Why F1 needs Asia

With the cars, drivers and racing tracks all serving as de facto advertising hoardings, competition for the lucrative space is tight. Despite all its successes, though, F1 still needs to grow. Its popularity in Europe has in recent years shown signs of waning, which makes it more important than ever for the sport to enter untapped markets and attract new sponsors. For this, Asia is a major priority.

The announcement in the spring of 2007 that the F1 season would make a stop in Singapore was seen as another example of the sport heading East in search of new markets. The Singapore race is the latest step in the overall development of F1 in the region. This year Korea will join Japan, Malaysia, China, Australia and Singapore as the latest Asia-Pacific host country, while India is slated to join the roster in 2011. But F1’s progress in Asia is not just seen in the number of countries that want to join the global road show; equally important has been the interest of Asian brands to attach themselves to the sport.

Industry monitor Formula Money says approximately 175 companies will this year spend a total of US$723 million on F1 sponsorship, with roughly 20 per cent of team sponsors now coming from Asia. Malaysian oil company Petronas takes the top spot in Asia with an estimated $55 million invested in title sponsorship of the Mercedes team.

Another big sponsor in F1 is LG. The Korean electronics company last year became the sports’ global technology partner in what Formula Money believes is a five-year arrangement priced at $20 million per year. The association includes branding at the circuit and its logo embedded into the television feed.

Meanwhile the Force India F1 team, founded by a consortium headed by Indian businessman and owner of the Kingfisher airline and beer brands Vijay Mallya, is building momentum in its home country. As well as flagship sponsor Kingfisher Airlines, other Indian brands such as Reliance and ICICI bank have in the past several years associated themselves with the team.

The attraction of F1 is obvious - the glamour and prestige associated with the sport not only served up globally on an annual basis for nine months of the year, but also has strong local appeal because of the geographical spread of the races.

“You can’t compare it with the World Cup or Olympic Games,” says Monisha Kalternborn of the Sauber F1 team. “Those are focused on a short period of time and in one place. After it’s over who talks about them? You might remember the event - but what about the companies involved? F1 is the only sport - at the highest level in its category - which takes place practically throughout the year and all over the world.”

The sport was not always this attractive a proposition. In the 1970s, before Bernie Ecclestone gained a mandate from team owners to restructure the commercial side of the sport, F1 was a haphazard collection of races with a varying entry of teams and drivers in each race. To turn it into a professional sport Ecclestone needed other entrepreneurs like him. Back then, these were wheeler-dealer racers and car-traders-turned-team-owners - such as Frank Williams with his eponymous outfit, and Colin Chapman of Lotus. Ecclestone standardised TV broadcasting and took it global. As a result, the number and type of companies buying sponsorship grew dramatically.

Ecclestone’s challenge for the 21st century, though, is to maintain F1’s position as a global sport. While Europe remains the hotbed for F1, television viewing figures have declined over the past four years. New markets need to be explored and Asia, with its huge audience potential, is an ideal choice.

Key will be creating a local base and for this Ecclestone needs the assistance of local entrepreneurs who understand the markets. One such person is Tony Fernandes.

In 2001, after a successful career in the music industry, the Malaysian took over the low-cost carrier AirAsia. Fernandes promoted his airline with sponsorship of the Williams team in F1 from 2008. Last year, he created, from scratch and in record time, a new team combining Malaysian financing with British technology to bring the Lotus name back into Grand Prix racing.

While the 46-year-old is enthusiastic about the sport, it’s clear his involvement is first and foremost a business investment.

“My view is that there’s a huge upside to F1,” he tells Campaign Asia-Pacific. “It’s a European sport now but it will become a global one. You can’t turn up in Malaysia and expect it to be like [the] UK overnight. It’s going to take many years of investment and marketing but it will happen. F1 is a huge sport and gets tremendous coverage. It’s also technologically right if you want to present your brand in a certain way.”

Gary Carey, global sponsorship director for Johnnie Walker, says F1 is “glamorous, stylish and sophisticated”. The whisky brand entered the sport with the McLaren-Mercedes team in 2005 as part of an exercise to give the brand a more contemporary feel, and to address the 15-year decline of the whisky market. That the new race additions to the championship calendar also matched those targeted for growth by the Diageo label was an important consideration. “F1’s footprint is huge and growing, especially in Asia,” notes Carey. “The growth of the brand over the past five years is down to the F1 programme. It has worked tremendously well.”

However, Kenny Hau, regional business director, Entertainment, Sports & Partnerships, Asia-Pacific at GroupM, points out that compared to other sporting properties in the region, F1 is percieved by marketers in the region as more challenging to master and perfect. He argues that successful sponsorship deals need an appropriate fit and relevance between the sport, brand and audience. Unlike, say English Premier League (EPL) football, F1 is something of a double-edged sword for marketers.

“The intangible marketing benefits and entitlements available from F1 sponsorships can be extremely compelling and appealing,” he says. “However, they tend to suit more sophisticated and experienced marketers who have preference for creating their own out-of-the-box solutions versus adopting a more turnkey solution that can be activated with limited budgets and resources. This can mean F1 is seen by Asian brands as challenging and hard to get right - particularly compared with the relative predictability of the EPL.”

