still in F1 today that can remove you from the grid if you’re more than 7% slower than the fastest time, depending on practise times and the discretion of the stewards.
Good news though new team owner, the sport’s governing body wants to add more teams! The last time the sport encouraged a big expansion was the 2010 season when three new teams came in – Lotus, Hispania and Virgin. They were encouraged to enter from the FIA with $10m dollars of financial support and the promise of a budget cap to help manage costs! The bad news was it never materialised as the potential regulation change led to massive political infighting and nearly led to a breakaway series! With poor results and a lack of long-term financial backing, all three teams would eventually fold by the end of 2016.
But that’s not a concern to you rich person watching this video, you have all the cash you need to start an F1 team and you’re even prepared to lose some to make it happen! Awesome! But there’s another problem… the sport makes it very difficult for new teams to enter. (Hi Andretti!)
First, you have to be approved by the FIA. Every few years they’ll open a formal process for new teams to apply. You’ll need to hand over $300,000 upfront just for the FIA to consider your application, and then they’ll look through it rigorously to see how it holds up. You’ll likely need to have the foundations of your team set, like having a firm business plan, confirm where your funding’s coming from, have a base of operations being prepared, how many staff are you hiring… that kind of thing.
So good news, the FIA has looked at your business plan, and they like it! They’ve given you their approval to join the grid in a few years time, excellent! But sadly there’s one more problem… you have to also get the sport’s commercial wing onboard too. And Formula One Management generally aren’t keen to expand their grid. Here’s why.
For the sport to avoid more embarrassment of a team entering the sport only to quickly leave if they were out of their depth, the teams came together and added an anti-dilution clause into the sport’s Concorde Agreement in 2020. This meant that any new team to enter the sport from 2020 onwards would have to pay a one-off 200 million dollar fee, shared amongst the 10 current teams. This was seen by the teams as protecting their commercial value, as McLaren CEO Zak Brown said at the time:
“The $200m is intended to really make sure that if someone is coming into the sport that they have the wherewithal to do it, and we don’t have what we’ve historically had which is random announcements people are going to come in and then they never make it to the track.
“You would never see that, or I don’t think you’d ever see it, in other major forms of sport.”
…And it’s only going to be even harder to get into F1 in the Liberty Media-owned era of the sport.
F1 was bought by Liberty in 2017 for $4.6 billion dollars. Since then, the sport’s value according to most economists has gone up due to a popularity surge post-pandemic and through Nextflix show Drive to Survive.
Forbes recently valued F1 at $17bn, a potentially massive return on Liberty’s investment. The owners and bosses of the teams in F1 now know that their place on the grid is worth a lot more now than it was just a few years ago. With that in mind, they’re going to want to protect its value, which they think might be diluted, if your new team is going to enter the sport.
Why? Firstly, the sport’s revenue, which is partially split amongst the teams, will have their slice of the pie reduced if your new team makes it 11 teams instead of 10. And if you’re a current team boss, you probably don’t want the extra competition to hurt their own team’s chances of winning.
Liberty Media clearly prefers its own business model. It likens the 10 teams in F1 to the “franchise model” that American sports leagues have, like the NFL’s Dallas Cowboys, or the NBA’s Los Angeles Lakers. It wants to protect the teams already in F1 and make its money through them, rather than add more teams and potentially, more instability.
So yeah, see that $200m anti-dilution fee I mentioned earlier? Well, the teams think that’s now an outdated figure and are working out a new, much higher fee that covers what they think they’re worth, as well as what they think they’ll lose if your new team comes in. That new figure could end with a B, rather than an M, if you catch my drift!
So… do you still want to make an F1 team? If you do… good luck, because you’re going to be in for a fight on and off the track!
Do you think the sport should expand? And do you think it’s right that F1’s going out of its way to look after its current teams? Let us know in the comments, and if you liked the video, be sure to subscribe!