F1 entry fee: Why do new teams have to pay a whopping $200m fee to enter?

The opening lap of the Emilia Romagna Grand Prix Sprint. Imola April 2022 Credit: Alamy
The opening lap of the Emilia Romagna Grand Prix Sprint. Imola April 2022 Credit: Alamy

Two decades after Ron Dennis told Eddie Jordan “welcome to the Piranha Club” those words still ring true as Formula 1’s 10 existing teams are not pulling their punches to block new arrivals.

Simply put: they want to keep the team numbers down in order to keep their revenue numbers up.

And if that doesn’t work, they are reportedly pushing for an exorbitant hike in the entry fee that new teams have to pay, a fee called the ‘anti-dilution fund’.

It’s the latest salvo in what is turning into an all-out civil war between the FIA, who want 11 or even 12 teams on the grid, and F1 where the bosses are happy to stick with today’s 10.

The Concorde Agreement tweak that opened the door

Back in the day, under Bernie Ecclestone’s leadership, only the 10 top teams in the Constructors’ Championship earned prize money.

That was set in stone in the Concorde Agreement, the document that governs the running of Formula 1 as well as the prize money structure.

That meant Caterham lost out at the end of 2013 and again in 2014, playing a role in the team going into administration at the end of 2014. Just 10 teams remained on the grid, a number that meant everyone would get a scoop out of the prize pot.

But in 2016 Haas joined the mix, finishing P8, and Marussia found themselves down in 11th. They folded at the end of that season.

Perhaps that’s why Formula 1 changed the rule when the new Concorde Agreement, which runs from 2021 to 2025, was signed and made it so that every single team would earn prize money.

In exchange for the existing teams to agree to that, the sport established the ‘anti-dilution fund’.

What is the ‘anti-dilution fund’?

Simply put it is the entry fee that it payable by any and all new entrants, a fee that is presently set at $200 million.

But it’s not money that goes to Liberty Media or even the FIA, rather it is divided between the existing teams.

Designed to mitigate the loss of revenue given that going forward the prize money will be divided by 11 or even 12, the new entrant pays the anti-dilution fee and each of the teams already competing in the sport receives $20m.

But for the current teams that $20 million is not enough, at least according to reports.

According to The Race, the Formula 1 teams want the anti-dilution fund fee to increase from $200m to a whopping $600m.

‘Wary of suffering any financial loss should the grid get bigger it has been suggested that the anti-dilution fund enshrined in the Concorde Agreement signed in 2020 – which runs from 2021-2025 – should be significantly increased,’ read the report.

‘Now, just as the FIA prepares to open the expressions of interest process and the likes of Andretti ready a formal bid, there is talk of raising the anti-dilution fund to as much as $600m as part of the new Concorde Agreement that needs to be agreed for 2026 onwards.’

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What has triggered this call from the teams?

One word, or best to say one name: Andretti.

Michael Andretti with his Andretti Autosport and its General Motors link-up wants a spot on the Formula 1 grid. And he’s ready to throw everything at it.

The American already has a factory, an engine deal and a potential driver in Colton Herta. But that’s just the tip of the iceberg.

He also has the funding and the know-how to make a success of a Formula 1 venture. It’s fair to say he won’t be down in 11th place, not in his first year and definitely not as time goes by.

It has Andretti’s potential future rivals running scared as they’re foreseeing a dip in their earnings.

“It’s better to have 10 very stable teams than taking the risk to have no gain, and having somebody more to share the money with you know,” said Haas team boss Guenther Steiner.

“If an 11th team comes and just takes an 11th off the revenue which is there now, you dilute everybody else’s revenue. Why would you do that?”

Fred Vasseur, formerly of Alfa Romeo, added: “We don’t need to welcome new teams, risking two or three teams on the grid.”

By increasing the fee they’ll either make up for lost revenue in the short-term, bagging $60m each instead of just $20m, or they’ll put Andretti off joining.

Jordan, declaring that the fund “makes a cartel out of the teams that are there”, told RaceFans in 2021 that it would have put him off entering Formula 1 – Jordan that ultimately became today’s Aston Martin team.

“It would have curtailed teams like Jordan entering Formula 1,” he said. “Jordan came through Formula 4, Formula 3 and 3000 and won all the races in those categories to be able to get the superlicence to move forward. This stops all of that, so I’m wholly against it.”

Explaining F1’s prize money distribution

Formula 1’s prize money is divided into three columns, the first being the CVC revenue which is otherwise known as Column A. 50 percent of the CVC earnings go towards the team and are divided equally amongst them with the other 50 going to Formula 1 group and its shareholders.

At present that’s divided by 10 but if Andretti, or any other team joins, it will be divided by 11.

In Column B, which is based on where the teams finished in the championship, the Constructors’ Champion receives 14 percent of the total prize pot. That was an estimated $66m for Mercedes in 2021. Red Bull, P2, earned 12.9 percent of the prize money.

The bottom team, Haas in 2021, only received six percent which equated to about $15m.

If there’s an 11th team in the future, that team will reportedly receive a flat $10 million for participating in the championship.

Column C is the bonus column, the one that historically favours F1’s oldest team Ferrari for just being on the grid.

The latest round in the civil war between F1 and the FIA

Money, or as Andretti put it “greed”, is the latest topic in which is fast becoming a long list of issues causing a chasm between the FIA and Formula 1.

While last season they clashed over the red flag at the Italian Grand Prix, the handling of the Japanese Grand Prix, and the FIA jumping the gun on releasing the 2023 calendar and claiming credit for it, now it’s the grid – or best to say the number of teams on said grid.

FIA president Mohammed Ben Sulayem is very much in favour of including the Andretti-GM partnership on the grid and even opened a new Expression of Interest process to find as many as two new teams.

Saying he would “welcome” Andretti’s arrival, the 61-year-old added: “It is surprising that there has been some adverse reaction to the Cadillac and Andretti news.

“The FIA has accepted the entries of smaller, successful organisations in recent years. We should be encouraging prospective F1 entries from global manufacturers like GM and thoroughbred racers like Andretti and others. Interest from teams in growth markets adds diversity and broadens F1’s appeal.”

But the F1 teams and Formula One Management aren’t in favour and have made it clear to Ben Sulayem that he cannot allow an 11th team on the grid without their express permission.

“There is great interest in the F1 project at this time with a number of conversations continuing that are not as visible as others,” read F1’s response.

“We all want to ensure the championship remains credible and stable and any new entrant request will be assessed on criteria to meet those objectives by all the relevant stakeholders.

“Any new entrant request requires the agreement of both F1 and the FIA.”

Expect this one to rumble on and on…

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