F1 boss Ecclestone says series prepared to add two or three races, increase revenue to teams

Mercedes has yet to sign the Formula One Concorde Agreement, which will govern the sport from 2013-20.

An expansion from the current maximum of 20 Formula One races each season to “22 or 23” events will be part of the new Concorde Agreement, F1 boss Bernie Ecclestone has revealed. 

The current six-year contract between Formula One and the teams--which details the commercial arrangements in Grand Prix racing such as the division of TV revenue and prize money--will expire on Dec. 31. The new contract will run through 2020.

The new deal calls for Formula One to give the teams of one-time payment of $180 million in return for signing the agreement.

Under the terms of the current contract, the teams share 47.5 percent of the underlying annual profits from Formula One's trades in race-hosting fees, TV broadcasting rights, corporate hospitality and trackside advertising. It is believed that Ferrari gets an additional 2.5 percent. 

An unnamed source told The Guardian newspaper in the United Kingdom: “The current deal pays the teams 50 percent plus some extras, which means that it pays them about 59 percent.”

From 2013 through 2020, the base prize fund will remain at 47.5 percent, but Red Bull and McLaren will each receive an additional 2.5 percent and Ferrari an extra 7.5 percent. Mercedes has yet to sign the new Concorde Agreement, as it believes it is deserving of an additional percentage, as well.

The source concluded: “The new deal [with built-in extras] is basically 60 percent plus a little more, so it is going to be about 63 percent.”

Ecclestone, the CEO of Formula One, is beginning to leak details of the contract ahead of the projected launch of Formula One shares on the Singapore Stock Exchange, even though the initial public offering is no longer expected to take place within weeks, as previously indicated by Ecclestone and other company executives.

A long-term agreement with all the teams has been viewed as an essential prerequisite of the IPO. Some investors have been cautious because the terms of the new deal had not been finalized.

Ecclestone told them that an agreement in principle has been secured with all the major teams, including Ferrari, McLaren and Red Bull, all of which have been offered special terms and seats on the Formula One board. However, it has not been clear that all the participants are on board, most notably Mercedes-Benz, which has been seeking similar terms to those of its three main rivals on the track.

The Guardian's source added: “There are some signing-on fees for the teams of around U.S. $180 million.” This would be by far the biggest single payout from Formula One to the teams since the first Concorde Agreement came into force in 1981. Ecclestone himself told the newspaper that, on average over the duration of the new contract: “The teams are going to get around $70 million a year more.”

In 2011, the teams' share of Formula One's profits amounted to $686 million.

The new Concorde will also incorporate clauses making it more difficult for teams to leave Formula One, particularly the front-runners.

With regard to the planned calendar expansion, Ecclestone said that, under the terms of the 2013-20 Concorde Agreement: “We will have the flexibility to go beyond 20 races. We already have four or five places waiting to do something.” 

Apart from the new events that are projected in the next couple of years in Russia and the United States (Austin and New Jersey), event promoters in Argentina, France, Mexico, South Africa, Thailand and elsewhere are known to be seeking to join the Formula One show. Two gaps are expected to be created in the near future when the returning French Grand Prix will alternate with the Belgian GP, and the two Spanish events in Barcelona and Valencia come to a similar arrangement.

Adding even two or three races will have a substantial impact on Formula One's revenues. The ability to do so would allow Formula One to demonstrate growth potential to equity investors if and when it publishes an IPO prospectus.