08/07/2013
NEWS STORY
At a recent Formula One sponsor event a senior deal-maker reminded Pitpass’ business editor Christian Sylt that the most recent blockbuster sponsorship signed with a team was way back in 2007 when Dutch bank ING became Renault’s title partner. Sure, plenty of deals have been done since then, with parcel firm UPS and telecoms company Blackberry joining Ferrari and Mercedes respectively earlier this year. However, the value of those deals doesn’t come close to the amount spent by ING. Its departure didn’t just coincide with the allegations that Renault team principal Flavio Briatore had rigged the outcome of the 2008 Singapore Grand Prix, it also came at the same time as the global banking crisis. The teams weren’t the only ones who lost out as a result of the financial meltdown as we learn from an article written by Sylt in Sunday’s Express.
The report reveals that F1’s parent company Delta Topco lost £22m ($32.8m) in advertising and sponsorship revenue from ING and the Royal Bank of Scotland (RBS) when the banking crisis forced them to pull out.
In 2008 RBS had advertising hoardings at 7 of the 18 races but in October that year the taxpayer took a 57% stake in the bank and just over 12 months later its trackside presence disappeared completely from F1. Likewise, ING got a $13.5bn cash injection from the Dutch government in October 2008 and pulled out of F1 at the end of the following year when it had trackside advertising at 12 races.
Page 95 of the prospectus for the long-awaited flotation of F1 reveals that “revenues from advertising and sponsorship in 2010 decreased £22m ($32.8m), or 14.1%, to £134.6m ($200.6m) from £156.6m ($233.4m) in 2009. This decrease was primarily driven by the decisions of ING and RBS to not renew their contracts at the end of 2009, principally as a result of the global economic downturn and the impact of the financial crisis on those banks.”
The drop came despite two races being added to the F1 calendar in 2010 - a manoeuvre which would usually boost revenue as it increases the total number of trackside advertising hoardings.
The loss of advertising and sponsorship revenue was partially offset in 2011 after Swiss investment bank UBS became a global partner of F1. The prospectus states that “revenues from advertising and sponsorship in 2011 increased £15.4m ($23.1m), or 11.5%, to £150m ($223.6m) as compared to £134.6m ($200.6m) for 2010, driven primarily by the full year effect of the UBS Global Partner contract signed during 2010 and an improvement in general economic conditions.”
According to reports from earlier this year UBS has been reviewing whether it should remain in F1. The deal was driven by the bank’s former chief executive Oswald Grubel who is a racing fan. Before joining UBS in 2009 he was chief executive of Credit Suisse and was a board member of Sauber which was part-owned by the bank.
Grubel resigned from UBS in September 2011 after taking responsibility for a £1.5bn loss resulting from a fraud by rogue trader Kweku Adoboli. Sergio Ermotti, the bank’s current chief executive, is reportedly not enthralled by F1 and is understood to have requested a review of the deal. A UBS spokesperson said “we have ongoing, multi-year contracts with Formula One. We continually analyse our commitment.”
F1 isn’t taking any chances this time round and earlier this year it future-proofed itself by signing significant new sponsorship agreements with Emirates and Rolex. The revenue from these deals is understood to far outstrip the amount brought in by UBS so F1 won’t be exposed if the bank pulls out. It is a rare example of F1 planning ahead rather than being reactionary. It is a shame that the sport’s rulemakers don’t always follow the same strategy.