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JULY 20, 2001

Concorde Agreement shake-up begins

THE accord under which the commercial affairs of Formula 1 have been managed for the past 20 years began the protracted process of renegotiation in London this week, after the upheaval in ownership of the sport's commercial rights.

Following a European Commission investigation the governing body of the sporting and technical regulation of Formula 1, the FIA, and the commercial management of Bernie Eccledtone's commercial rights-holding company SLEC have been amicably but irrevocably divorced.

Furthermore SLEC is now 75% under the control of the German media giants EM.TV and KirchGruppe, and the teams and manufacturers that compete in Formula 1 are pushing for a greater share of the profits generated by their endeavours on the track.

The Concorde Agreement has always been a contentious document, although when it was created the team managers were happy to hand over the business of making money through the promotion of the sport to Bernie Ecclestone, who took a gigantic percentage but still the teams earnt enough to keep them happy. Since then however the annual turnover of Formula 1 has grown to be counted in billions, and the Formula 1 teams want a larger slice of the proceeds.

The most recent amendments to the agreement came in 1997, but still the takings of Ecclestone's Formula 1 Management were considered disproportionate and McLaren, Williams and Tyrrell refused to sign up to the agreement.

Williams and McLaren have proven strong enough to survive without the earnings of the Concorde Agreement through strong commercial backing for the Formula 1 teams and an ability to diversify into different strands of motor sport and even road car development. The obstinacy of the two British teams brought about a further, more favorable re-write of the Concorde Agreement while Tyrrell sold out to Craig Pollock and British American Tobacco, creating British American Racing.

With the dramatic increase in manufacturer involvement in F1 in recent seasons, it has been a long-held ambition of Ecclestone to bring them in as shareholders in his Formula 1 empire, at once cementing their commitment to the sport and offering the gilt-edged security of the motor manufacturers should Formula 1 be floated on the stock exchange.

The manufacturers have so far refused to buy in, suggesting that Ecclestone and, latterly, Leo Kirch have asked an impossibly high price. Initially they threatened to go their own way and form a rival championship, but are now seemingly willing to sit down and discuss the future with Kirch and Ecclestone.

Rumors from Germany suggest that the manufacturers are angling to buy out the shareholding of EM.TV, which has been in dire financial trouble since overstretching its budgets to buy in to Formula 1 in 1999. Bernie Ecclestone also reportedly offered the manufacturers 10% of his remaining stake in the sport on the proviso that they would all support at least two teams in the championship, which it is believed all bar Mercedes-Benz were already aiming to do.