As this is written, less than 18 months remain before Formula 1’s total regulatory reset ahead of the sport’s ‘new era’ under Liberty Media. Not only are the technical, power unit and sporting regulations coming in for swingeing changes in 2021, but the sport’s revenue distribution structure and governance procedure also being reviewed.
Add to this the introduction of the much-vaunted, long-promised financial regulations (aka a cost cap), and the sport faces arguably the most comprehensive set of year-on-year rule changes in its 70-year history – all aimed at reducing costs while spicing up the spectacle with closer racing.
True, an enormous amount of time, expense and energy has been invested in aerodynamic research by Liberty, with a number of teams providing additional input and data via studies undertaken outside of their current wind tunnel and CFD allocations, while Pirelli will soon commence testing of its 18-inch tyres. The power unit regulations were largely agreed last July, so are at least 90 per cent there.
However, the process has been fraught and did not get off to the best of starts, with shuttle diplomacy by bigwigs in Montreal culminating in a four-month delay to the end of October rather than inflicting incomplete technical regulations on the sport by adhering to the 30 June deadline as prescribed by the FIA’s International Sporting Code.
In terms of the ISC such a delay required unanimous agreement from all teams, which in turn provided the independent teams with the leverage required to insist that all parties waived their rights to challenge the current cost cap level of $175m, and, crucially, the list of agreed exclusions as outlined previously.
In addition, the regulations provide for aggregate capital expenditure limits of $36m the first three years under the cap, and indexed adjustment thereafter. Consider that it pans out at an average of $3m per month, then wonder how many independent teams can afford those sums, which amount to over $180m over the five-year stability period…
Ironically, though, the provisions of Clause 18.2.2 of the ISC relate only to technical regulations, meaning the sporting and financial regulations are governed by 18.2.3, which provides for deadlines of 20 days prior to entries closing – generally end-November for Formula 1. Thus, it seems the major teams were duped into granting the deadline concessions for regulations not yet due…
Still, fans can only hope that the additional time is spent wisely, for numerous drivers have suggested that this year’s aerodynamic changes, introduced as precursor to 2021 designs, have hardly – if at all – aided overtaking. While it is all very well to point to the scintillating race that was the Austrian Grand Prix, the race was an exception, not an example, and a number of factors came together to deliver such a fest.
The issues currently facing F1 have not so much been created by poorly-framed regulations, but rather by a convoluted governance process that makes change virtually impossible to effect unless it favours the major teams. Worse, short-term implementation requires unanimous agreement at F1 Commission level before potential changes even reach the FIA World Motorsport Council for ratification. Herding 10 stray cats seems decidedly easier.
F1 has suffered from an inability to react speedily and decisively where necessary, in turn creating knock-on effects all the way down the line which ultimately manifest themselves on-track. These issues were then compounded by an inequitable revenue structure that paid, for example, McLaren 33 per cent more prize money for placing ninth than Renault received for fourth!
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“That’s why we are so keen and loud about securing things like more equitable prize fund distribution, and a budget cap,” said the French team’s managing director recently.
“Those two things, we believe, in the medium to long term are what is going to improve Formula One in terms of overall competitiveness of the grid. 2021 change of technical regulations: for me, it’s a different story. That why the focus, as far as we’re concerned, is more on the financial side.”
In fact, so lop-sided is the 2013-20 revenue structure that was inflicted on the sport by CVC that Ferrari could retire both cars at the end of the first lap of every grand prix between 2013 and 2020, yet still receive greater shares of F1’s revenues than would an independent team winning both titles for eight years consecutively. Any wonder, then, that F1 finds itself in its current state?
Thus F1’s post-2020 priority should not be primarily focussed on the technical or sporting regulations, but to ensure that F1’s regulatory and revenue frameworks are fit for purpose, with last-named comprising not only more equitable prize money schedules, but also enforceable financial regulations that not only restrict spend to manageable levels, but enable transgressors to be swiftly dealt with in the event of breaches.
After all, effective regulatory processes would enable any technical or sporting shortcomings to be rapidly identified and corrected, but no amount of fancy research and hand-wringing will achieve the same objective if necessary rule changes are bogged down by red tape and exclusion of half the grid from the process, as has been the case since 2013.
All forms of non-performance-related bonuses – whether the regulations permit these to be spent directly on car performance or not – ultimately defeat the objective of the 2021-on regulations, namely to foster close racing. Equally, in an activity in which revenues and performance are directly linked, such payments goes against the spirit of equal and fair competition.
It cannot be coincidental that since the bonus payment structure came into effect in 2014, all races – all 100+ of them – have been won by the three teams who benefit the most, namely Ferrari, Mercedes and Red Bull Racing.
Thus it makes little or no sense cap costs, then pay a select few – or even one team – a form of bonus that is used to procure the services of top drivers or acquire cutting-edge facilities – both of which are excluded from the cost cap, but ultimately provide inherent performance advantages that the rest of the grid cannot afford? How can drivers such as Lewis Hamilton or Max Verstappen not be performance differentiators?
