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Sponsorship marketplace in F1 looking “pretty good” says F1 business expert
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Posted By: James Allen  |  13 Jun 2013   |  5:56 am GMT  |  50 comments

The sponsorship marketplace in Formula 1 is looking “pretty good” at the moment with several new brands coming into the sport, according to Formula 1 business expert Zak Brown, however he adds that there remains a big pressure on teams to continue to find ways to raise money.

Teams are facing soaring costs heading into next year, with the new 1.6-litre V6 engines set to be introduced to the sport. As a result, the price of the powerplants will rise from around £6-10 million per year to around £18 million. That sizeable increase will put pressure on the midfield and back marker teams.

Brown, who is the founder and CEO of Just Marketing, told the June edition of the JA on F1 podcast: “The sponsor marketplace is pretty good, globally as sport, there were some significant announcements in off-season such as UPS, Rolex, Coca Cola (through their Burn brand) – so there’s still a lot in-flow.

“But the sport has big appetite for sponsorship and in history of sport, there has never been enough money coming in to make everyone fat and happy. So there is constant pressure on teams to raise money which is still very difficult despite a few coming in in the off season.”

The biggest change to the sport in terms of sponsorship is the type of brands which are aligning themselves with teams. The recent trend has seen the arrival of more consumer packaged goods companies entering the sport.

“A few years back, we though the whole consumer packaged goods category would be next in line to enter the sport and sure enough, Unilever, GSK and Coca Cola have all entered the sport in the last 12 to 24 months,” added Brown.

“I think what’s is great is that they are some of the largest activators to consumers in the world. One of the things that made Nascar so successful was the advertising campaign created for the sport by hundreds of thousands of sponsors involved who are all very consumer driven.

“When you get into banks, logistics or narrow consumer groups, they don’t tend to be mass market as much. I think the new trend is a win-win. It will be good cash for racing teams but also help extend the reach of the sport – which is only good for everybody.

“I think this trend demonstrates that on a global basis [in terms of sports sponsorship], F1 is the leader. If you have a global product, there are very few means in which you can do an arrangement that reaches 200+ countries.

“To be able to replicate that through the traditional advertising channels would be a very expensive proposition. When you break down the value and the reach brands get with F1, it’s actually not nearly as expensive as it sounds.”

There has been speculation that following Vodafone’s departure as McLaren’s title sponsor, Mexican businessman Carlos Slim – who backs the team’s driver Sergio Perez, might use one of his companies, such as the European telecommunications company Claro which has appeared in the Woking-based team’s car this season, to take over the sponsorship, but Brown says history suggests that won’t be the case.

“I’m not surprised to see some of Carlos Slim companies align with McLaren,” said Brown. “He has always supported drivers no matter what team or category – they’ve done GP2 and Grand-AM in American and F1 – but I have never seen them become title partner.

“I think you might see a bit more of the Slim family involved through their backing of Perez but I don’t anticipate seeing them as a title sponsor. They haven’t historically shown they put that level of investment behind a driver.”

With regards the lack of a Concorde Agreement in the sport, Brown doesn’t think it’s a big problem at the moment because “everyone seems to be operating pretty well” without one. However, he adds that it will need to be done before the sport floats on the Stock Exchange.

“It [the Concorde Agreement] will be important when they eventually do go public because it’s something the investor community would want to see,” said Brown. “It will eventually get done but there is probably not a massive sense of urgency.”

Recently, Donald Mackenzie, the co-founder and co-chairman of private equity firm CVC Capital whose stake in F1 is just under 35%, said the proposed flotation may again be put on hold until next year.

“Donald would obviously know better than anyone what plans are,” said Brown. “Maybe he wants to cool the noise a little bit. That could be one strategy as to why he’s throwing out a soft comment.

“Maybe something is going on and he wants to manage expectations because everyone, myself included, thought it was a done deal to go public this year. Maybe he wants to pull back on expectations a little bit because he knows something that we don’t.”

To listen to the full interview with Zak Brown, plus more from Christian Horner, Mark Gillan and Derek Warwick make sure you listen to the June edition of the JA on F1 podcast available to download via the iTunes store or directly here.

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  1. Chris Normal says:

    That’s actually pretty interesting stuff. Have you happened to find out anything more about what happened to Lotus’s title sponsor or who it was susposed to be? It seems they’ve dug a deep hole with the idea of the resultant performance attracting a sponsor who would fill it back up. And speaking of Lotus, how seriously do you see the Kimi to red bull rumors? I have a feeling they are nothing more than a rumor predicated from the enthusiasm of Kimi fans. But I was also the guy who gave you a little bit of a hard time for publishing a story about the rumor of Kimi coming back to F1 so my instincts have a tendency to be off.

