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With the controversy surrounding the FIA and Liberty Media, you might have heard of the 100-year agreement.
It was discovered earlier in the year that a Saudi Arabian Public Investment Fund placed a $20billion bid to buy Formula One’s commercial rights. FIA President Mohammed Ben Sulayem came out on Twitter saying that any potential buyers should “apply common sense” in coming up with such offers.
He added how these plans need to “consider the greater good of the sport” and not only money. He finished his statement by saying: “It is our duty to consider what the future impact will be for promoters in terms of increased hosting fees and other commercial costs, and any adverse impact that it could have on fans.”
Figures from Liberty Media such as chief legal and administrative officer Renne Wilm fumed over this statement. Liberty Media bought Formula One’s commercial rights in 2017 for $4.4billion. He accused the FIA of interfering “with those rights in an unacceptable manner,” Sky News revealed.
If any potential offer comes up for a buyer to purchase these commercial rights, the 100-year agreement gives full responsibility to Liberty Media to decide whether to sell or not. The FIA can only advise, but wouldn’t have the final say.
So what is exactly the 100-year agreement?
What is the 100-year agreement?
The 100-year agreement was created in 2001. It sees the commercial rights of Formula One sold to companies from the official management. This creates a bridge between Formula One and the FIA, which is now solely the motorsport regulator.
Whoever holds the deal is responsible for a range of activities in Formula One such as marketing, sponsors and partners, potential country sponsors and so much more. These activities all see huge money flow going in and out of Formula One, so it’s a really big deal and has a major responsibility.
The first company to purchase such rights was SLEC. Its majority was owned by German media companies Kirch and EMTV. Bernie Ecclestone held the remaining 25%.
SLEC had already owned a media contract which ended in 2010. That means that the 100-year agreement came into play in 2010. The German media company had already agreed with Formula One management in 2001 that they’ll proceed with the commercial rights contract once the 100-year agreement commences.
Initially, the five European-based manufacturers at the time: Ford with Jaguar, FIAT with Ferrari, Mercedes, BMW and Renault weren’t thrilled that German media companies had control over the sport’s media rights. They were known as the “Big Five” at the time and they threatened to break away into their own championship.
Teams feared that they wouldn’t receive enough income from the TV rights now that the owners were literal media companies. However, an agreement was reached and no new championship ever happened.
Since 2017, Formula One’s rights have been owned by Liberty Media. One can say that the American company has embraced the possibilities of fan experiences. It created the famous Netflix documentary, Drive to Survive, which saw an increase in younger fans and also in the American market. Races are having record crowds and the diversity in the audience increased too.
Until another buyer comes through and Liberty Media decides to sell, the American mass media company has Formula One’s commercial rights till 2110.
How does the European Commission come in?
It all started in the 1990s when the FIA had more say on what goes on in Formula 1. However, this didn’t comply with the European Commission’s regulations. The FIA, as a sport regulator has to comply with the European Commission because it has bases in both France and Switzerland. Hence, this makes it a European association too.
The Commission understood that as a regulator, the FIA will have control over certain regulations involving the sport. These regulations relate to issues such as the construction of the car, like the 2022 guidelines that were introduced. However, in 1994 and 1997, the FIA started requesting clearance from European competition rules.
They came under fire by the Commission in 1999, when the FIA was accused of “abusing its power by putting unnecessary restriction on promoters, circuit owners, vehicle manufacturers and drivers as well as to certain provisions in the commercial agreements with television broadcasters.”
The Commission argued that the FIA should only regulate the technical side of the sport. Their involvement in transforming “motor racing into ‘big business’” urged companies to turn to the European Union competition rules.
That is why the European Commission and the FIA reached an agreement with all third parties involved too. Firstly, they agreed that the FIA can only be a sports regulator and cannot have a say in commercial works or issues.
They also added that:
- “The FIA rules are not used to prevent or impede new competitions unless justified on grounds related to the safe, fair or orderly conduct of motor sport;
- Internal and external appeals procedures against FIA decisions are strengthened.”
This was when the FIA sold all its rights to the FIA Formula One World Championship and how it led to the 100-year agreement.
Why was it mentioned in the situation between the FIA and Liberty Media?
These two agreements prohibit the FIA from having any say on what Liberty Media can do with the Formula 1 commercial rights which they own. However, the FIA President attempted to influence such a matter through his tweet.
He said: “As the custodians of motorsport, the FIA, as a non-profit organisation, is cautious about alleged inflated price tags of $20bn being put on F1.
“Any potential buyer is advised to apply common sense, consider the greater good of the sport and come with a clear, sustainable plan – not just a lot of money.
“It is our duty to consider what the future impact will be for promoters in terms of increased hosting fees and other commercial costs, and any adverse impact that it could have on fans.”
As President, Mohammed Ben Sulayem can only interfere in the sporting regulations which ensure the safety of drivers. These can vary from the cars’ aerodynamics and engines to the safety of tracks and decisions on races, such as penalties to drivers.
However, they can’t interfere in any commercial rights discussions. They can advise, however, it is all down to Liberty Media who paid for such rights and now rightfully owns them. If the FIA interferes with that, then it’ll receive a knock on its door from the European Commission.
Liberty Media created a whole new fan experience which saw great results. They revamped the Formula 1 app and enhanced the content on F1 TV. They expanded F1’s horizon by adding more races in America and the Middle East.
This tweet created somewhat of a “dangerous game” as my fellow writer James Phillips explained. Read here on the continuous battle between the FIA and F1 and understand better how the 100-year agreement comes into play.
Featured Image Credit: Formula 1
