Rumoured Heineken Deal Good for Formula 1, but Not Necessarily Individual Teams

The Netherlands is the centre of the Formula One universe this week. First, there was Dutch driver Max Verstappen's astonishing win in Spain, and now there are rumours that brewing giant Heineken is set to announce a new sponsorship deal with the racing series.

The agreement is said to be worth $150 million over five years, according to a report in Dutch newspaper De Telegraaf (h/t the Guardian's Paul Weaver).

This is great news for Formula One Management (FOM), the sport's commercial rights holder, coming on the back of Shell's recent withdrawal as a series sponsor (though their relationship with Ferrari continues), per German website Motorsport-Total.com (h/t Crash.net).

It is not necessarily great news for F1's teams, though.

That is because FOM, a privately held company, takes a cut of the revenue from series sponsors (as opposed to the teams' individual sponsors) before distributing the rest to the teams through annual prize money disbursements. FOM's cut is approximately 35 per cent, according to Autosport's Dieter Rencken and Lawrence Barretto.

So the actual amount the teams will receive, if the Heineken rumour is accurate, is somewhere in the neighbourhood of $100 million over five years. With 11 teams currently competing in the sport, that would work out to a bit less than $2 million each year per team if the prize money were distributed equally—but it's not.

And it's not exactly a massive windfall in a sport where some team budgets are counted by the hundreds of millions.

Aside from dealing with the inequitable prize money payouts, the teams are actually battling against the commercial rights holder for sponsorship dollars. Some companies sponsor teams, placing their logos on the cars and the drivers' race suits, while others sponsor F1 itself.

If you were a company, what would you prefer: your logo plastered around every circuit and seen by millions of television viewers every race, or on the side of two cars, which could just as easily end up smashed in a gravel trap as on the podium?

Brands like Rolex, DHL and now Heineken opted for the former, sponsoring the entire F1 series, rather than a specific team.

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As ESPN F1's Kate Walker wrote: "When it comes to value for money the commercial rights holder can offer guarantees of exposure not only through trackside signage, but also through its control of the world television feed, choosing which clips do and don't get viewed by the sport's global audience."

The rumoured Heineken arrangement, and other series sponsorship deals, also end up reinforcing the power imbalance in F1. The big teams like Ferrari and Red Bull get a significantly larger chunk of the prize fund—in part due to bonus payments that are not performance-based—ensuring the smaller teams continue to struggle for funding.

In recent years, HRT and Caterham have disappeared, while Manor were rescued from bankruptcy. Sauber were late paying their staff earlier this year, and they partnered with Force India (another team in financial trouble) to file a complaint with the European Union competition commission about F1's governance and revenue distribution.

All this is not to disparage the Heineken deal. The fact that new, prestigious sponsors are still coming on board highlights F1's continuing global appeal, despite declining television viewership numbers. Putting more money in the sport's coffers enriches everyone involved—it's just that some are getting richer than others.

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And it isn't only the small teams that are inconvenienced by FOM's sponsorship deals. McLaren, one of the most successful teams in F1 history, still have not landed a title sponsor after more than two years of searching.

That is partly to do with the team's recent struggles, but surely the value of an FOM sponsorship deal in comparison to a McLaren one has not helped.

More equal revenue sharing (and a smaller percentage lining the pockets of the sport's private equity owners) would alleviate some of the burden on the teams, but the teams benefiting from the unequal structure would not necessarily support such a proposal. Either way, the status quo will remain until at least 2020, when the teams' bilateral agreements with the commercial rights holder expire.

At a macro level, the Heineken deal is definitely good for F1. When you look a bit closer, though, it isn't all sunshine and tulips for the teams that make up the sport.

Follow Matthew Walthert on Twitter for updates on new columns and other (mostly) F1-related news and banter: @MatthewWalthert.