    1. Stephen Taylor says:

      A lot of kimi fans don’t want him to leave . The good wisdom according to Mark Hughes is that Mateschitz wants Kimi but Christian Horner is against the idea.

      1. C Lin says:

        Still hoping for it to happen.
        Can’t wait to see 2 WDCs in the same team.
        The last time was Hamilton & Button & I enjoyed that.
        Bring on Vettel & Raikkonen!

      2. Stephen Taylor says:

        2 WDC winners in the same team is non sustainable.

      3. Kimi4WDC says:

        @Stephen Taylor looks like deal made in heavens for Red Bull :D

  2. janis1207 says:

    Entry of consumer packaged goods sponsorship is a double edged sword at best.
    Yes, it’s big money, and may extend the reach of F1, but it could be a real Pandora box.

    F1 used to be an elite sport with elite sponsors. It was aimed at relatively sophisticated people capable of appreciating the subtleties of F1. Now with packaged goods money flowing in, F1 will have to re-orient itself with much simpler general audience in mind.
    F1 has already shifted away from being motor sports to being entertainment with cars involved. Now this trend is set to accelerate. We already have artificial thrills like DRS, and I won’t be surprised if talk about shorter GP’s will be resumed soon (2 h GP is too long for a channel switching average TV consumer).
    Who knows what will come next… ?

    1. Matt says:

      Are you trying to argue that relatively sophisticated people don’t use Gillette shavers or any one of Unilever’s myriad brands?

      There are a lot of “sophisticated” people in the world who haven’t tuned into F1 yet.

    2. Warren G says:

      Sophisticated F1 sponsors have never been the norm. Title sponsors throught the years included the likes of JPS, Marlboro, West, BAT, 7Up, Camel, Vodafone, Orange etc. Those are not elite brands by any stretch and I think that big consumer brands getting involved in the sport will only be a good thing.

      If only the likes of Coca Cola and such would jump in with both feet rather than a half baked effort with Burn.

      1. DonSimon says:

        Sega? Surely only a sophisticate can appreciate the wonders of the mighty, and sorely missed, Dreamcast!

    3. Hendo says:

      Elite & sophisticated sponsors! You’re joking aren’t you?
      F1 sponsorship started with cigarettes (Gold Leaf) and petrol. As for FMCG – what about the Yardley McLarens of the 60′s?

    4. Andrew Carter says:

      Does anybody remember the one off appearance of an f1 car sponsored by Hustler? It was at Brands Hatch in the late 70′s, possibly for a Race of Champions rather than the World Championship.

      Very classy.

      1. JC says:

        On the same lines, penthouse and durex on surtees team an others in the 70′s (went well with James Hunt’ famous racing suit patch). Classy indeed !

    5. Elie says:

      You’ve got to be kidding Janice1207- if you can afford seating in a decent stand for a GP weekend you will know its a luxury that very few will do often (if ever). Names like Rolex, Santander, Genii, PDVSA are not your bread and butter companies either compared to Camel , Marlboro , Mobile etc..The consumer goods names will attract more people to the sport mostly via electronic mediums which is where all the money is. This is both economically sound and strategically sensible for the growth of these avenues for F1.

    6. Steve says:

      “F1 used to be an elite sport with elite sponsors. It was aimed at relatively sophisticated people capable of appreciating the subtleties of F1.”

      Based on the comments I read on F1 blogs, the days of F1 fans being “relatively sophisticated people capable of appreciating the subtleties of F1″ ended a long time ago. (if it was ever true to begin with) Many (most, even?) cheer for drivers they see as cartoon heros and boo drivers they see as cartoon villains and that’s the full extent of their sophisticated appreciation of F1. It’s glorified pantomime for many fans.

  3. David Burger says:

    Engine configuration should be V6 not V8.

  4. Mat W says:

    Can someone confirm that it is still the case that the livery of both cars in a team must me the same ? I remember years ago BAR trying to run two differently branded cars and it being disallowed – leaving them to run with a different paint scheme on each side of the 2 cars.

    I’ve always thought this rule is a bit stupid sponsorship wise. If the teams could have different branding on each car (as in many other motor sports) it would presumably allow them to seek multiple major sponsors who would sponsor a car rather than the team and reduce the cost of for sponsors to get their brand on a F1 car. It would also make the grid a lot more colourful :)

    1. Pete_from_Nepal says:

      I suppose everyone would want to be on Kimi’s car. Poor Grosjean!

    2. Simmo says:

      The rules are that both liveries must be the same on each car, and must stay the same throughout a season.

