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Formula won

Indian GP Formula One, with its high-octane mix of glamour and monies, is (finally) vrooming to a circuit near you. Where does India figure in its plans?

india Updated: Oct 16, 2011 09:38 IST
Vinayak Pande

Formula 1 is big business and getting as many countries as possible to host an F1 race leads to revenues in the hundreds of millions for the sport's commercial rights holders. The push to the East is fuelled by the need to get as much in race hosting fees as possible. The Indian promoters, Jaypee group, are forking out around Rs171 crore just to gehttp://www.hindustantimes.com/Images/HTEditImages/Images/16-10-11-metro12.jpgt the event, set to take place at the Buddh circuit on October 30, to their spanking new 875-acre facility in Greater Noida.

Bubble bursting
Seven new venues have been added to the F1 calendar since 1999, out of which six have been in Asia. The events in Malaysia (added in 1999) and China (2004) are backed by the countries' governments in a big way and the losses made by the organisers of the race are offset by this support.

This shift has a reason and that is the bursting of F1's sponsorship bubble. The tobacco bubble started in the late 1960s with Gold Leaf sponsoring Lotus. Pretty soon an F1 car became little more than a moving cigarette pack with big tobacco companies keen to market their devil-may-care products through a sport where the participants had a devil-may-care attitude about personal safety.

The former sponsorship and team manager of Williams, Peter Windsor remembers the time when with this tobacco money, teams could easily afford to go racing. "Thanks in part to easy tobacco legislation and F1 being better priced within the sports industry, teams could afford to luxuriate and spend big money on making cars faster. With team budgets now being disproportionate to the sponsorship budgets of many corporates," says Windsor, "the short term solution is to keep adding more and more races to the calendar in the hope that there are governments and TV networks willing to pay for hosting and broadcasting rights."

The business of sport
As a business model, F1 is currently at the mercy of one organisation. It is headed by an 80-year-old man who's undergone a triple-bypass operation, has openly expressed his admiration for Adolf Hitler and considers dictatorship to be the best way to control a business. That man is Bernard Charles (a.k.a. Bernie) Ecclestone and his Formula One Group (FOG) is an umbrella under which fall Formula One Management, Formula One Administration and Formula One Licensing BV.

Under this model, the race-hosting fee for any new F1 venue averages around Rs147 crore with a provision that it would go up by five to 10 percent every year.

It all leads to the Formula One Group generating Rs8,768 crore according to the sports industry guide Formula Money. Race hosting fees were estimated to amount to Rs2,784 crore last year and are expected to become the main source of income for FOG.

This model is sustained through the image of glamour and excitement being created around the Formula One circus as it goes globe-trotting from the playground of the rich and famous in Monte Carlo to Mayawati's backyard Noida.

Glamour in F1
Back in the 1950s and 1960s, formula one drivers were not much better off than mechanics when it came to the subject of payment.

The team owners probably didn't see much wrong in that as a lot of drivers used to be mechanics themselves, such as five time world champion Juan Manuel Fangio.

The perks were certainly better for those behind the wheel rather than the ones handling a greasy spanner. Post-race 'events' back in the old days included 'dunking' for silverware thrown into a barrel of water to simply raising hell at the local watering hole.

Spectators had the kind of access to drivers that they can only dream of nowadays with the top stars being available for autographs and photo-ops pretty much throughout the race weekend when they were not strapped into a racing car.

With drivers getting paid better from the 1970s and a sponsorship boom in the 1980s, things did start to get a little more lavish, but it was still considered very much down to earth in comparison to the way things are today.

In 1984, a close friend of (you guessed it) Ecclestone, Patrick McNally started a concept known as the Paddock Club. McNally's Allsport Management company was already handling trackside advertising for Ecclestone when he came up with the idea of introducing exclusivity at an F1 race weekend. When it was pointed out to McNally that the concept fit more at a horse race like Ascots rather than F1, McNally replied, "F1 should be like Ascots."

With 200 Paddock Club passes being sold for an estimated Rs98,000 to selected personalities by invite, an F1 pitlane and starting grid started to go more page 3 than sports page.

On the lines of the Paddock Club are F1 glamour initiatives such as F1 Rocks and the Amber Lounge. Even at the Indian GP, corporate boxes are being sold for anywhere between Rs35 lakh and Rs50 lakh.

Economic ripples
While there doesn't seem to be much in hosting an F1 race for the organiser, the local economy does reap the benefits from the spike in tourism and judging by the rising hotel room rates in and around Delhi, the local tourism industry is well aware of this. According to Formula Money, a nation that hosts an F1 race experiences a 456 percent return on investment. The average boost to a local economy in a country hosting an F1 race in 2010 was Rs492 crore.

While the money made by governments through taxes is a little tricky to calculate, it is clear that F1 remains a good business. For now at least.