F1 considering success ballast

[xpensive]

The distribution of money from FOM to the teams is indeed bizarre, the rich getting richer and the poor getting poorer.

A budget cap might seem appealing at first, but as far as I'm aware, nobody has yet come up with a sure way to police it?

[MOWOG]

attempting to improve the show while not taking on the source of the problem.

That't it in a nutshell. The Solons of the sport are simply clueless. They don't even understand what all the fuss is about. Here in the US, we call it being "tone deaf". They see empty stands at Hockenheim and run around like Chicken Little screaming "We must run and tell the King!" All they see are dropping attendance and TV numbers.They don't care a hoot about the fans.They only care about protecting the goose that laid the golden egg (I seem to be in my nursery rhyme phase this morning. ) They feel they are ENTITLED to rake in all that cash, because, well, because that's the way it has always been! At least since Bernie took over the reins way in the last century.

A symptom of how far removed they are from reality occurred last weekend when the German reporter has the AUDACITY to suggest that F1 maybe SHOULDN'T be trotting off to put on its show in places where gross human rights violations are occurring on a daily basis. He asked if they would go to North Korea if Bernie told them to and the answer is "Damn right we would!"

The response from Christian Horner and others was to criticize the journalist and blast the media for being too negative. No interest whatsoever at examining their own house and trying to find out what the source of that negativism might be. It reminds me of the NIxon White House with its paranoid prating about the press. Now they want to revoke that journalist's press pass so he can't ask such impertinent and embarrassing questions any more. The NERVE of the man! Who does he think he is to question the collective wonderfulness of Formula One's Powers That Be?

Frankly, I don't see any form of budget cap as being remotely possible. Although it is a good idea in theory, it would be well nigh impossible to police and enforce.

I see the sport headed over a cliff. In the end, it will be undone by the insurgency that is the digital universe. The internet has sent print journalism into a death spiral and it will shortly do the same to Formula One. The people in charge are simply to old and too entrenched to understand what is going on all around them. It may well be too late to save the patient.

[Jersey Tom]

A budget cap might seem appealing at first, but as far as I'm aware, nobody has yet come up with a sure way to police it?

How do salary caps get enforced or checked in major sports leagues? Presumably some sort of auditing process?

[xpensive]

A budget cap might seem appealing at first, but as far as I'm aware, nobody has yet come up with a sure way to police it?

How do salary caps get enforced or checked in major sports leagues? Presumably some sort of auditing process?

I think the total cost of running a Formula 1 team becomes a tad more complicated, like which consultant is paid by whom, counter invoicing, non-charging partners, non-financial sponsor support, parent-company pay-offs, "trainees" and "interns",
the opportunities for creative accounting in a global economy has no end.

[GitanesBlondes]

I agree that it's an absolutely silly idea, the wrong solution for an incredibly obvious problem.

For as long as I can remember I have been a supporter of a budget cap, combined more more freedom in the regulations. It is becoming more and more obvious that this may well be the only real solution that is acceptable for the fans. As long as there is no consensus on even a high-budget cost cap, we'll keep getting numerous silly ideas like these, attempting to improve the show while not taking on the source of the problem.

I'm afraid a budget cap simply is unenforceable in any practical manner for a multitude of reasons.

Giving more money to the lower placed teams is more realistic. Not capping payouts for only the top 10 teams would go a long way to helping provide a more stable ground for all involved. If the field is expanded to 12 or even 13 teams, there should be a payout for all.

[SectorOne]

Could a more even prize distribution act as sort of an unwritten budget cap?

Let´s say Red Bull got 100 million last year for winning the WCC. Now let´s say they would only get 66 million for winning the WCC.
Would they not go "hang on, why are we spending so much money when the return is so small, let´s do this and this to decrease our costs"

Or would the teams still spend as much as they can even though the prize money has decreased?

[GitanesBlondes]

Could a more even prize distribution act as sort of an unwritten budget cap?

Let´s say Red Bull got 100 million last year for winning the WCC. Now let´s say they would only get 66 million for winning the WCC.
Would they not go "hang on, why are we spending so much money when the return is so small, let´s do this and this to decrease our costs"

Or would the teams still spend as much as they can even though the prize money has decreased?

I think the teams would still spend as much as they possibly could even with the prize money being increased down towards the bottom.

The trick more with F1 anyway is to build your car for Monza where you don't need, or want a lot of downforce. It gives you a starting point that you can use also for Spa. Work your way up from there if you can. I don't mean to make it sound as if it is an easy task, but it's better than trying to build a car for all the races. Accept the high downforce circuits are a lost cause (save for Monaco) unless you have the money to sit there refining aerodynamics, and work on low downforce setups. Having a good showing at either or both Monza and Spa can be the difference between 10th and 9th place in the WCC.

