Formula 1 is already lowering how much teams can spend developing their cars to win the global racing series. Now the tens of millions of dollars paid to superstar drivers like Lewis Hamilton are under scrutiny.
The Paris-based regulator Federation Internationale de l’Automobile is in talks on a possible salary cap with the F1 of Liberty Media, the teams and drivers of the sport who will return to the glamorous Monaco Grand Prix after the 2020 race is canceled due to the pandemic .
“The details of such a regulation are still in the very early stages of discussion, and no conclusions have been drawn as to the specific details or whether this is something we will pursue further,” the FIA told the Financial Times.
The discussions come after a cap on team spending was agreed last year, along with an agreement to distribute revenue more evenly. One figure discussed by race directors is $ 30 million, which is shared between two drivers each year. This is a mystery to top drivers like Hamilton whose pay exceeds this amount.
Aston Martin F1 Team Principal Otmar Szafnauer said that some form of cap “makes logical sense because you are trying to limit the money you spend on [racing] Performance and the driver is a big part of the performance ”. He suggested that teams should be flexible about paying drivers more as they cut their expenses elsewhere.
Further tightening of financial regulations would mark the next step in the transformation of F1 owned by Liberty Media, the investment vehicle of US billionaire John Malone, who acquired F1 for $ 8 billion in 2017.
Of course, when you put this on the table, the drivers react very negatively
This season is the first to feature the newly agreed cost cap of $ 145 million agreed last year, which aims to limit the extent to which Mercedes, Red Bull and Ferrari outperform their rivals in the quest for victory can.
The cap and the broader Concorde deal that governs how F1 divides revenue was agreed in 2020 after a three-year battle between Liberty Media and the teams. However, the limit, which is slated to drop another $ 10 million over the next two seasons, excludes salaries paid to drivers and top three employees who have now shifted attention.
One person close to Formula 1 said “the driving force” for the continued focus on cost control is “to balance the system [the] The best drivers could be attracted to other teams while reducing overall spending in F1. “
Zak Brown, managing director of McLaren Racing, said a cap doesn’t necessarily mean drivers’ salaries will go down. One way, he said, would be to increase the team budget limit by, say, $ 30 million to include a driver contract allowance. Teams are free to sacrifice expenses elsewhere to pay drivers more. Similar measures could be applied to salaries for top executives.
“This is something all the teams have been talking about,” said Brown. “It’s important to make sure the sport doesn’t return to its bad habits. So if you have a few key elements outside of the sports cap that are still related to the sport, we seem to have an ongoing business.”
Investors poured money into the sport last year. The Williams team changed hands and McLaren raised £ 185million from MSP Sports Capital as the pandemic disrupted the 2020 season and weighed on teams’ earnings.
McLaren Racing chief executive Zak Brown said a cap doesn’t necessarily mean drivers’ salaries will go down. © Jean-Francois Monier / AFP / Getty
However, imposing limits on driver salaries in the name of financial sustainability threatens a new rift within F1 after years of negotiating the broader cost cap. “If you put this on the table, the drivers will of course react very negatively,” said Alejandro Agag, founder of the Formula E and Extreme E electric car competitions.
Teams must weigh the need to cut costs against the risk of pushing away star drivers who attract sponsors, fans and the media.
“I’m not sure it’s fair to bring her [drivers] Damon Hill, who won the 1996 World Championship with Williams, told the FT. “A driver’s career is short.”
Hamilton, who this week dubbed F1 a “billionaire boys club” when calling on the sport to become more inclusive and accessible, raised concerns about a salary cap.
The British star, who has been the focus of seven consecutive Mercedes design competitions, will negotiate a new contract. At 36 he is in the final stages of his career.
A person close to Mercedes said an upper limit was not relevant while Hamilton, who has won seven F1 world championships with a shared record, is still racing.
Although Mercedes supports the introduction of a soft cap, team boss Toto Wolff has stated that changes should be introduced gradually from 2024 in order to avoid the loss of the “superstars” of the sport.
There is also a lot at stake for Red Bull, who are relying on 23-year-old Max Verstappen to win their first championship since 2013.
“We understand the shared responsibility to reduce costs in all areas and are part of the discussions. However, this is a decision that requires a balanced approach and an agreement by all teams that has not yet been achieved,” said Red Bull. We also need to consider the athletes involved as this affects both them and the teams directly. “
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Salary caps are complex and difficult to monitor, according to several high-ranking figures in the sport who have warned that there are many ways to circumvent the rules, such as asking sponsors to cover drivers’ salaries.
Any salary limit is complicated too, as team leaders often have duties beyond their organization’s F1 outfits, which means they can be paid by different parts of a larger parenting group. “It’s really difficult,” said Agag. “There are so many ways to bypass a salary cap.”
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