F1 Grand Prix: Asia takes pole position in Formula One races

NEW DELHI: The world’s richest sporting circus is a demanding mistress. Not only are the monies involved in hosting a Formula 1 race massive, retaining the event and making it sustainable and successful is harder still. Yet, at any given point of time, it has no dearth of suitors, especially in Asia.

In 1998, just one of the 16 races was held in Asia: in Japan, largely because of its bustling automobile industry. This year, Asia is hosting seven of the 19 races, with the gains largely at the expense of European tracks.

Paul Downward, who teaches sports and leisure policy and management at Loughborough University in UK, says it’s no surprise that F1’s centre of gravity is shifting east, given that Europe has been in the grips of a slowdown and the charge of Asian economies. “There is no evidence that viewership for F1 in Europe is falling,” he says. “The new and improved Sky Sports TV rights deal shows that it retains its popularity in the UK, but clearly, the new big investments in terms of infrastructure creation and sponsorships will come from Asia.”  The sport’s rights holder, the F1 Group, has been keen to expand the sport’s following, and convert what was essentially a Europe-centric event into a global event. That explains the sizable number of stopovers in Asia, which is host to the largest number of young urban consumers. In 2012, F1 will return to the US after five years, with a race in Texas, and possibly add another in New Jersey in 2013. The F1 Group is also looking to return to Africa, with a race in South Africa.

Playing host to F1 has become a matter of national pride. Even though the F1 Group is privately-owned, 15 of the 19 races in the 2011 calendar have received government funding in some way or the other.

According to one estimate from the Federation Internationale de L’Automobile (FIA), government investment in the races exceeded $400 million in 2010. Even though local organisers do not keep the lion’s share of the race-weekend income, it hasn’t deterred governments, particularly in Asia, from ploughing in big money into F1.

In Singapore, for instance, the country’s tourism board has bankrolled about 60% of the $100 million paid to the F1 Group in licence money to host the event. Similarly, the track in Shanghai, which was built at a cost of about $250 million and has hosted F1 races since 2004, is almost entirely state-funded.

“Local authorities generally seem to feel that F1 races are good for them and that it is worth the money they have to invest,” says Joe Saward, the founder of Grandprix.com, an F1 website.

In most countries, especially the new additions, federal and central governments have to offer massive subsidies, both for construction and the upkeep of tracks. For example, in Texas, which will host a race in 2012, there is a raging debate on whether the state should extend annual financial support of $25 million for 10 years from taxpayers’ money.

Government help is also help vital to keep the track busy for as many as 200 days, besides from three days of F1, to recover investments. India, though, is an exception.

The Indian government’s benevolence has been limited to keeping the race-day proceeds tax-free.

The road to recovery for the Jaypee Group, the promoter and owner of the Buddh International Circuit, is full of difficult bends.

For the promoter only tickets sales are available to recoup these costs, which explains why F1 tickets can be very expensive. Saward says one way around the problem is to expand seating capacity at racetracks. “For this to work, there needs to be enough demand, and that is not always the case,” he says.

(Times of India)