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MODULE 4
THE CONCORDE AGREEMENT:
THE FINANCIAL BLUEPRINT OF F1
Lesson 10
FINANCIAL HISTORY: THE ROAD
TO THE CONCORDE AGREEMENT
The Concorde Agreement is like a master contract that dictates how the money flows in F1. It also lays out the rules of engagement between the three groups: the ten F1 teams, the Federation Internationale de L’Automobile (The FIA), and as of 2024, Liberty Media. The FIA oversees the sport, while Liberty Media holds F1’s commercial rights.
Before the Concorde Agreement, the teams and F1's governing body were constantly arguing over issues like revenue sharing and technical standards. This fighting led to what’s known as the FISA-FOCA war, a huge and bitter dispute in the late 1970s between the F1’s ruling authorities and the teams. This was a period when everyone was fighting for control, and smaller teams were often left in the dust by wealthier teams and manufacturers.
The Concorde Agreement set up how much money each team would get from F1's revenues, primarily from TV rights, race hosting fees, and sponsorships. It has a tiered system where teams earn money based on their performance, which has kept competition alive and allowed smaller teams to survive in the sport, even if they're not winning races. With each new version of the agreement over the years, more elements have been added, like budget caps and performance-based rewards, to try to level the playing field.
Lesson 11
THE FINANCIAL SYSTEM OF
THE CONCORDE AGREEMENT
The Concorde Agreement has several financial principles, and most notably is revenue sharing. Teams receive a part of F1’s revenues based on historical performance, team standings, and legacy status. Successful and long-standing teams often receive a higher percentage. Certain teams like Ferrari get “heritage bonuses” due to their historical significance in F1. This is in addition to their performance-based revenue. Teams also receive sponsorship and independent standing. The teams secure major private sponsorships which supplement their budgets.
Another major part of Formula One’s financial model is their salary cap. F1 introduced a cost cap on team expenses but there’s no cost cap of the driver salaries, although that has been a point of discussion. The cost cap covers development, operations, and some staffing costs. Driver salaries, marketing and executive compensation are
excluded from the cap, allowing teams to spend more freely in these areas. High-budget teams may spend over $300 million annually when all costs are included.
Formula 1 has changed its financial regulations by focusing on team cost control and facility investments. The cap aims to make the sport financially sustainable and more competitive, helping smaller teams by preventing top teams from monopolizing on performance advantages.
Lesson 12
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