Business

Formula 1 sponsors form alliance

A Williams Formula One car sponsored by RBS
Image caption Formula 1's corporate sponsors are forming their own representative body

A group of the biggest corporate sponsors of Formula 1 have launched a new organisation, which will lobby the sport's power brokers on their behalf.

The firms which provide much of the sport's revenue are becoming increasingly concerned that their interests can be ignored when decisions are being taken.

It intends to recruit the top 100 sponsors currently involved in F1.

But F1 chief Bernie Ecclestone called it "silly".

The association, called Formula 100, held its first meeting in London this week.

Its membership so far includes some 30 firms, including Total, Shell, Santander and Allianz.

On the face of it, Formula 1 provides a golden platform for any company which wants exposure for its brand. It claims to have a worldwide television audience of 520m, across 187 countries.

But being an F1 sponsor doesn't come cheap. The average deal is worth $4.1m (£2.6m), according to analysts Formula Money.

Little say

Collectively, commercial backers are expected to spend more than $720m on the sport this year. By way of comparison, the owners of F1 teams, including car manufacturers Ferrari, Renault and Mercedes, are investing just over $550m.

Yet sponsors have comparatively little say in the strategic decisions which will decide the future of Formula 1. These are taken by the Formula 1 Group, which holds the commercial rights to the sport, and the governing body, the FIA.

Many of those decisions are taken with one priority in mind - to increase revenues.

The F1 Group is majority-owned by private equity firm CVC Capital Partners, which borrowed heavily to buy its stake. It needs cash to service its debts.

Expanding calendar

The teams which take part in F1 also want to maximise its commercial revenues, because they take a 50% share of the proceeds.

As a result, Formula 1 has been expanding its calendar, holding more events - and holding them in places where governments are prepared to pay very high fees for the privilege of hosting a grand prix.

New venues in recent years have included Abu Dhabi, Bahrain, Singapore and Turkey. In October, the Korean Grand Prix will take place for the first time.

While this might enhance F1's global image, it hasn't always pleased the sponsors, because for many of them the new events take place away from their traditional markets.

"The physical, geographical direction the sport is taking at the moment is a real concern for many of our members", says Christian Sylt, one of the founders of Formula 100.

Collective voice

Sponsors have also been affected by recent moves to cut costs in the sport - for example, by reducing the amount of testing teams can carry out during the season. While that saves the teams money, it deprives sponsors of valuable opportunities to entertain their clients.

F1 is no stranger to disputes between its main stakeholders. But while the teams have found a strong collective voice through the Formula One Teams Association, sponsors have traditionally stood alone.

The new association is the brainchild of Formula Money, the sporting consultancy Right Formula and the organisers of the annual Motorsport Business Forum.

It is intended to give the sponsors a platform - and allow them to speak with one voice to the sport's ringmaster, Bernie Ecclestone.

But the man himself takes a rather different view - and dismisses the new venture out of hand.

"The sponsors know exactly what they're doing when they get involved in F1," he says.

"They're all run by people who are over 21. We speak to the sponsors all the time. I see them at Grands Prix and I talk to them."

"The people behind this thing have no investment in F1. They're just being silly."

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