- 05 Apr 09, 05:46#102327
Le coeur a ses raisons que la raison ne connaît point. 
Recession May Hit Formula One Later, if at All
By BRAD SPURGEON
Published: April 4, 2009
The maiden victory of the Brawn team in Melbourne, Australia, last Sunday was rich in symbolism for Formula One: a restructured team that barely survived the financial crisis went on to win in its first race.
As the money-guzzling, conspicuous-consumption series prepared for the Malaysian Grand Prix on Sunday, it was on the cusp of following Brawn’s lead or sinking into the financial vortex.
The larger story behind Brawn began when Richard Branson, the British entrepreneur who founded the Virgin Group, flew to Melbourne on March 28 to announce that Virgin had become the team’s first sponsor. Branson told The International Herald Tribune that Virgin had invested in the team to show the world that his company was ready to make a move amid the economic uncertainty.
“Everyone is just frozen in the headlights of this recession, and if everybody stays frozen in the headlights of the recession, it’ll just get worse and worse,” he said. “If you get out there and try and invest in times of recession, we can start pulling the world out of this recession.”
He also said it was a cheaper time to get into Formula One.
In fact, the financial situation of the current season will be little different from past years thanks to sponsorship, circuit hosting and television contracts signed years in advance. But ticket sales and corporate spending could be off.
Despite several top sponsors like ING, Credit Suisse and RBS announcing that they would not renew their contracts after they expired, the 2009 season is set for all the teams. Problems could begin in 2010, said Mario Theissen, the director of the BMW Sauber team.
Much will depend on where the economy goes and how successfully the series cuts costs. But many people inside and outside the sport say it remains a value for advertisers.
“It is still the best bang for buck spent in advertising anywhere in the world, and I would argue one of the best sporting opportunities because you’re in so many parts of the world, televised to so many different countries,” said Paul Stoddart, an Australian airline business entrepreneur and former Formula One team owner, who has long criticized the sport’s escalating costs.
Adam Parr, the chief executive of the Williams team, said the sponsorship problem was not with Formula One, but that companies were waiting to see which way the financial crisis would move.
“We are talking with people now who get Formula One, they get the match with their brand,” Parr said. “They get the global marketing potential and they see that there’s nothing else that they could do that will give them the same return on investment than this. But they are sitting on their hands because they are saying, ‘Making a decision now, it’s just so difficult.’ ”
Despite this, Parr said that in the final quarter of last year, Williams re-signed or renewed nine sponsors, and a 10th renewed in July. Of those, four at least doubled their investment from the previous year. He said the team already had a budget for 2010 that was 90 percent of this year’s budget.
Since sponsorship began in Formula One with the Gold Leaf cigarette logo appearing on Lotus cars in 1968, sponsorship trends have often shifted. As tobacco sponsorship ended, technology companies like Hewlett-Packard and Intel joined. After the technology bubble burst, many of those companies left, and the financial services trend began with companies like Allianz, ING and RBS joining.
Virgin is part of a new trend, an influx of airline companies, which includes Kingfisher Airlines and Air Asia.
Teams owned by car manufacturers is a trend in itself, and therein lies a danger: the sudden withdrawal of a manufacturer. In December, Honda quit Formula One, but the team was acquired by Ross Brawn, a former Ferrari technical director, and is racing under his name.
“There are a number of teams on this grid who are funded by effectively one shareholder,” Parr said. “As long as that shareholder is happy to continue funding, you’ve got a budget.”
That is why Brawn’s results are encouraging for the future of the sport. Last month, the International Automobile Federation, the sport’s governing body, announced that it would institute an optional budget cap of $42 million for 2010. Teams could opt for the budget cap in return for more technical freedom in building a car, or spend all they want, but with technical restrictions.
The budget cap represents a tenth of the highest team budgets in recent years. But Stoddart, who owned and operated Minardi from 2001 to 2005, said it was not impossible to be competitive with a lower budget.
“Our average over five years was $27 million a year,” he said. “We were two seconds off the pace, but I’ll tell you what, we were there. So it can be done.”
In fact, he said something had to be done.
“We’ve seen Honda go,” Stoddart said. “There are at least two others that I know that have got serious budget shortfalls at the end of this year. So serious that their masters — who may not be seeing Formula One as their greatest priority in life, given the global economic recession — may just quite ruthlessly turn the tap off, turn the money supply off and say we’re out. That would be catastrophic for Formula One.”
