The value of a Formula 1 entry has increased so much that some teams are refusing offers of “almost billions”, according to championship CEO Stefano Domenicali.
F1 teams have become much healthier and profitable enterprises in recent years because of a raft of changes combined with a surge in popularity for the series as a whole.
The introduction of the budget cap in 2021 and a redistribution of the prize money as part of the terms of the revised commercial deal between teams and F1 (the Concorde Agreement) are key factors in controlling costs and maximising profitability for more teams.
It has attracted several new partners and manufacturers to a range of teams, brought interested new entrants to the FIA’s door, and turned F1 into a seller’s market for arguably the first time in its history.
In 2021 MSP Sports Capital paid £185million for a stake in McLaren Racing that can grow to 33%, valuing the organisation (which also includes McLaren’s IndyCar, Formula E and Extreme E programmes) at the time at $750m – with CEO Zak Brown claiming it would exceed $1bn in five years.
Audi is buying three-quarters of Sauber for an undisclosed amount that is believed to value the team at no less than $600m and there have been rumours for months that Williams owner Dorilton Capital slapped a billion-dollar price tag on the team, while Red Bull has a similar valuation for AlphaTauri.
“Two years ago, when the new Concorde Agreement has been signed, when there was the talk about what is the value of a team to come into Formula 1, there was a number put on that was $200m, which seems unreachable,” F1 CEO and chairman Domenicali has said on F1’s official podcast, released this Wednesday.
“There were teams in the past that were sold for £1. Now, the market is offering almost billions to teams. And they are refusing that.
“Can you imagine that?”
Domenicali, who was speaking in the context of how important it is in his role to treat all 10 teams equally, said that the shift in valuation puts F1’s recent growth into perspective.
Since Liberty Media bought the rights to F1 there has been a huge emphasis on turning F1’s smaller teams into healthier, more competitive entities.
The growth of the so-called ‘franchise system’ accelerated when the COVID-19 pandemic struck in 2020 and F1’s stakeholders made a concerted effort to distribute revenues more fairly, while the increasing popularity of things like the Netflix Drive to Survive docu-series made all teams more appealing to new partners.
Domenicali said that F1 can only grow if the majority of the teams grow too, as “the more you are able to have a competitive field, the more you may have interesting races, the more you can create interest in the sport”.
“We are building important structures, important dynamics of which the more everyone is growing, the better and the stronger the business platform is that we are all working in,” he said.
Domenicali argued that while the growth of the 10 teams has been impressive financially it will take longer to manifest itself in F1’s primary goal, which is for more teams to fight at the front of the grid consistently.
He also said he believes the existing teams should be rewarded for investing in F1 up to now, which is partly why he personally is not in favour of expanding the grid at the moment.
“I think that 10 teams are more than enough to create the show, or the business and the attention that we want to see on the track,” he said.
“There is an evaluation going on today that involves the FIA and us to make the right call for the future. And this is something that is also connected to the future discussion that will happen with the renewal of the Concorde Agreement.
“We need to remember that this expires in 2025, so there is still a long time to go.
“But it’s an evaluation that we need to take, considering what I said, where in the past there were teams that were coming in, getting out with zero value, and now the teams are stable, very profitable, and very strong in terms of technical capability to be competitive on the track.
“Therefore the right answer is that in the next months it will be a very important point of discussion that we need to take.
“Do we need to stay with 10, do we need to have more teams, or can we give the exemption to future possible teams that can be very strong to join?
“These are all topics that will be part of the discussion for the future.”
Keyword: F1 team owners refusing buy-in offers of ‘almost billions’