FORMULA 1 – CAPPING DRIVER SALARIES IS NOT THE SMARTEST MOVE

Formula 1 driver salaries – A recent proposal to introduce a limit of $30million in 2023, to be split across both drivers, has received unanimous support from the teams, with precise details still to be discussed.

It is true that the teams severely limit what the drivers can do with their brands. The thing is, without the teams and F1, the drivers would not have those brands, at least not in the size they have now. By racking up championships in a class of the field car, every year Lewis is growing his brand bigger and bigger.

While he still drives, Mercedes can use that brand as well as his driving talents to increase its own brand value. When Lewis decides to hang his boots, he’s free to exploit and monetize the brand value of his persona in any way he sees fit.

Lewis Hamilton has identified the main ‘handicap’ future Formula 1 stars will face if the championship goes ahead with a salary cap without amending a crucial commercial limitation for drivers.

Teams would be allowed to spend more than this on drivers but it would be unlikely as any difference would then be taken out of the team’s operational budget cap, restricting funds that could be spent on aerodynamic development and other beneficial activities.

While such a cap is likely to limit the bumper salaries of only a select few drivers, there will also be the potential knock-on impact of ‘second drivers’ not being able to secure bigger deals because teams will need to pair a higher earner with a lower earner to remain within the cap.

Mercedes’ seven-time world champion Hamilton, still yet to sign a new deal for 2021, may never be affected by this planned legislation. When asked for his thoughts on the salary cap ahead of the Bahrain Grand Prix he hinted he’ll leave F1 after 2022 with the comment that “currently the salary cap is supposed to be implemented probably when I’m not even here”.

But the more interesting takeaway from his answer is how he arrowed in on the fact that presently F1 offers a fundamentally less fair environment for a salary cap than the American sports that spawned the idea – because they cannot supplement their wages from the team with as many deals on the side.

“I do think that the drivers here are the stars of the sport,” said Hamilton.

“They’re the ones who bring their brands, and their reputation helps elevate the sport, and help them [the brands] travel around the world.”

And like in other sports, the very best in F1 can expect to maximise their position and platform financially. But limiting a person’s earnings is a controversial move and in the US it’s only really tolerated by the superstars because there are other ways to earn their worth.

NBA star Lebron James has, for many years, earned considerably more from sponsorship off-court than he has his base salary for appearing on it. How F1 currently operates, that is not possible for Hamilton now, let alone a driver of probably lesser global profile in the future.

“If you look at other sports, there have been salary caps,” Hamilton acknowledged. “I think the one difference is that those places the individuals own their image in many areas so then they can try to maximise their image elsewhere.

“But this sport controls pretty much the driver’s image.”

Mercedes boss Toto Wolff has admitted that presently what that means for drivers is “the scope of promoting their brand, endorsement deals etc. are very limited”.

And Hamilton, who is unlikely to be impacted by this legislation even if it does come into force, has (deliberately or unwittingly) identified that is something that must change if F1’s idea is to avoid being fundamentally unfair.

“I do think about the next up and coming young stars that are coming through and I don’t particularly see why they should be handicapped,” he said.

“If they’re bringing something huge to the sport – it is a multi-billion dollar sport – they should be rewarded for what they do bring to it.”

So while I agree with Hamilton that capping driver salaries is not the smartest move, I would balance that with the need to control overall motorsport costs.

But surely the way forward is to create an environment which is a win-win and if that was achieved in a smart way there should be considerable upsides for both the professional racing teams and the drivers.

So when Hamilton and Toto Wolff gather round the yuletide fire to negotiate that new contract, I hope that their discussions will result in a deal whereby Lewis can continue to be paid what he’s undoubtedly worth and that the Mercedes F1 team finds a way through leveraging Hamilton’s image rights to unlock more sponsorship dollars. It should be possible.

It looks reasonably likely Hamilton will start something in the fashion industry after his F1 career, and is likely to have success with the enormous brand value that he has already built up by his success in F1, success that has been made possible by driving for the right teams at the right time.

Hence, it’s not like the teams “own” him and his rights for life, just for the time he continues to drive. What he’s getting paid now is not just 50 million, it’s 50 million + advertisement of him and his persona. If he had to pay for that brand advertisement value himself, that kind of global exposure would cost hundreds of millions annually to upkeep.

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