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Ecclestone's Asian gamble could be a winning hand for Formula One

Source : BUSINESS_STANDARD
Last Updated: Thu, Oct 18, 2012 19:23 hrs

Bernie Ecclestone, the chief of Formula One (F1), isn’t your usual businessman. Battered after a mugging incident in December 2010, a black-eyed Ecclestone reportedly contacted Hublot, F1’s official watchmaker, whose timepiece he was wearing during the attack, even before the Englishman had got rid of his stitches. The result was an advertisement featuring Ecclestone’s bruised face, with the tagline: ‘See what people will do for a Hublot.’

It is this tenacity to turn any opportunity into a money-making venture that has underlined Ecclestone’s rise from a small-time businessman to the boss of the world’s most expensive sport. And that is also probably why few have questioned Ecclestone’s drive to take F1 beyond its traditional circuits in Europe and into emerging markets of Asia.

Expanding in the fast lane
For a sport that is effectively controlled by a Jersey-based holding company, where private equity firm CVC and one-time Wall Street major Lehman Brothers, along with Ecclestone, hold stakes, the details of F1’s finances are notoriously vague. The sport has an annual turnover of about euro 1,169 million (about Rs 8,184 crore), according to CVC’s website, with broadcasters’ fees, charges paid by promoters of individual races for hosting a F1 event and sponsorships bringing in the money.

But it hasn’t been a smooth ride since the global slowdown hit. Japanese carmakers Honda and Toyota, German automobile major BMW and even tyre-maker Bridgestone have left the F1 circuit since late 2008. More recently, plans for its $3 billion (Rs 15,900 crore) initial public offering were shelved due to market conditions.

Yet, F1’s finances are robust, observers feel, although the prolonged economic slowdown could be hurting high-spending sponsors. “I believe that F1 is in a strong state of health,” says Adrian Atkinson, owner and founder of Sportfolio PR, a sport and entertainment sponsorship activation firm that has worked in F1. “Sponsors and car companies come and go in F1 all the time but the global platform is still of interest to brands seeking global awareness and association.”

Part of the reason behind sustained interest in F1 is global expansion. The sport now has 20 races, with a return to the United States this year, following an absence since 2007, and a Russian Grand Prix scheduled for 2014. As a result, Atkinson says, there is hope that “new territories will increase the popularity of the sport outside of Europe and grow the fan base internationally.”

Bas Leinders, a former F1 driver-turned-commentator, too, believes that the sport is “still a very healthy business with enough funding from partners and sponsors to continue to a high level.”

“(Initially) F1 gets an interest and then it will drop slightly, which is very normal because there is not really a culture of motor racing in these countries,” the Belgain explains, “F1 was not build over-night in Europe either. It has taken decades before F1 became a general interest for the big public in Europe.”

Racing into India
It is this process of building viewership and interest that is risky. In its report, ‘Changing the Game: Outlook for the global sports market to 2015’, PricewaterhouseCoopers underlined the importance of working out “who will pay to come and watch both from the local and overseas markets.”

“Questions often arise about the sustainability of efforts at internationalisation, such as with the new Indian Grand Prix circuit, which failed to achieve full capacity. Elsewhere the evidence is patchy, with Formula 1 appearing to be continuing to grow in countries such as Turkey while in others such as South Korea, it appear to have plateaued,” the December 2011 report added.

“Just because the event is there is no guarantee that people will want to visit. A circuit must work hard to monetise the other 51 weeks of the year,” says Atkinson, about Jaypee Sports International Ltd’s $400 million (Rs 2,120 crore) Buddh International Circuit, where the Indian GP is held.

India has about another five years to get its act in order, says sports journalist and author of History of ‘Formula One: The Circus comes to India’, Chetan Narula. “Because if the Indian GP doesn’t become important enough, Ecclestone can easily take it elsewhere,” he explains. “So, it has to be made into a hub for motorsports in India.”

The obvious partnership for the Indian GP would have been with F1 racing team Sahara Force India, co-owned by United Breweries chief Vijay Mallya and Sahara’s Subrata Roy. Mallya, though, is in trouble, with his airline nose-diving, while Roy and the Jaypee Group are seen as close to opposing political camps.

It is the sort of minefield that Ecclestone would probably navigate through with relish. And this is exactly where Indian motorsports and its promoters could do with some of his tenacity.


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