When Max Verstappen took the checkered flag at the Malaysian Grand Prix in October, the curtain came down on 19 years of Formula One racing at the Sepang circuit.
Najib Razak, Malaysia’s prime minister, cited falling ticket sales and tourism receipts, as well as the cost of staging the race, as factors behind the decision to depart from the F1 championship series.
The loss of one of the longest-running races in the emerging world may yet come to be seen as an epochal event in terms of the global reach of the sport under Liberty Media, the US company that bought F1 in 2016.
During the reign of Bernie Ecclestone, who presided over F1 for four decades, “the business model was strongly influenced by revenues he managed to extract from the track owners,” says Paolo Aversa, associate professor of strategy at London’s Cass Business School. “Therefore he strongly favoured emerging countries for which he would ask very high fees, hundreds of millions of dollars, and they usually had to have the government on board.”
This approach dramatically reshaped the footprint of F1, rendering it one of the few truly global annual sporting contests. Malaysia came on board in 1999, spicing up a Eurocentric roster, with a sole Asian outpost in Japan. China and Bahrain followed in 2004, Singapore in 2008, Abu Dhabi in 2009, Russia in 2014 and Azerbaijan in 2016. Mexico returned to the fold in 2015 after an absence of 23 years.
For the newcomers, the lure was “the image,” says Caroline Reid, co-founder of Formula Money, an industry monitor. “F1 is associated with glamour, technology, excitement and drama, so it was a good way to brand a country that people maybe didn’t know much about or had an outdated image of.” The result was a rise in average race-hosting fees from $15.5m in 2006 to $31.1m a decade later.
With many European governments unwilling, or unable, to match the lucre that poured into F1 from often authoritarian regimes in the upwardly mobile emerging markets, the continent lost races in such places as Portugal, Luxembourg, San Marino and France.
To be fair to Ecclestone, this approach was not all about money. “Formula One is not the European championship. This is the world championship,” he said in June 2016, months before the Liberty Media takeover.
The impact, however, was stark. In 1997, more than 70 per cent of races were held in “traditional” Europe and just 5.9 per cent in Asia, says Formula Money. By this year, Asia had almost caught up, hosting 36.8 per cent of the calendar, against Europe’s 42.1 per cent.
But there are reasons to think F1 may now have reached a peak in Asia and a peak in emerging markets. Liberty executives have spoken of their desire to augment the US Grand Prix with a street race in Miami, Los Angeles or New York. The US marketplace is “ripe to be detonated,” says Sean Bratches, F1’s managing director for commercial operations.
Liberty Media has a strong understanding of the US environment “in terms of sport promotion, entertainment, TV and so on”, says Aversa. “They are comfortable there. This is where they can get the greatest traction.” Bratches says Liberty Media sees a strong future for F1 in European “heritage races like Monza, Spa and Silverstone”. France returns to the calendar in 2018 after a 10-year hiatus.
Europe “is where the hardcore fans are”, says Aversa. Races in Europe also help keep logistics costs down.
Of emerging market hosts, Greg Maffei, Liberty Media’s chief executive, said in March that staging a race in Azerbaijan “does nothing to build the long-term brand and health of the business”.
The event, in Baku, highlights the problem of low attendances in some new markets. It attracted a race-day crowd of 18,500 in 2016, which Reid believes could be “the lowest race-day attendance in the history of the sport”.
Of the 10 emerging market grands prix held last year, just two, Mexico and Singapore, attracted a race-day crowd of above the global average of 71,600. Bahrain (32,500), Malaysia (46,900) and Brazil (57,600) were among the backmarkers. “For a large part the newer races are lossmaking,” says Reid. Azerbaijan would be “a complete disaster” if run on purely commercial lines.
“Asia has less of a sports culture and a less developed motorsport culture than the US and Europe,” Aversa adds.
Although Bratches says Asia and South America are “fertile territories for growth”, Aversa expects more emerging-market countries to bow out of F1, particularly those that attract larger crowds for MotoGP bike races.
A strong future is envisaged in European ‘heritage’ races like Monza, Spa and Silverstone
Reid suspects that Singapore and China, both of which renewed their contracts this year, did so at a much-reduced fee. The long-term future of the Brazilian GP appears unclear, against a backdrop of low TV ratings and dwindling sponsorship, after São Paulo unveiled plans to sell the lossmaking track. The retirement of Felipe Massa leaves Brazil without an F1 driver for the first time since 1971, replicating the lack of homegrown interest elsewhere.
“We haven’t had an iconic Asian driver in years,” says Aversa. “There are no Chinese or Japanese drivers.”
Technological complexity means no Chinese constructor is likely to enter F1, despite two Chinese teams competing in the rival electric Formula E series.
“Formula 1 is a truly global sport and we want a calendar which reflects that,” says Bratches.
Not everybody is convinced. “America is the target market,” says Reid.
“So it could be that some of the global aspect may have to go.”
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