Liberty Media, who are F1 owners, have made the decision to halve the prize money for the 2021 season, according to the Express, and such a move is not exactly good news for people who were looking at getting their feet back underneath them after they were hit hard by the COVID-19 pandemic.
As with any business, if they do not get enough money through the gate, then they will ultimately look at cutting costs.
Mercedes finished the 2020 season with the second-highest amount of prize money after winning both the Drivers’ and Constructors’ titles; it was their impressive seventh consecutive time in doing so.
Mercedes are still in talks with seven-time world champ Lewis Hamilton, with his contract finishing up at the end of last year. With the news that prize money could be slashed, it could seriously jeopardise the contract talks.
The sticking point is that Hamilton is still requesting his huge £34million salary, however, Mercedes are hoping to sign him to a contract less than that.
With Liberty Media’s decision, it has only hurt Hamilton’s chances of keeping his salary the same, with the Silver Arrows set to lose a jaw-dropping £37million in earnings.
According to Auto Motor und Sport, Toto Wolff’s team came home with £130million in prize money last year, however, because of Liberty Media’s ruling, that will now be cut to £93million.
Money for winning the championship will still remain at £56million and the other bonuses from the season will be cut in half, which leaves a deficit of £37million. However, the manufacturers did manage to get a payout of £15million-a-year thanks to Bernie Ecclestone when he was boss.
What this means is that all of the 10 F1 teams are going to see their money cut as well, however, some will suffer more than others.
Ferrari will get to keep their cash injection of £54million to keep their individuality with F1, which means they cannot race in different motorsport races.
Other teams like Racing Point, who are now Aston Martin, will get around £30 million more in the 2021 season than they did in the 2019 season based on their improved finishes, in which they reached the podium four times throughout the season.
Another team that will see an improvement in their funds is McLaren, who managed to finish third in the championship, behind both Mercedes and Red Bull.
However, it is still unclear how these financial reductions are going to impact each team, but in Mercedes’ case, it only gives them less money to throw at Hamilton in their ongoing contract negotiations.