In May 2022, the president of Liberty Media, Greg Maffei said “There’s a potential we may increase the teams over time,” so the Andretti-Cadillac joint venture to join Formula One shouldn’t come as a surprise. Unfortunately, most of the teams on the grid aren’t too keen on expanding anytime soon, and for a number of reasons.
Recently, FIA president Mohammed Ben Sulayem defended expansion and the Andretti-Cadillac entry by saying, “We should be encouraging prospective F1 entries from global manufacturers like GM and thoroughbred racers like [Michael] Andretti and others.” Ben Sulayem continued, “Interest from teams in growth markets adds diversity and broadens F1’s appeal.”
The joint Andretti-Cadillac venture is appealing simply due to how invested Andretti is in motor racing. Michael Andretti has teams in eight different motorsports series, including Formula E, IndyCar, and others, so he brings an impressive background to the sport that teams should be welcoming. So why have the existing teams and F1 CEO Stefano Domenicali been rejecting Andretti’s F1 entry for two years? It’s an interesting question considering Gene Haas gained entry a year after announcing his bid into F1. I mean no disrespect to Haas and have a tremendous amount of respect for that entire organization, but we know that Haas doesn’t come close to the level of competitiveness that an alliance between American automotive royalty does, and being that they’re both American teams, Haas is going to be as protective as possible over its home representation on the grid. Of course, the counterargument against Haas is that it’s failed to capture the national identity of America and its fanbase, which are necessary for viability in F1’s current market.
As we all know, racing is extremely political, but ratings speak for themselves. The 2022 season averaged 1.21 million viewers-per-race (up 28 percent YoY from 2021), setting new viewership ratings in America, which supports race demand. With that said, one would think it would behoove teams to stop gatekeeping when it comes to promoting their commercial interests. With 61 million General Motors vehicles in operation in America, it would appear those commercial interests could generate existing teams a lot of money and a lot of exposure for sponsors through new fans.
If the politics behind denying the Andretti-Cadillac entry were due to teams trying to preserve the European architecture of F1 that would be one thing. But we know it’s because the hierarchy has already been established and teams don’t want disruption. After all, new team entries equals a reduction in payouts, and from a Constructors‘ point of view, that’s reason enough to say no.
Constructors’ payouts and how distributions work is for another blog post, but here’s what we know about how Andretti-Cadillac would affect the finances in Formula One. For starters, in 2020, terms of the Concorde Agreement between teams, FOM, and the FIA were agreed upon, which “sets out the terms under which teams will compete in F1 until 2025.” The original intent of the Agreement was to guarantee that teams would participate, but the focus on the current Agreement was the introduction of the budget cap, which was supposed to help close the gaps that are causing such drastic disparities on the grid. (Side Note: two seasons in and the grid looks pretty much the same.) This Agreement also set the F1 entry fee at $200 million, which would be dispersed equally among the existing 10 F1 teams. This method of disbursements replaces the previous conditions, which specified that new entrants would only receive prize money in their second season.
Unfortunately, teams appear to have had a change of heart when it comes to those distributions.
The Concorde Agreement would have given each team $20 million to offset losses over the course of a few years, but now, that initial fee comes at the cost of teams losing around 10 percent of earnings. The Concorde Agreement was agreed upon before Formula One saw profits rise exponentially–which were in part to the success of Netflix’s Drive to Survive series. By the time global COVID-19 lockdowns were instituted, there were already two seasons and 20 episodes of DTS available on Netflix, which drew millions of new fans and profits to the sport that few (if any) had anticipated. Because of the “Netflix Effect,” F1 teams now think that entry fee should be more in the range of $500-600 million, which is on par with most major professional sports leagues.
Andretti-Cadillac would like to enter Formula One in 2024, but with the Concorde Agreement set to renew in 2026, don’t be surprised if teams make them wait simply to raise the entry fee. Remember that the cost cap combined with new global marketing opportunities means a significant increase in profits for FOM and current teams, so if FOM sides with the 10 current teams it would align with what we’ve read in the media lately.
In September 2022, Domenicali told Sky Sports, “As always, you need to be balanced. You need to see all the things that are around the table. Having more drivers, at the end of the day there is a limit at which you can go.” Domenicali continued, “I think that in respect, there is the evaluation of the sustainability of the team, the evaluation of not being too crowded with that. So I would say in terms of priority, it is not really a need for F1 today.”
When it comes to the “limits,” the last time F1 had eleven teams on the grid was 2016.
Domenicali makes several points against and for expansion in those statements. On one hand, if you add an eleventh team you have to add a twelfth team to “balance” the grid. On the other hand, expansion teams have to be sustainable. With Andretti-Cadillac being two names and brands that are synonymous with sustainability, the partnership makes sense and should satisfy Domenicali’s concern in that regard. I think for this to work, however, a twelfth team which is just as iconic and logical is the only way to balance the grid. Until that happens, I don’t think expansion will be a priority. And with teams eying a new Concorde Agreement in 2026–which could put significantly more money in their pockets–Domenicali has to work in the best interest of the existing teams, regardless of who supports expansion.
As of now, FIA President Mohammed Ben Sulayem and McLaren boss Zak Brown are the only influential people within the sport who support that. McLaren has had previous partnerships with Andretti so this shouldn’t come as a surprise, but without support from the Holy Trinity (Ferrari, Red Bull, and Mercedes), it’s unlikely any of the other teams budge or voice their support for the addition.
With several team principals expressing that Andretti-Cadillac addition offers “no value” to F1, and with Andretti’s options to buy into a team limited at the moment, in my opinion, it’s unlikely they’ll receive approval from F1 or the FIA for entry in 2024. I do, however, believe that when you consider the “value” interpretation, a 2026 entry as an expansion team looks like the more promising route to the grid.