Then there is the more straightforward question of price. Many brands are put off  by the huge values put on sponsorship. Johnnie Walker’s Carey says the price of F1 sponsorship “is not massively out of kilter. Bear in mind you don’t need to promote the sport and it’s aired in almost every country. But it all comes down to how you activate. If you only do three countries then it’sgoing to appear expensive.”

Johnnie Walker’s F1 theme is fully integrated into the marketing mix from advertising, through point-of-sale and digital, he says. “Markets across the globe can choose to use the F1 materials when a Grand Prix is in their territory and revert to local programmes thereafter.”

But as Asian brands are at least beginning to get excited about F1, Asian consumers so far seem less enthralled. Figures from IFM Sports Marketing show that F1 global viewing is still heavily concentrated in Western Europe. In Asia-Pacific, the culmulative viewership for dedicated F1 race programming in 2009 was just over 100 million, compared with close to one billion for Western Europe. Significantly, the Asia-Pacific audience fell 23.2 per cent year on year, while the global average was a decline of 3.2 per cent. Formula Money say this was the result of some races starting later and clashing with other sport on TV in the Asian time zones.

Take China, for instance. According to Formula Money, the highest individual race audience in 2009 was just over 14 million. This number pales against other sports, including the staggering 110 million Chinese who watched local hero Ding Junhui beat Stephen Hendry in the final of 2005 China Open snooker in Beijing. On-the-ground attendance is sporadic. The inaugural Chinese Grand Prix in 2004 set an attendance record for China of 260,000 for the three days. But attention dropped thereafter and last year’s event was marred by empty stands trackside.

Juss Events, the local promoter of the Shanghai Grand Prix, says it is using its experience in tennis to improve promotion of the event and its relevance to local people. “We need to further develop the motor-racing culture in China,” says Jiang Lan, chief executive of Juss. “In order to do so, we hope to attract more sponsors and encourage them to foster local drivers. Although this is a relatively long process, we believe we can achieve our goals in less time than it would take a Western country.”

Another challenge — and one highlighted by the China example - is the current lack of local role models in the region. Yao Ming has elevated the status of basketball in China, while India has always had its cricket heroes. Asian F1 drivers, though, are still few in number.

Vicky Chandhok, a leading light in India’s motor sport scene and father to F1 driver Karun, takes up the theme: “When Force India entered F1 in 2008 it triggered the eyeballs. There was an 18 per cent increase in viewership in 2008. It grew another 27 per cent last year. Then when Karun joined F1 this year with the Spanish HRT team, it jumped 40 per cent.”

Similarly, in Spain, F1 was not especially popular before Fernando Alonso’s rise to fame in 2005. Now it hosts two F1 races each year in Barcelona and Valencia. “People need someone to associate with,” says Chandhok. “The Indian Grand Prix makes sense only if you have a local driver to create passion; Indians are very patriotic.”

Nick Wilkinson, vice-president of programming at pan-Asian sports broadcaster ESPN Star Sports, thinks it’s a little more complicated: “People in Asia want to see the best - not the best Asian”, he says, adding that a local racer can be a boost but poor performance “can be a turn-off”. Wilkinson agrees however that successful local stars can greatly boost fortunes. For example, he notes South Korean footballers playing at the highest level, such as Park Ji-sung at English Premier League team Manchester United, have sent ratings “off the chart”.

Wilkinson says in Southeast Asia F1 is the second most-watched sport on ESPN Star Sports after football. India is dominated by cricket but F1 is still one of the country’s top four most-watched sports. In Malaysia, especially, F1 rates much closer to football than it does in other markets. This reflects the country’s relatively deep association with the sport - it began holding the Grand Prix at Sepang in 1999. At the same time, Malaysian Alex Yoong raced in F1 in 2001 and 2002, while Fernandes’ Lotus Racing is heavily backed and staffed by Malaysians.

Wilkinson believes viewership will grow as the sport becomes more prevalent in the region: “In Singapore we’ve seen our ratings go up, and not just for the Singapore GP,” he says. “Interest has grown both from viewers and advertisers.”

However, it is a very European brand - Ferrari - which has had the biggest effect: “The key is the excitement of the races but Ferrari’s performance is very important. As with Manchester United people get behind Ferrari much more than other teams. It’s a big brand. The ratings fall a lot if Ferrari is having a bad year.”

For Fernandes, the future for F1 in Asia is simple: the sport will become more popular as local consumers feel they have something they can identify with. “People want local content,” he concludes. “At Warner Music, I was asked why anyone would want to buy local artists when they could have Phil Collins or Madonna. By the time I left we were 70 per cent local. People want to touch their stars.

“You can build all the nice stadiums but what people come to watch is in the stadiums. This year the Malaysian Grand Prix had its largest crowd because there was a Malaysian team and driver - real Malaysian involvement. F1 needs Asian drivers. A Chinese driver. An Indian driver. There is a huge upside in the sport.”

Speaking of the Singapore night race, which was introduced to coincide with European viewing times, Fernandes identifies what he believes will be the ultimate tipping point for the sport in Asia. “I told Bernie that when you have a morning race in the UK because you have two billion people watching in Asia - that’s when F1 will have become a truly global sport.”

This article was originally published in the Ocotber 2010 issue of Campaign.