A long way until new Concorde flies

What a difference a bit of patience can make to Formula 1 teams' fortunes - if, that is, they're prepared to play the long game. History has taught us that very few are usually prepared to do so, preferring a scrawny bird in the hand to a fatted one on the backburner.

Equally, if they wait too long they may find themselves severely jeopardised.

It is common knowledge that the current (2010-2012) Concorde Agreement, the tripartite document that sets out the respective obligations of the FIA governing body, Formula 1 commercial rights holder FOM and the 12 teams to the sport, expires on December 31 2012.

It is also a fact that little tangible progress has been made towards agreeing a successor to this vital document, one without which Formula 1 is unlikely to have survived its most turbulent times since 1982, when the first such covenant was signed between the governing body and the teams then in the sport.

From 1998 the sport's commercial rights were vested in entities controlled by Bernie Ecclestone, who acquired these for a period of no less than 113 years (!) for a total pittance ('relative' being way too feeble a word in this context) from an FIA then led by his long-standing friend Max Mosley.

Ecclestone paid around £250 million for the rights to a business now generating an annual income of close on £1 billion. It is not inaccurate to suggest that after the first year Ecclestone recovered his full outlay, with the remaining 112 years creating the wealth that enables his family to throw hundreds of millions in any currency at a high life via a trust floated in the wake of a transaction best described as sport's 'deal of the millennium'.

Concorde mutated from bi- to tripartite in 1998 in the wake of the FIA's surrendering its rights to its premier championship, with Ecclestone shrewdly locking the grid into a 10-year deal - but not before persuading them to collectively share just 23 per cent of the sport's retained revenues, with his business diverting the balance after expenses into his trust.

When the Concorde Agreement expired naturally at the end of 2007, Ecclestone (and Mosley) stubbornly refused to agree a formal extension under more-equitable terms. This bilateral approach to a tripartite agreement was simply not sustainable, and soon the teams, led by the manufacturer outfits who had come into the sport since the turn of the century, made their displeasure publicly known before finally voting with their feet at the 2009 British Grand Prix ahead of planning their own 'breakaway' series.

Mosley's de facto ousting followed soon after, as did agreement for a new Concorde, one collectively paying the teams 50 per cent of the sport's retained revenues, with the balance flowing to the shareholders of the rights to the lease, led by venture fund CVC Partners. CVC had acquired around 70 per cent of the lease by complicated means, thereafter appointing Ecclestone (whose family trust remains a minority shareholder) as CEO. Even this doubling of revenues proved insufficient...

But the teams accepted the olive branch, not least because the Concorde tilted governance of the sport in their favour through eliminating the powers vested in the FIA president, powers that could be (and could be said to have been) abused at a whim, so what they gained on the roundabout they somewhat willingly sacrificed at the T-junction.

Still, there is no hiding the fact that the Agreement was hurriedly cobbled together as all parties sought to avert that threatened pirate series, and thus it has considerable shortcomings - as perfectly illustrated by the row over the procedures used for the approval of regulations slated for introduction beyond the expiry of this Concorde later this year.

Despite this (now) tight window, no formal negotiations have commenced. The previous round had taken three acrimonious years to (eventually) reach an acceptable conclusion, yet the teams seem curiously unperturbed about this lack of progress towards securing increased 2013-onwards revenues. On the face of it, they are content to vest their (financial) futures in the man who previously retained 75 per cent of the revenues their endeavours had primarily generated, and now expects them to share half with him.

FOTA considered starting its own breakaway show in 2009 © LAT

To digress slightly, according to the Securities and Exchange Commission filings of the publicly-listed Dover International Speedway in the US, the financial structure of NASCAR's Sprint Cup is somewhat different: 65 per cent of television revenues accrue to the hosting tracks, 25 per cent go to competitors through the prize purse, with NASCAR itself retaining 10 per cent. The promoters themselves get 90 per cent of the television revenue, with the competitor allotment being included in the track's contribution to the purse.

