F1: Further proof of India as a sports market

An image of the article as it appeared in Free Press Journal

The arrival of Formula 1 in India must be seen as another significant step towards establishing India firmly in the world’s sports market. It is a natural consequence of the opening up of our economy, its stability – and the enormous numbers of the young consumers of televised sport here – that India has been identified as an emerging sports market, as a sporting destination.

Look at how soccer teams from Europe have started investing their attention here – Bayern Munich, Manchester United, Manchester City and Tottenham Hotspur are good examples. Consider how NBA has already set its foot on Indian soil by tying up with Mahindras; or, for that matter, look at how golf’s European PGA Tour has already expanded its base with a second-level Challenge Tour event in India. It was inevitable that Formula 1 President and CEO Bernie Ecclestone brought the sport to India sooner than later.

Curiously, it is more important for sports like Formula 1 to make their presence felt in India than it may be for India to seek such an event to get on to the world map. Not for nothing do a few believe that Formula 1 has to be constantly seeking new pastures. For instance, it is not insignificant that the Victorian Government is reconsidering its support to the Australian Grand Prix in Melbourne since it cost the tax payers $50.2 million to stage the event in 2011. The Singapore Government has said it is in no a hurry to negotiate with the Formula One Management for an extension of its street circuit race past 2012. South Korea joined the calendar last year, the US Grand Prix stages a return after five years at a new venue (Austin, Texas) in 2012 and in 2014 the first F1 race in Russia will take place.

Even if cricket takes up much of the viewership (and therefore dominates the sponsorship market), India’s TV audience has shown that it has great appetite for a variety of international sport – somewhat to the detriment of national and the chagrin of organisers of domestic sport. Given that there are millions of F1 fans in the country, there will always be a demand for the event to be held in India.

For all that, it is now an accepted fact that most international sports events are being supported by audiences that go way beyond the capacity of any stadium. The combined F1 viewership of 527 million last season, including around 30 million from India, is the macro audience for which the F1 drama is unfolded every time. The fact that the Canadian Grand Prix is scheduled to suit the convenience of the European TV audiences is an ample indicator of how it the TV audience rather than the trackside spectators which has precedence.

For close to two decades, Formula 1 has been telecast in this country and its viewership has risen past the 30 million mark. The interest in the sport is so enormous that every year close to 10,000 Indians turn up at the Singapore Grand Prix. The event itself may be niche – with the top five teams signing the most sponsorship deals – but the audience now transcends the metros, sparking huge interest in the hinterland as well.

It is estimated that the Formula One Group will generate $1.789 billion in revenue this year and could rise past the $2 billion mark next year. According to F1’s industry guide Formula Money, race hosting fees, which were worth $568m last year, are expected to be the largest source of growth. The sale of television rights fetches F1 $470 million, trackside advertising gets $243 million, corporate hospitality $ 153.5 million and sponsorship and licensing $90.5 million. Team sponsorship and supplier deals have bucked the trend of falling four times in five years by rising from $802 million in 2010 to over $887 million this year.

Given that Formula 1 circuits’ main source of revenue is neither a share of the TV rights money nor much more than 30 per cent of trackside billboards but ticketing – and the Buddh International Circuit is expected to rake in $26 million if it hosts a sellout event – the money it will make from each Grand Prix is just about one-eighth of its expenses. Why then has Jaypee Sports International (JPSI) itself invested more than $200 million in developing the facility and why would it spend a similar amount in licencing and other costs? Clearly, the primary intention is to put India on the map of what is truly a world class sport but it would be a good wager that the infrastructure major – with interests in Engineering and Construction, Cement, Private Hydropower, Hospitality, Real Estate Development, Expressways and Highways – is hoping for a matching return from its real estate projects around the track.

A number of Indian companies like the title sponsor, Airtel, Hero Motor Corporation and Amul have joined the Formula 1 bandwagon. Hotels in and around Noida have been booked for the fortnight and many have found it tough to find room in the vicinity.

Ecclestone’s company flies six jumbo jets with cars and equipment – and each plane is said to cost $900,000 in fuel and charter costs – so that races can be conducted. One of the Boeing 7474 planes delivers the Outside Broadcast facility that forms the hub of the TV production with more than 150 personnel working on producing the broadcast.

It is also a fair question to ask what would happen on the track once the dust settles down after the F1 race on October 30. You can be sure of a lot of activity through the year. Designed by German architect Hermann Tilke, the track is part of an ambitious 2500-acre sports complex that will include a motor driving academy to be set up in collaboration with Mercedes-Benz. It is possible that as many as 35-40 weekends will see motor sports activity, including the final round of the JK Tyre FMSCI National Racing Championship as early as next month.

This article first appeared in Free Press Journal, Mumbai, on Sunday, October 23, 2011.