The Concorde Agreement is a unilateral agreement that binds the sport’s commercial rights holder with the governing body and the teams.
Once upon a time, that was a bilateral agreement between the CRH and the teams, but it expanded under its most recent version to include a governance element.
The current Concorde Agreement, therefore, contains two elements: governance and commercial.
From the team’s perspective, the commercial agreement is the most important.
It outlines their responsibilities, which is essentially to enter every race of the season and sign over media rights such that the CRH can sell broadcast rights globally, in exchange for significant financial rewards, among other benefits (such as logistics).
Those are directly linked to a team’s finishing position in the championship with (roughly) 45 percent of F1’s forecasted revenues paid out as prize money.
Precisely how that money is divided out is defined by the Concorde Agreement and, with 10 teams, sees the championship winner receive 14 percent of the pot, and 10th place receive six percent.
In 2023, teams shared in around $1.2 billion, a figure expected to grow to more than 1.3 billion this year, and potentially as high as $1.5 billion in 2025.
However, the split teams are entitled to will change with the admission of an 11th team, and it is for that reason the anti-dilution fee was introduced in 2021.
Under the existing Concorde Agreement, it is set at a flat $200 million.
That sum was designed to cover the risk a new entry posed to the prize money income incumbent teams would receive for a period of five years.
Essentially, it’s an insurance policy to reimburse teams for a reduction in income from the CRH while the sport builds its finances such that the 11th team essentially becomes cost-neutral (or, ideally, positive).
However, since being introduced in 2021, the anti-dilution fee has proportionally reduced as the sport, and the valuations of teams, has risen.
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In 2020, Dorilton Capital acquired Williams for $200 million, which worked out to be around $160 million once debt was taken into account.
Audi acquired a 75 percent stake in Sauber in 2023 with suggestions the deal was worth $450 million, putting a valuation of $600 million on the team.
Since then, the manufacturer’s interest has increased to complete ownership in an agreement with former owner Finn Rausing that will complete in the new year.
It is then poised to sell a third of the organisation for an estimated $350 million, which suggests its value has risen to over $1 billion in two years.
In 2021, the $200 million anti dilution fee equated to around 19 percent of the total F1 prize pool. The same figure today is only around 15 percent as the sport’s finances have grown, making the barrier to entry proportionally smaller.
Heading into the next Concorde, the figure is set to rise, with Cadillac set to pay $450 million for the right to enter the championship.
Cadillac is not bound by the current Concorde Agreement, since it won’t enter F1 until after it has expired, and the next iteration has not yet been completed.
Even still, it’s understood a figure of $450 million has been agreed upon, which falls short of the suggested $600 million figure that will be introduced for new teams come 2026.
It was initially suggested that figure would rise to $700 million in subsequent years.
As previously reported by Speedcafe, such a move was short-sighted and introduced significant risk to the business on two fronts. A set fee worked only if the sport’s finances remained flat.
As the sport’s finances grow (or shrink), the anti-dilution became proportionally less or more. Contractually enshrining a set figure could become a significant barrier to entry for any new teams even if the sport desperately needed them.
It’s a point those in power have now realised, with the anti-dilution fee for a 12th team set to be linked to the financial performance of the commercial rights holder.
It’s a subtle but significant shift as it ensures the barrier to entry remains proportionate to the health of the sport’s own finances.
The change also addresses concerns, as raised by Speedcafe, that the fee was being used as a means of unreasonably compensating existing teams for the impact a new entry would have on their valuation, not to mention competition for sponsors.
The latter is a foolhardy argument in any regard as one cannot legally prevent free market competition, be that from a direct sporting rival or an external party – another team approaching sponsors is essentially no different than an organisation from another sport approaching them.
Changes to the commercial Concorde and the anti-dilution are therefore entirely reasonable and appropriate, if one accepts it is appropriate to charge teams for entry into an open, as opposed to a franchise, competition.
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