How The Law Of Supply And Demand Is Growing The MotoGP Grid

Dorna took Suzuki's departure from MotoGP at the end of the 2011 season badly. After bending over backwards to accommodate the Japanese factory during their final few years in the class - giving Suzuki an exemption from the (now defunct) Rookie Rule, allowing the factory a larger engine allocation, and finally accepting the reduction from a two-rider effort to just a single entry, that of Alvaro Bautista - Suzuki finally pulled out of the series altogether, though they promised to return at a later date. Coming on top of Kawasaki's withdrawal ahead of the 2009 season, Suzuki were the second Japanese factory to depart the class after a string of broken promises.

So unsurprisingly, when Suzuki opened talks about a return to MotoGP, Dorna was hesitant. Their entry was to be subject to a number of restrictions; Suzuki would be made to pay penance for their initial abandoning of the series. Initially Suzuki were told that they would only be allowed to enter through an existing team, rather than creating their own infrastructure. The idea behind this was that none of the teams who had remained in the series should lose out just because Suzuki wanted to return. When it became clear that the teams which were candidates to aid Suzuki were not really up to supporting a full factory effort, that idea was quietly dropped.

Instead, Suzuki were informed that they could enter the series as a separate factory team, with their own staff and equipment, but that they would have to buy out an existing team and purchase their grid slots. Dorna and Suzuki agreed that a fair price for two MotoGP grid slots would be around 1.6 million euros, and Davide Brivio, hired by Suzuki to run their MotoGP effort, started assembling a factory team at a workshop in Italy.

At that point, Suzuki and Dorna ran into a basic law of economics. When a commodity is limited, economic theory says, and demand outstrips supply, then prices rise to reflect that increasing demand. Precisely this appears to have happened to Suzuki. According to reports last week in the Spanish newspaper El Periodico, none of the existing teams were inclined to sell Suzuki a grid slot for a mere 1.6 million euros. Prices being asked by existing teams went through the roof, settling somewhere between 5 and 6 million euros for a pair of slots.

That is way too much money for Suzuki - probably between 10 and 20 percent of their total MotoGP budget - and an amount that even Dorna was unwilling to countenance. Dorna had felt that the teams deserved adequate recompense, but this looked like outright price gouging. Dorna should not have been surprised, of course. One of the very first lessons in any economics class is the law of supply and demand, that prices rise when demand is greater than supply, and fall when supply is greater than demand. By insisting that grid size would remain unchanged at 24 grid slots, and by allowing Suzuki to enter, they had increased demand, with the inevitable consequence that prices would rise.

Dorna were forced to look for a solution, and that solution is to alter the other variable in the equation. It now looks as if Suzuki is to be admitted as a new entry, with the grid size increasing to 26 slots. That leaves the teams who, in the eyes of Dorna, had tried to make money off the back of Suzuki's entry with empty hands, and also opens the door to further teams entering into MotoGP. The two most successful Moto2 teams are known to be considering moving up to MotoGP, with the Marc VDS Racing team looking at an entry for Scott Redding, and Sito Pons hoping to make a return to the premier class after being forced to abandon it back in 2006.

The entry of Marc VDS and the return of Sito Pons has been made more attractive by the prospect of more competitive machinery being available. Marc VDS has been in talks with Kalex and Yamaha over leasing a Yamaha M1 engine for Scott Redding, to be housed in a Kalex chassis. Pons, meanwhile, has a long history with Honda, and is reported by El Periodico to be looking at entering Honda's production racer in 2014. The Kalex Yamaha option is not the only one for Marc VDS, as Redding's outstanding 2013 Moto2 season has generated a lot of factory interest in the young Englishman, and Redding is still in the frame for a satellite machine for next season. Marc VDS owner Marc van der Straten has backed Redding personally since Redding joined the team, and is keen to remain associated with the Gloucestershire rider. Pons, meanwhile, would be able to take Tito Rabat up to MotoGP, and perhaps also Pol Espargaro, if Yamaha lose interest in the former 2013 title favorite.

