Blogg - Formula 1 Future Costs Cap

Formula 1 Future Costs Cap

Current real life Formula 1 implemented Costs Cap to reduce expenses of top teams and give better chances to bottom teams.

In real life the problem is that 3 top teams have “unlimited” resources from their mother companies and everybody else works with much less money. There are new investors which can help stabilize team budgets but the financial deficit to top teams is too big to match their budgets. The cost cap would limit the expenses of top teams while average and bottom teams would still need to find resources. Benefit for top teams will be higher profit as there is no need to invest money to match other top teams expenses. Bottom teams should become competitive. Races should be more equal and exciting which should generate better revenues for the series which will then result in more income to all teams and should raise the profits.

In My Racing Career the top teams do have limited income, but the bottom teams are even more limited which makes racing for drivers in bottom teams very unattractive. That is also unrealistic as we know that in real life we have investors who can fill the budget to the levels of the costs cap. Top teams do not need to make profit because there is no way to use it. Therefore we do not need to limit or lower the expenses of top teams, but we need to allow small teams to fill their budgets to become competitive.

So the goal of the costs cap in My Racing Career will be to limit the expenses of car development and give small teams the option to fill the budget to the costs cap level thanks to “external” investments.

Here are key ideas:

• top teams should not need coins to fill the capped budget
• bottom teams will have to pay reasonable amount of coins to fill the budget
• successful teams should get reasonable bonus as reward for the good work
• management of employees should have higher effect
• car development should be much more difficult, good analysis and decisions should result into better results
• knowledge gained by managers should be protected so the way for success cannot be copied that easily by other teams (that means only minimum information about car parts and investments should be public)

TEAMS INCOME

Teams income is supposed to be cleaned up and questions related to the amount of money earned for issuing shares should not be raised anymore.

Simplified Income System

Income of the teams will consist of following

1. series revenue share for teams - fixed 10M per season
2. constructor championship reward - from 0 up to 10M
3. sponsors income - 3 sponsor types

• headline sponsor
• 2 main sponsors
• 3 minor sponsors (signed for whole season instead every 3 weeks)
• estimated top sponsor income - 40M
• estimated bottom sponsor income - 20M-25M

4. merchandise sales - new type - income 2M-5M
5. activity points conversion (user donations) - same as now maximum 5M
6. driver contract investment (driver donations) - only from signed drivers maximum 5M
7. facility sale
8. development cancelation
9. supplier income (selling parts to customer teams)
10. share issue (simplified)

Income Estimation

In general the maximum team earnings possible would be 75M while minimum income would be 32M. We expect 46M income for all teams to be easy to achieve.

COSTS CAP

Costs cap should cover all expenses on car performance improving projects but should not affect other expenses.

1. base costs cap set at 60M
2. capped expenses

• facility maintenance (except team museum)
• project budgets
• employee salaries who participates on developments
• employee signing bonus who participates on developments
• driver salaries and signing bonus
• supplier costs
• financial penalty (depending on commissioner decision)

3. uncapped expenses

• facility upgrades
• team museum maintenance
• commercial department salaries
• commercial employees signing bonus (contract will specify commercial or technical employee - commercial guys cannot be used for technical tasks)
• commercial budget

4. increased cap

• development cancelations (only difference of investment and refunded value counts against the cap)
• cumulated bonus for results in previous 2 seasons - this give small boost to the teams who were successful
• 1st team in constructor championship gets +2.5M to costs cap for next 2 seasons
• 2nd team gets +2M to costs cap for 2 seasons
• 3rd team gets +1.5M to costs cap for 2 seasons
• 4th team gets +1M to costs cap for 2 seasons
• 5th team gets +0.5M to costs cap for 2 seasons

5. cap exceeding - only employee salary up to 1M can be spend over the team cap for the season and will be deducted for cap next season (this is only a security blanket for cases like team signs quality employee from the market)
6. cap rollover - whole part of the unused cap during one season will be transferred to cap next season up to maximum 2M (this should be reasonable amount so it can be changed after discussion - teams should have little security gap in case of unexpected expenses)

UNCAPPED BUSINESS

We spent hours of thinking how to avoid teams to give up on commercial department and simply fill the budget for development by issuing shares. That is still the option, but it will not come cheap. The benefit of having success in commercial department will have no other benefit, then to lower the need to invest real money and coins into F1 team.

At least the top teams will have bigger income than the costs cap. All the commercial activities which then lead to increased team income will not be capped as the result of this activity can be replaced by simple coin investment.

The key team measures will stay in the game:

1. team rating -  is realistic indicator of the team quality and is gained by the results
- have effect on sponsor deals and merchandise sales
- can be gained by the good results

2. team popularity - is the real indicator of popularity among other MRC users
- have effect on sponsor deals, merchandise sales, activity points revenue
- can be gained by attracting managers to join fan club and selling team helmets, liveries, suits or real merchandise in MRC shop

3. team image - virtual indicator of team popularity among virtual motorsport fans
- have effect on sponsor deals and merchandise sales
- can be gained by commercial department projects (will be changed a lot from current system and will be explained in future article)

SHARE ISSUE LIMITS

Limit for the total season income of the team is 70M and is applied only if the team decides to issue shares. That means if a team gets more money from sources other than from issuing shares it is ok but they cannot request issuing shares.

Teams can only issue as much shares as is needed to get up to 70M.

Season income of every team is finalized in the morning of day 71 unless the team is supplying parts to customer teams.

Team can request to issue shares anytime during the season but:

1. during days 30-70 of the season - maximum 10M
2. during days 71-77 of the season - maximum difference between real season income and 70M limit
3. if on day 77 of the season the season income of the team which issued shares is higher than 70M, amount above this limit is taken from the team`s balance for no compensation. It is the responsibility of the team to manage this, final check will be performed and actions taken automatically. This will happen only in this 2 cases:

• the team requested a share issue during days 1-70 and they got more money from constructor championship reward or activity points conversion than expected.
• the team requested share issue during days 1-72 and they sold engine or parts to more teams than expected.