[Just_a_fan]

Do Ferrari still get their "because we're Ferrari and we'll leave if you don't give us special treatment" bonus? If so, scrap that and give it to the bottom three teams. I seem to remember a figure of $150M (seems high but this is F1 after all) - giving $50M to each of the bottom three would make a huge difference to their competitiveness.

[Moxie]

Could a more even prize distribution act as sort of an unwritten budget cap?

Let´s say Red Bull got 100 million last year for winning the WCC. Now let´s say they would only get 66 million for winning the WCC.
Would they not go "hang on, why are we spending so much money when the return is so small, let´s do this and this to decrease our costs"

Or would the teams still spend as much as they can even though the prize money has decreased?

I have thought much about this strategy, as I have propose the same thing in several other threads. Reducing the prize money will not stop a factory team from spending like mad just for the bragging rights that go with wining the WCC. However, what will stop such excessive spending are shareholders. Investors want to a return on investment.

This is simplified, but roll with it:

The bragging rights of winning the WCC and/or the WDC have a monetary value based upon the advertising value of the exposure, and increased respect for the brand. A good finance person will work hard to estimate that value, then add it to the potential prize money and the value of sponsorships to determine the possible return. From that, the desired rate of return is subtracted to determine the amount to be invested.

If the rate of return on this investment is lower than expected investors will be unhappy. If the rate of return becomes negative investors will be pissed and sell their shares. Therefore, although it may seem that a firm like Fiat or Mercedes has unlimited cash to blow, it really doesn't. If a determined CEO really wants to win the WCC, the first question he must ask is "How much money would investors allow me to lose?"

Clearly this is not a value that can be easily determined by an outsider, but hedge fund managers have more access than the average Joe. The thing to remember is that reducing the prize money for the top teams will reduce the potential return on investment. Therefore it increases the risks that the CEO will piss off the fund managers.

[SiLo]

Just give the teams more of the generated profit. In fact give them almost all of it. Then you can give a lot more to the smaller teams whilst at least maintaining a good amount of money to be won for each championship point and winning overall.

[Moxie]

Just give the teams more of the generated profit. In fact give them almost all of it. Then you can give a lot more to the smaller teams whilst at least maintaining a good amount of money to be won for each championship point and winning overall.

I agree, but with conditions. The owners of the circus certainly have their right to make profits. But when it gets to the point that the performers cannot afford to put on the show, the owners have made a very big mistake. Even the lowest teams deserve a slice of the profits. Currently the formula for payouts in F1 does pay what is called column 1 prize money. Essentially is the payment that goes to the teams for performing in the show, but it is not quite that straight forward, because in 2013 Marussia did not receive the Column 1 payment.

Furthermore, column1 payments don't amount to squat, when compared to the total prize money paid out to the winner of the 2013 WCC. A bottom team must budget in the hope of receiving a $35 million return at the same time the top teams can budget for a potential $102 million return.

Ref:
http://bleacherreport.com/articles/1955 ... per-season

It should be noted that the reference left out the unwritten Column 3...the Ferrari payment

Here is where I diverge from SiLo: while I have no problem giving the teams a bigger slice of the profits, I think that the really important factor is the payout ratio between first and last place. In 2013 that ratio was 7.3. I'm sure an economist, or a game theory expert could define the ideal payout ratio, but I dare to suggest that reducing it to 3.0 would not be a bad place to start.

[MOWOG]

"How much money would investors allow me to lose?"

Sounds like a corollary to the famous racing aphorism: "Speed costs money. How fast do you want to spend?"

[theblackangus]

Im going to throw this idea out there to be de-constucted =)

So I think we all agree a budget cap is not really police-able.
The problems we are trying to (help) solve with the budget cap and the success ballast is:
- Reduce the dependency in spending (speed) between the top and bottom teams
- Increase the show by providing closer racing

What if one were to create a system where upgrades (the result of spending) are used to police spending in a loosish way.
The idea here is that if the top teams want to spend more money let them however punish the constructors championship points for upgrades introduced (money spent), also increasing the risk of deploying a bad upgrade.

Say something like (just for example) teams "spend" constructors championship points to add upgrades.
Implement a scale as such:
CC standing:
Rank:Cost of each upgrade introduced
1 - 10 pts
2 - 8 pts
3 - 6 pts
4 - 4 pts
5 - 2 pts
6- 1 pts
7-* - 0 pts

Variant 1:
Teams gain upgrade points in inverse corporation to constructors championship points. Upgrade points allow for upgrades to be used during the season.

I'm sure there are a few variants of how to implement this and likely better than my off the cuff suggestion but IMHO it would seem that this would help cap costs and decrease the gap front to back, and possibly help open up the formula again.

Most likely wishful thinking from someone who would like to see a closer more open formula 1 again.