By BRAD SPURGEON
Published: April 4, 2009
The maiden victory of the Brawn team in Melbourne, Australia, last Sunday was rich in symbolism for Formula One: a restructured team that barely survived the financial crisis went on to win in its first race.
As the money-guzzling, conspicuous-consumption series prepared for the Malaysian Grand Prix on Sunday, it was on the cusp of following Brawn’s lead or sinking into the financial vortex.
The larger story behind Brawn began when Richard Branson, the British entrepreneur who founded the Virgin Group, flew to Melbourne on March 28 to announce that Virgin had become the team’s first sponsor. Branson told The International Herald Tribune that Virgin had invested in the team to show the world that his company was ready to make a move amid the economic uncertainty.
“Everyone is just frozen in the headlights of this recession, and if everybody stays frozen in the headlights of the recession, it’ll just get worse and worse,” he said. “If you get out there and try and invest in times of recession, we can start pulling the world out of this recession.”
He also said it was a cheaper time to get into Formula One.
In fact, the financial situation of the current season will be little different from past years thanks to sponsorship, circuit hosting and television contracts signed years in advance. But ticket sales and corporate spending could be off.
Despite several top sponsors like ING, Credit Suisse and RBS announcing that they would not renew their contracts after they expired, the 2009 season is set for all the teams. Problems could begin in 2010, said Mario Theissen, the director of the BMW Sauber team.
Much will depend on where the economy goes and how successfully the series cuts costs. But many people inside and outside the sport say it remains a value for advertisers.
“It is still the best bang for buck spent in advertising anywhere in the world, and I would argue one of the best sporting opportunities because you’re in so many parts of the world, televised to so many different countries,” said Paul Stoddart, an Australian airline business entrepreneur and former Formula One team owner, who has long criticized the sport’s escalating costs.
Adam Parr, the chief executive of the Williams team, said the sponsorship problem was not with Formula One, but that companies were waiting to see which way the financial crisis would move.
“We are talking with people now who get Formula One, they get the match with their brand,” Parr said. “They get the global marketing potential and they see that there’s nothing else that they could do that will give them the same return on investment than this. But they are sitting on their hands because they are saying, ‘Making a decision now, it’s just so difficult.’ ”
Despite this, Parr said that in the final quarter of last year, Williams re-signed or renewed nine sponsors, and a 10th renewed in July. Of those, four at least doubled their investment from the previous year. He said the team already had a budget for 2010 that was 90 percent of this year’s budget.
Since sponsorship began in Formula One with the Gold Leaf cigarette logo appearing on Lotus cars in 1968, sponsorship trends have often shifted. As tobacco sponsorship ended, technology companies like Hewlett-Packard and Intel joined. After the technology bubble burst, many of those companies left, and the financial services trend began with companies like Allianz, ING and RBS joining.
Virgin is part of a new trend, an influx of airline companies, which includes Kingfisher Airlines and Air Asia.
Teams owned by car manufacturers is a trend in itself, and therein lies a danger: the sudden withdrawal of a manufacturer. In December, Honda quit Formula One, but the team was acquired by Ross Brawn, a former Ferrari technical director, and is racing under his name.
“There are a number of teams on this grid who are funded by effectively one shareholder,” Parr said. “As long as that shareholder is happy to continue funding, you’ve got a budget.”
That is why Brawn’s results are encouraging for the future of the sport. Last month, the International Automobile Federation, the sport’s governing body, announced that it would institute an optional budget cap of $42 million for 2010. Teams could opt for the budget cap in return for more technical freedom in building a car, or spend all they want, but with technical restrictions.
The budget cap represents a tenth of the highest team budgets in recent years. But Stoddart, who owned and operated Minardi from 2001 to 2005, said it was not impossible to be competitive with a lower budget.
“Our average over five years was $27 million a year,” he said. “We were two seconds off the pace, but I’ll tell you what, we were there. So it can be done.”
In fact, he said something had to be done.
“We’ve seen Honda go,” Stoddart said. “There are at least two others that I know that have got serious budget shortfalls at the end of this year. So serious that their masters — who may not be seeing Formula One as their greatest priority in life, given the global economic recession — may just quite ruthlessly turn the tap off, turn the money supply off and say we’re out. That would be catastrophic for Formula One.”
Le coeur a ses raisons que la raison ne connaît point. 