So the MotoGP grid could grow as large as 28 entries, and this in turn creates a problem for Dorna. The reason to limit the grid to 24 entries was to act as a quality control, and to restrict payouts to the teams. A total of 24 entries was a way of keeping out the weaker teams in the paddock, and ensuring a certain level of quality in the field. In previous years, with unlimited grids, riders were often present who were many seconds a lap slower than the top riders, and ended up acting as rolling chicanes, increasing the danger to both front runners and back markers. Having only 24 riders on the grid also meant a cost saving for Dorna, who still pay out sizable sums to the teams in the form of transportation expenses, start money and prize money.

Dorna appear to have found a way to address this issue as well. According to a report on the MCN website, Dorna is currently looking at cutting support for the teams that finish last in the championship. The new entries in 2014 would not receive any support for next year, and the teams which finish at the bottom of the standings in 2014 would be offered little or no support for the 2015 season. That would mean that any entries in 2014 would need to be strong enough and have sufficient sponsorship backing to survive the season with assistance from Dorna, and the teams which finish last would either have to drop down a category, where they may still be eligible to receive support at a reduced level, or go out and raise enough sponsorship to stand on their own two feet.

The Grand Prix Commission, MotoGP's rule-making body, is set to meet this weekend at Barcelona, and according to MCN, this is one of the subjects under discussion.

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We do not know the intricate details of the agreements between the FIM, Dorna, MSMA, and IRTA; but it appears that Dorna did not purchase a few grid slots to hold in reserve. Reserve entries would have allowed Dorna to underbid the private teams to reduce the effects of scarcity on new entrants. In some instances, Dorna's low bid might be sufficient to reduce the price of entry for a major factory, like Suzuki, without Dorna actually having to sell its reserve supply.

Regardless, the value of the grid spots should be determined by the value of the technical regulations, the value of Dorna's marketing platform, and by the value-added of the participants. If Suzuki are left out in the cold b/c a terrible global recession knocked out their race budget, MotoGP would incur prolonged opportunity costs from their absence. Similarly, funding all teams, regardless of how inconsequential their participation may be, would violate the value-added concept. I'm not surprised to read that Dorna are considering de-funding the bottom teams. This could also allows Dorna to acquire a few reserve entries should the teams go under.

Typical political and economic wrangling.

Given the UK's loss of mainstream tv coverage due to price gouging it seems more than a little hypocritical of Dorna to be surprised or angry that others follow suit.

Funding teams dependant on their championship standings. Isn't that the modus operandi of Formula 1? Not for the first time Carmelo seems to draw 'inspiration' from there.

As long as they can get within 107% 26-28 riders on the grid would be welcome in my opinion.
Really hope the Marc VDS team can put Redding on something competitive. I think a satellite Ducati would still be much more appealing than a Kalex Yamaha, but maybe not?

I've noticed this statement, presented as fact, has been trotted out both here and from other respected sources.

Can someone help me out..because I don't get it?
Qualifying, especially under the new system, is not representative and scores you ZERO points.

Mugello for example..very similar ambient & track conditions despite being a little earlier.

Total race time was 2.2sec faster last year, or about a tenth per lap.

Guys like Lorenzo, Pedrosa & Crutchlow - riding the same bikes - set similar fast laps this year.

Yet at Ducati..Dovi's race time was 10 seconds slower than Hayden in 2012 - who was beaten by Rossi - and his fast lap last week was well over half a second slower than Nick last year.

After 5 races Andrea has less points than Rossi had this time last year and the gap from him to Hayden is smaller than the Italian had over the American at the same point 2012.
With Rossi, this was supposedly an unmitigated disaster?

At the Mugello test after the race, Hayden said he was disappointed with the improvement the lab bike was expected to bring.

I just can't see where all the basis for this optimism comes from, other than wishful thinking.

out of all of Redding's options I would think a satellite Ducati would be MUCH better than a CRT and I would assume still much better than a Kalex Yamaha/production Honda (though that remains to be seen). Personally I'm not sure if Ducati will ever get righted, I'm not on that "Ducati is improving" bandwagon until they get some consistent results, but no CRT rider has gotten a factory or satellite ride yet despite good results from some of them. For Redding's career sake he should be on something at least half way competitive. Are either of the satellite Hondas up for grabs next season?

..and using your comment as a springboard.

As far as I know, all prototype RCV riders have contracts through 2014.
Shame for Scott.

I'm sure he'll have good options outside of Ducati - who apparently weren't as straight as VDS would have liked after his test last year - if he continues his good form.

