Summary of the situation:
F1 is run by a management company headed up by Bernie Ecclestone. The company owns very little in the way of assets i.e. dont own any circuits, they essentially organise the annual calender of races and negotiate the commercial deals. The finances of the management company are very secretive. It allegedly only passes on c.50% of its income to the participating teams. The way it is passed on is secretive - different teams have different financial arrangements with it and receive differing amounts of appearance and prize money. The management company also decides which teams can enter F1 and how many can enter. This management company, in conjunction with FIA President Max Mosley also decide the rules of F1.
The problem the breakaway group has is the transparancy of the operation and the amount of money they receive. In these difficult financial times, they do not see why they should give 50% of their money to essentially a middle man between them and the circuit owners and TV companies. They see no reason why they cannot collectively deal with the circuit owners and TV themselves and so have an additional c.400m+ to divide between them. This 400m is even more important in the current climate where manufacturer and sponsor money is dwindling.
There is also the governance issue. They are not happy that they dont have full sight of the finances and that different teams get paid differently. They would prefer a system where teams got basic expenses covered and pro-rata prize money depending on e.g points scored in a season.
Apart from the credit crunch making people take a closer look at money, the issue which has brought this to a head is rules proposals by F1 management. Teams are unhappy that the rules change every couple of years which means they have to spend loads of money with totally new cars etc. They are also unhappy that they have no say in what rules are introduced even thought they have to pay the adaptation costs. One rule F1 management wants to introduce is a 40m budget cap. This cap would mean that most F1 teams would have to lay off most of their staff (and incur redundancy costs etc. etc.). The teams would prefer getting a bigger slice of the income rather than cut their costs.
I think the clincher is that if F1 management was out of the picture, the teams would receive c.40m each more in money. This is in excess of the budget cap. So the worst case scenario with a breakaway is better than the best case scenario with F1 management. F1 management wants them to cut to 40m costs per annum, but they'd have to raise most of the money themselves. If they breakaway, the 40m extra they each receive would mean they could at least survive at this level even with no sponsorship or manufacturer support.
What happened over the weekend is that the entry deadline for next years F1 passed and the only entrants are two teams, both of which have no engines for 2010, plus 3 new applicants, 2 of whom are still "concepts".
In tandem, the breakaway "FOTA" series was announced with 8 of the 10 existing teams plus 3 new teams, all of whom are established with a good track record in motorsports.
Bernie Ecclestone tried to call their bluff by having an entry deadline thinking nobody would have the b***s to stand up to him.
But the emperor has been left with no clothes.
Some side stories to this:
Press are saying FIA will not recognise the new series because Max Mosley is president and he's involved with Bernie. Red herring as FIA is a regulator, not an organiser. There are also some red herrings about circuits going around - truth is that the FOTA series is free to rent any circuit.
There is also a Brits versus the rest of the world undercurrent. F1 management is dominated by Brits and in recent years, a lot of non-British teams have gone bust, whereas the British ones get favourable treatment. FOTA wants to keep the sport "International" as opposed to an upperclass old boys network in the UK.