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If you’ve been following the financial side of Formula One, you may recall that Marussia had not signed a commercial agreement heading into the 2013 season. It prompted team boss John Booth to say:

“No [it’s not vital for Marussia ahead of Australia],” he added. “It’s vital for Bernie because he won’t be able to film us without it.”

Our friend, Christian Sylt, caught up with the soon-to-be 83-year-old ring leader of the world’s most advanced form of racing and discovered the reason for the lack of a commercial agreement between Marussia and Formula 1:

“they don’t have a commercial agreement because they are not in the top ten. We pay the top ten, that’s what we do. For three years we did something different because we had an agreement with Max but from now on we will pay the top ten and that is it.”

The reason given had to do with the new team entering F1 as arranged by former FIA president Max Mosley. According to Ecclestone, the commercial payout was arranged for all of the teams to help the minnows afford their involvement in the series but the escalating costs of the team compensation has prompted F1 owners to re-think that arrangement when it expired at the end of last year.

According to Sylt, the issue tied to the planned flotation of the Formula One later this year. In order to tactically position the series for an Initial Public Offering or IPO, the ownership group signed separate commercial compensation agreements with each team… each team from 1st through 10th that is. Teams outside the top 10 will no longer receive a payout or portion fo the TV revenue generated. Per the original arrangement, this would have a $10 million impact on a team like Marussia or whomever finishes last in the constructor’s championship. That’s a lot of dosh for a team struggling to stay afloat.

What kind of money are we talking about? The new arrangement has 63% of the revenue generated in F1 to be paid out to the participating teams. This equals $698.5m and will benefit the top 10 teams. This makes Caterham F1 driver Vitaly Petrov’s performance in the final race of the 2012 season such a death blow to Marussia. Petrov passed Marussia driver Charles Pic in the waning laps of the final race of the season in Brazil to snatch 10th place away from the team. As hurtful as that may be, irony would have Petrov without a ride at Caterham in 2013 and Pic moving to fill his seat.

Every single point counts in Formula One and while many suggest it is too early to institute team orders in Red Bull’s infamous Webber/Vettel saga, the reality is that it is never too early to secure points as much and frequently as possible starting at the first race of the season. While Marussia must be frustrated with the new financial arrangement, the start of the 2013 season has seen them outperforming Caterham in the first three races but the team in green have fought back and finished ahead of Marussia in the last race in Bahrain.

One wonders if Marussia or Caterham will find the courage and financial wherewithal to stay in F1 if they finish 11th and are bereft of the $10m they desperately need?

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An F1 fan since 1972, NC has spent over 25 years in the technology industry and as a CTO, he focuses on technology integration in commercial workspace design, AV systems integration, digital media strategies, technology planning, consulting, speaking, presenting, sales, content strategy, marketing and brand building.
  • the drivers seat

    It’s always the youngest that gets lost in the mix, real shame they can’t extend it 1 more place, I don’t see anymore teams lining up to join. Marussia denied a purchase at the end of last year, wonder if they are regreting that now. I think they are really on the right track so it wouldbe sad for it be all for nothing in the end.

    • tomfirth

      Agreed, Didn’t Marussia just buy its share from Lloyds bank of the team as well, so it owns something like 97.7% of the team now.

      Wonder how the company feels about that now.

      Just a couple of questions

      Does F1 still include legacy payments for its longest running teams, Ferrari, Mclaren , Williams and Red Bull ??
      I know Sauber apparently lost out on this when the team because BMW for a short while.

      Also do the teams below 10th, without Max’s plan still get logistical support instead of prize money, I know it used to happen ?

      Thanks.

  • MIE

    Well, with Williams posting a £5m loss for 2012 compared to a £7.4m profit in 2011, I don’t know how teams further back can stay in business. I can’t see Marussia’s pay drivers bringing more money than Williams’.

    However with even back of the grid teams spending close on £100m a year, the £10m from FOM doesn’t really cover much.

    • Jack Flash (Aust)

      Agreed that 10 million is not a big portion of a 100 million annual Operating Budget for an F1 team, however it is still 10% of gross.

      For any F1 team financially on the edges (like perhaps Marussia are), this 10% could be crucial to their final yearly ledger. It could be the difference between operating equality vs operating loss. It could be the 10% that breaks their financial backs.

      I know companies have been forced to wind up business because their Loans cannot be guaranteed extension with Banks any longer, purely over minimal percentage operating loss numbers. Banks/Investors get nervous when the books show someone in the ownership portfolio is going to be getting losing their capital.

      So, 10 million could be a really big deal to Marussia’s continuing viability at the years end.

      Bernie Ecclestone was’nt ever pleased with Max Mosely / FIA forcing him into the introduction of ‘new teams’ into the F1 Concorde Agreement. I suggest this is Bernie’s first opportunity to drop Max’s parting $$ millstone from F1 and his own pockets.

      Formula 1 is a corporate shark pool. Injured fur seals like HRT have already been cornered and consumed. Marussia better not bleed too much ionto the water…. else….

      ps: Does anyone know if these figures for F1/FOM/CA contracts are in UK Stg/£ or in US dollars/$ ? I thought the figures bandied around are in US$, because that is the currency basis of F1 contracts. It is possible since the FOM company is incorporated in Jersey, that it is in fact in UK £.

      • tomfirth

        Generally F1 figures in USD with FIA penalty’s handed out in Euros.

  • JakobusVdL

    So back to a 20 car grid from next year?