While it can be extremely dangerous to directly compare the business models of various sports - for example, in F1 the hosting circuits don't see a bean of the TV money, nor do they retain control over trackside signage or hospitality (in fact, they pay heavily for the privilege of staging grands prix) - it is nonetheless extremely illuminating to note the percentage taken by NASCAR's commercial-rights holder.

Back to Concorde: one of the reasons given by teams for this lack of progress is an undertaking (Clause 4.7 according to sources) that all three parties shall reasonably endeavour to reach agreement to extend the agreement beyond its expiry, but that equally (4.8) the commercial-rights holder should not, prior to December 31 2011, make any offer to any team in order to commit it to the championship in future unless it offers all teams terms that are substantially the same in all material respects. Thus this stalemate before the end of last year.

But now the sluice gates are open, and teams are able to negotiate individual deals with the commercial-rights holder. Here the five non-FOTA teams - Red Bull Racing, Toro Rosso, Ferrari, Sauber and (currently) HRT, all of whom left the Formula One Teams' Association umbrella body at various stages before the end of last year - are effectively on their lonesome, with the balance being able to rely on the collective clout of FOTA.

Had one or other team crumbled before December 31 2011 and run to Ecclestone seeking a deal, he would have had to offer the full dozen the same terms and conditions, and it would have been a brave team boss who turned him down, for he is notorious for not offering second chances. That said, Concorde allegedly does not specify the timeframe within which the identical offer needed to be made - so it follows that Ecclestone could have in August 2011 offered, say, Ferrari $500m to sign up beyond 2013, then made Red Bull the same financial offer in February this year.

In that case only he and Ferrari would have known about the deal - for Concorde apparently does not specify that he needs to share when/what offers were made, only that eventually all offers made to the teams before December 31 2011 need be identical...

That said, in the absence of proof to the contrary, it must be assumed that no offers were made, or caused to be made by representatives of the commercial-rights holder, and that earnest bargaining will soon commence, if they have not already done so behind closed doors. Ecclestone will have put aside a percentage of revenues above which he is not prepared to go; conversely the teams have their individual ideals - but the exact total remains unknown, for they are obviously playing their cards close to their respective chests.

Any of the parties could form their own series: the FIA could start an opposition series to Formula 1, just as it did with Formula 2 despite Ecclestone having a perfectly good GP2 championship; the teams could, for the third time in grand prix history, threaten to break away; Ecclestone could start the already-registered GP1 or even elevate GP2 should the demands of the FIA/teams prove too onerous.

But in terms of Concorde the teams are prohibited from publicising such intentions before July 1 2012, so the chances of any breakaway flying just six months later are exceedingly slim. Thus that option would feature only as an absolute last resort.

The dilemma facing F1 is, though, what happens if overall agreement is ultimately not achieved: the teams are committed to competing in the championship to the end of 2012, and not beyond; the FIA is obliged to accept their entries in the championship until the end of 2012, and not beyond; the commercial-rights holder is obliged to adhere to the terms and conditions of Concorde and not beyond...

That said, the teams have businesses employing hundreds of heads to operate; the FIA obviously has a vested interest in seeing its own premier championship flourish - even if it relinquished all hands-on rights - and the commercial-rights holder's shareholders, exposed to at least a billion dollars in debt, have compelling reasons to have as many cars on the grid as permitted come the 2013 season opener.

Red Bull and Ferrari are no longer members of FOTA and are free to negotiate with Ecclestone directly © LAT

What, though, if agreement is not reached? Bearing in mind that the teams consider the current 50 per cent to be rather paltry and are demanding that Ecclestone grow revenues via the adoption of various initiatives, including the exploitation of new media streams; that relations between the FIA and Ecclestone are not of the best for reasons previously outlined in these pages; that the teams are split into two factions - One Teams' Association (as the teams outside FOTA are colloquially referred to in the paddock) and Formula One Teams' Association - and further that the 2013 technical regulations have already been pushed back a year, it is not inconceivable that the parties fail to put pen to paper before the expiry of Concorde.

In that case all parties can agree to continue with the existing Concorde - just as they did for the 2008 and '09 seasons. That would obviously be detrimental to their bank accounts while playing into the hands of Ecclestone. Guess who will stall this issue as long as possible, just as he did last time around...