      Minor differences / modifications are allowed of course.

      If a team wants to do something different for a driver or race then they can ask the FIA for permission, but generally they are not allowed.

  5. IanC says:

    “One of the things that made Nascar so successful was the advertising campaign created for the sport by hundreds of thousands of sponsors involved who are all very consumer driven.”

    Most of whom don’t hang around the sport very long. F1 wouldn’t survive long with a NASCAR model.

  6. AlexK says:

    good article. There was also a good piece in F1 magazine last month which paints a slightly different picture and that is of FOM now taking huge chunks of the sponsorship that used to go directly to teams. FOM can guarantee x amount of minutes coverage every race as they control the tv feed. teams can’t guarantee this a good example was given as Emirates that witched from Mclaren to offical partner of F1.

    1. JohnBt says:

      I’m sure you heard of someone by the name of Bernie or something like that.

  7. nnails says:

    since the advent of sky f1 I have took to emailing sponsor of f1 and boycotting them.

  8. Michael S says:

    We keep hearing Lotus has little to no money. Not sure how they can keep Kimi with no title sponsor on the car. On the other hand sponsors probably do not want to commit money unless they know Kimi is on board 2 or 3 more years.

    1. Craig says:

      James theres a really interesting article Ive just been reading about the financial state of Lotus
      http://www.telegraph.co.uk/sport/motorsport/formulaone/f1news/10081762/Lotus-F1s-56m-loss-is-motorsports-biggest.html

      It says that the team lost a massive amount of money because the Lotus car manufacturer quit its sponsorship. What I dont understand is why it is still visible on the cars. Why would the team let this happen? The article doesnt explain it. Any idea?

  9. Tornillo Amarillo says:

    I’ve never bought a cigarette, a drink or gas from a sponsor because I saw his logo on the F1 car… But maybe some people do that.

    1. Simmo says:

      There’s more going on in people’s subconscious minds than you realise, making the adverts influence people.

      Well that’s what some scientists say (so it is therefore probably an unreliable statement!! ;) )

    2. Tim says:

      They say that half the money spent on advertising is wasted. The problem is, no one knows which half ;-)

      1. Tornillo Amarillo says:

        Yes they say that for every $10 millions, $5M is the half.

  10. chris green says:

    sorry to be the damp squid – sponsors will be harder and harder to find as the global recession deepens. everyone is in denial about this but the truth is the emperor has no clothes.

    the global financial system is bankrupt.

      1. Sebastian says:

        Hahahaha! Love it!

    1. NickH says:

      Chris Green is unfortunately absolutely spot on

  11. Sebee says:

    James,

    Nice bit about hanging out on the Pit Wall.

    Have you ever driven an F1 car as well? If not with a team Perhaps at one of those F1 experience places where they have older cars with the V8s?

    It’s fantastic to have such experiences. I wish there was a chance for fans to experience this first person.

  12. Daniel MA says:

    Slim Jr has already said in the Spanish GP that they will have a major sponsorship deal next season (how big no one knows yet) and they will indeed be using mainly the South American brand Claro, which I find a bit odd because here in Mexico Claro is completely unknown.

  13. nnails says:

    dont like comments about sponsors angry about fans botcotting them because of sky tv?

    1. Jeff says:

      pay per view reduces the number of viewers.
      this is bad for sponsors. I don’t pay the extra to get NBC SN over in leftpondia, so F1′s brand exposure to me is reducing. Multiply that by the number of viewers the BBC used to get with live free TV, and the numbers may get significant.

      Despite being a fan of F1 since the 70′s, I never smoked, never drank a Red Bull, only drink kingfisher if no decent beer is available, and never bought a canon camera, so maybe the loss of me as a regular F1 viewer isn’t a big deal.

  14. Kimster says:

    I really wish that Genii capital really get its act together….being a kimi fan since 2002 ,it’s very dreadful to see him loose at the end of season just because of bankruptcy situations and huge losses…which in turn keeps Lotus out of the development race and out of the WDC…coz WCC aint gonna happen..I can bet my life upon this..

    it’s really sad to see that raikkonen suffering again from matters which are beyond his control.. I so wish now that i could have deep pockets just to see him wdc again…

  15. Elie says:

    Nice article James and I really enjoyed Zak’s contribution to your podcast. He definitely sounds like someone that knows all the strategic alignments in motor sport. Do the teams go to him for external advice? Or is it more the sponsor companies.

  16. JR says:

    Sponsorship is significantly lower in 2013 than what it was in 2011, F1 has lost 1 team due to a lack of sponsorship, and most of the other teams have lowered their rate card.