It is, after all, one thing to procure sponsorship through sweat; another entirely to receive ‘heritage’ payments of up to $50m per annum – and yet that is on the cards, for Ferrari at least. Ditto the Scuderia’s long-standing veto: what sense in totally revamping the post-2020 governance process while granting one team a veto right, even if diluted from its current form?
There are fears amongst independent team bosses that ‘alliance building’ amongst groups of teams – such as, say, Ferrari/Haas and Sauber, Mercedes/Racing Point and Red Bull/Toro Rosso – could leave some out in the cold, particularly as such alliances could mix and match unlisted performance-differentiating parts that demand extensive development.
While the Financial Regulations make provision for inter-team transaction to be reported and controlled, these calculations do not take into account the manpower and resource time to develop such items, thus freeing the other alliance members to concentrate on performance development.
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That said, the proposed (note) governance process has been vastly simplified by scrapping the first link in the chain, namely the so-called Strategy Group – a body that did little in the way strategising – and replacing both it and the unwieldy Formula 1 Commission with a single, streamlined decision-taking body also known as the F1 Commission. Effectively there will be a single voting level below the FIA World Motorsport Council.
Under the proposal the F1 Commission will be cut back from 26 current members, consist only of the teams with a vote each, and the FIA and Liberty, each with a block of ten votes – thus 30 votes total. An exception will be made for power unit regulations changes, when each of the engine suppliers will have a vote in addition to the main voting bloc, whether they are team-owned or not.
Under the proposals, a simple/super majority (83/93 per cent respectively) will apply for changes before/after 30 April for the following season, with unanimity required for in-season changes except for safety-related issues, which the FIA may impose without the need for a vote. This contrasts sharply with the current 70%/unanimity structure.
However, the revision means that race promoters, the tyre supplier, technical partners and sponsors will no longer be represented on the Commission, although they will be able to voice their opinions and provide input on matters that pertain to them via a series of working committees.
While this is undoubtedly a step in the right directions – in the past race promoters voted, for example, on wing endplate changes, while tyre suppliers had a say in fuel specifications amendments – the mere fact that teams collectively have input equal to that of the governing body or commercial rights holder means the process could potentially still bog down. Not to the same degree as previously, but still..
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The big question, then, is: Should teams have votes on regulatory matters beyond providing input? Where the FIA and Liberty each have a single objective – respectively to administer/regulate motor racing’s premier series safely and equitably, and generate profit through staging a world-class motor racing spectacle – teams have their own agendas and reasons for being on the grid, being dictated by the disparate objectives of their owners.
“Trying to get consensus between teams that have got varying objectives, different set-ups, is going to be impossible,” Red Bull racing boss Christian Horner said even before the (ultimately delayed) draft package was presented in June.
“So it’s down to the commercial rights holder and the FIA to get together, come up with a set of regulations — what is the financial framework, what is the distribution that they want to have — put it on the table and it’s down to the teams whether they want to sign up to that or not.”
In contrast with likes of Lewis Hamilton and Nico Hulkenberg, who insists that drivers should be consulted on regulations changes, Max Verstappen echoed his team boss’s sentiments of the FIA/Liberty dictating the rules.
“I guess [the solution] is to find a way where not every team starts speaking for their own advantage,” said Verstappen during the Austrian Grand Prix. “Because at the end of the day, even with new rules coming at the moment, everybody is just speaking for their own advantage.
“Maybe it’s just better to leave out all the teams from the discussions and just say these are the rules and you deal with it.”
Let us consider the implications of team involvement, using 2021, F1’s first ‘new era’ season, as example: After a handful of races rule changes are deemed necessary or desirable for whatever reasons, but the 30 April deadline for 2022 has passed. Certain teams believe change could jeopardise them, so hold F1 to ransom not only for the rest of 2021, but 2022 as well. Sound familiar?
True, team powers are substantially reduced under the revised governance structure – currently the Strategy Group operates to a 50% +1 voting structure, and the F1 Commission as per above – but given their vastly differing business models and objectives, teams have historically caused ‘drag’ in the decision-taking process.
During its pre-CVC days F1 operated under a ‘benevolent’ dictatorship, so why not return to such a system rather than continue with a democratic structure, albeit much simplified, that arguably led F1 up its current creek? Sure, there is a chance that one or teams will threaten to leave, but ultimately F1 will be better off than being held to regulatory ransom. Now more than ever before, is the time for Liberty to display courage.
That, in a nutshell, is the singular challenge facing Liberty as it squares up for the post-2020 era, the first for which F1’s commercial rights holder has direct responsibility: While the proposed regulations and processes are marked improvements on those it inherited from CVC, there are justified fears within the paddock that they simply do not go far enough to correct the myriad imbalances under which F1 currently labours.
The sport has four months to refine its proposals, and for the sake of F1 and its millions of fans, one can only hope that time is spent wisely.
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