Good seats are tight mind.

i was kinda disappointed VDS didn't have a ducati team this year, but in retrospect, like you said, Redding could probably do better

Doesn't it seem that Dorna is at odds with it's quest for healthy teams in MotoGP? Why would you follow F1's practice of enriching the richest teams and screwing the less well sponsored teams? Wouldn't it make more sense to spread their budget evenly over all entrant teams. That would form a base that would support teams as they grow and would be easier to administrate as well as being non-political. MotoGP is not in the same ballpark as F1 financially and Carmelo shouldn't follow in lock-step with everything Bernie does in F1.

to factories make no sense to me (unless they are rolling in it, which doesn't seem to be the case if two new slots create a funding crisis). That money should be helping to level the playing field elsewhere in the paddock or supporting the sport/upcoming riders in countries where Dorna want to be.

This whole situation seems strange to me. First of all, why would you want to limit the field to 24 bikes? The last year of the 250cc class Dorna was saying it needed to be replaced because there were only about 24 regular starters, which was supposedly a tell-tale sign that there was little interest in 250cc anymore. (Personally, I think it was impressive that there were still that many, given the fact that Dorna c.s. had been talking about killing that brilliant class for many years already. Not exactly a way to make teams invest in a class.)

So now all of a sudden 24 starters is the limit? As always with changes or rules, the safety card is being played again, but that is nonsense. There is a 107% qualifying limit, isn't there? So speed differences can not be used as an excuse. Especially after they themselves implemented a confusing and slower CRT class within the MotoGP class.

And why is the door suddenly open for another extra team when the number is increased to 26, if Suzuki is entering with two bikes?

Also, I think it is very strange to put so many demands and contracts on participants, other than a clear set of technical rules and being fast enough to qualify. I really don't see why a team or factory would not be allowed to quit if they wish so, especially if they simply don't have the budget anymore. By making them commit for years and risking fines for leaving, teams/factories will surely think twice before giving it a go. What if you have a financial setback next year? You can't be sure that won't happen. They better create a series that is inviting to participate in, instead of scaring people off.

I agree that limiting grids to 24 bikes seems ludicrous but also the 107% qualifying rule seems a bit too generous imo.

Mugello pole time was a 1'47.157" then 107% of that is a 1'54.48" lap meaning Biaggi would have qualified for the race with the test time he set on Monday, as would the top 20 riders from Moto2 QP! Why bother with the rule if it's so far removed from the front runners pace?

After all that effort and money, setting a tight qualifying time is a big stick to beat someone with on a 'bad day'.
If you are in the paddock it's unlikely that you cannot justify the race participation.
With all the potential rule/technology changes some slack needs to left - the CRT ECU's were a case in point in Sepang, although I grant that testing such kit on a race weekend is probably unlikely. A rider/team being caught out by tyres, an off, or the weather are other reasons.
A struggling team needs the most exposure it can get and penalising the triers over what is probably a budget issue isn't in the spirit of things IMO, even at this level.

If 107% of pole is what a current WSBK champion can do on a current prototype, that doesn't sound too lax to me...
In the old days of wild-cards trying to qualify for the 250 grid, I've seen how hard it is to get inside that limit. It's really, really fast... if you haven't been on track and compared your times to what the Lorenzo's of this world can do, you have no idea.

Quoted from your article - "Having only 24 riders on the grid also meant a cost saving for Dorna, who still pay out sizable sums to the teams in the form of transportation expenses, start money and prize money."

Could you (or anyone who knows) please explain, in depth, the pay out system that Dorna uses to pay the teams. This is a subject that seems to completely missing from the worldwide coverage that MotoGP receives.

I would think this is a subject that would be of interest to many serious fans, but is one that I have never seen discussed. I would like to know (in real numbers, dollars or euros) what the rewards are for the teams that are racing. I realize that with some teams the rider needs to bring money, or sponsorship, to the table. Riders salary (or $ participation) should not enter into this as that is a completely separate matter.

BUT - What is the pay out system?
Does the winners team receive more in prize money than second or third place?
How is start money calculated for individual teams.
Are transportation expenses the same for all teams, etc., etc, etc.?????

I don't understand why this subject has not been addressed and would really appreciate a knowledgeable answer.