    Red Bull had a 2012 loss of AVE exposure in the UK of £19.8 million compared to 2011.

    This is directly due to the Sky deal, which has led to a loss in unique UK viewers of 22%.

    Which is incidentally why Silverstone haven’t sold out, less people watching on TV equates to less people wanting to visit a circuit, and Sky have lost about a fifth of their 2012 viewers so far this year.

    1. I know says:

      I concur. Additional revenue from pay tv has to be weighed against loss of revenue from loss of sponsorship.

      That does not mean that pay tv is never the more lucrative model – the premier league sponsors get decent exposure even with pay tv, for example, because there is still plenty of free, multi channel coverage of all the games. The problem in F1 is that most sponsorship money is paid directly to teams, whereas broadcasting deals are brokered by the “commercial rights holder”, who only pays out a share of the revenue to the teams. This skews the equation in favour of pay tv.

    2. Simmo says:

      Proof that pay TV is bad for F1.

      I hope you’re reading Bernie…

    3. Phil Glass says:

      As James would say, Have A Nice Day.

    4. Tim says:

      @JR
      Red Bull had a 2012 loss of AVE exposure in the UK of £19.8 million compared to 2011….

      AVE data is race-performance based and it focusses solely on the exposure gained during the race itself, excluding exposure from the grid, podium or practice and qualifying sessions. It’s not surprising, therefore, that Red Bull suffered a loss in 2012 as they were loss dominant – hence less race exposure.
      I am not saying you don’t have some valid points, just that you appear to have reached some pretty big conclusions based on rather superficial analysis. For example, maybe the British GP is struggling for sales due to the problems last year with the weather – asking fans not to come because there is no where to park is quite a negative message to send. Or, perhaps no likelihood of a Brit winning the race. Who knows?
      I doubt very much that it can all be laid at the door of SKY.

      1. JR says:

        But unique viewers in the UK dropped by 22% after the Sky deal, (and are still dropping), are you seriously saying that there’s no connection?

      2. Tim says:

        I didn’t say there was no connection and I acknowledged you made some valid points. My gripe was with the sweeping conclusion you reached (it’s all Sky’s fault) – based on, what appears to be, a superficial analysis of a complex subject.
        Undoubtedly, some of the loss of AVE is due to the Sky deal – less viwers = less exposure.But it is not the sole reason as you have stated. Likewise the poor ticket sales at the British GP are not entirely the fault of Sky. Here is a quote from Richard Phillips, the managing director of Silverstone – “If you look at the cycle on selling tickets … on the Monday after a grand prix Sunday you tend to see a spike. The weekend we had Lewis on the podium there was a spike and when you see Vettel there is less of a spike,” he said, referring to demand for tickets for the British Grand Prix.
        Perhaps it’s Sky’s fault that Lewis is not beating Seb :-)

      3. JR says:

        @Tim … I went back 15 years, and despite UK drivers having varying degrees of success, I couldn’t find a variation of more than 3%, so even assuming the biggest swing was down to British drivers not winning races, that still leaves 19% unaccounted for.

        … Someone will blame Pirelli next, oh wait Button just has.

  17. I know says:

    Real Madrid has just signed a five-year contracts with Emirates, reportedly worth 25M € per year. That kind of money will not even fund a back-marking F1 team.

    While a top team like Red Bull generates a lot more exposure for its title sponsor compared to even a top football team, the fact that the exposure is truly global can be a problem – it’s befitting a global brand, but not great for a brand with a focus on regional or national markets, like many sponsors for the second tier football teams. A leading global brand, on the other hand, does not want to be associated with a losing team, and there can only be 3-4 teams with a realistic chance of consistently winning races.

    Apart from privateers with deep pockets who like to have “their own” team, I therefore don’t think that sponsoring any other team makes a lot of sense – outside of F1, names like Caterham, Sauber or Force India get very little exposure, and always running near the back does not create a positive image.

  18. I know says:

    When it comes to F1′s floating, the elephant in the room is the likely charge against Bernie Ecclestone for corruption. And while I don’t think it currently affects sponsors, Daimler have just recently made it known that they have the option to terminate their contract prematurely should Ecclestone be convicted. Not the best moment for blue-chip sponsors to enter the sport.

  19. Phil Glass says:

    Fascinating to see Kimi’s return to F1 confounding totally some of the myths about him that were generally accepted.
    For example, the myth that he is a nightmare for sponsors. In fact he is currently the only driver fronting a high profile ad campaign for a major car maker. [Jens is only one of three sports personalities].

    Funny thing is it plays on his famous non-communicative personality. The script could have been taken from any post race interview: “No.” “No.” “No idea.”
    Being Kimi has become big business.

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