Earlier this month, British American Racing, the newest arrival on the Formula One grid, revealed the livery of its team for the 1999 championship, hurling BAR straight into the headlines – the two cars looked nothing like each other. In the red and white corner stood Jacques Villeneuve and a car adorned with the name of British American Tobacco’s most popular brand in Latin America, Lucky Strike, while in the blue and yellow corner stood Brazilian GT champion Ricardo Zonta and a car promoting 555, a brand most often smoked in the Far East.
The rulebook written by the sport’s governing body, the FÃ©dÃ©ration Internationale de l’Automobile, dictates that cars in the same team must be of the same technical specification and “almost identical in outside appearance”. This makes sense: life would be very difficult for everybody if Arsenal players, for example, appeared on the pitch wearing 11 different shirts. But Craig Pollock, Villeneuve’s former manager and managing director of BAR, is challenging the FIA over who has the right to determine the colours and branding of the team’s cars.
Pollock claims that commercial branding on the cars is almost the only area of control left to the teams in a sport that is strictly regimented by the FIA. BAT is said to have committed 250m over five years to the creation of its Formula One team and wants influence over its weighty investment.
Whatever the result of the FIA’s hearing, due to be announced in early February, the case speaks volumes about the state of the sport and the battle for supremacy between sponsors and governors.
The fact that Pollock feels justified in challenging the FIA demonstrates how much clout sponsors in Formula One have – more than in any other sport. And in no other sport do the sponsors form such a close-knit team. “How often do you get sponsors doing deals with each other in the Premier League?” asks Matthew Argenti, director of sales worldwide for Octagon Motorsport, which represents Benetton. “There is a perception, for example, that Federal Express paid a lot of money to sponsor the Benetton team, but it is about more than just the name on the car. It also becomes a preferred supplier and moves parcels for United Colors of Benetton. Hewlett-Packard is a Jordan sponsor and it also supplies kit and does deals with other sponsors.”
But while smaller teams rely on sponsorship for their revenue, the biggest teams get up to a third of their income from prize money and deals on TV exposure: the more laps they lead, the more cash they receive. “The TV money is critical,” explains Steve Herrick, managing director of CSS Promotions, which represents the Williams team. “Ten years ago, it was a bonus. Now it is a core part of the teams’ income.”
So perhaps the sponsors’ iron grip on the sport is loosening. With BAT buying the Tyrrell team and Benetton buying its own team ten years ago, it begins to look like there is a trend towards ownership rather than sponsorship of Formula One teams.
Benetton has found that owning the team rather than being the main sponsor means that it gets its name about far more effectively. It is guaranteed a mention in every news report about its team’s performance in a race, whereas a report is unlikely to refer to all the sponsors of a car. What’s more, Benetton is now in the happy position of having secured so many sponsors that it does not have to invest any cash itself. The estimated cost of 30m-60m to run a team for the season is covered by Japan Tobacco brand Mild 7, along with FedEx, Korean Air and others. The word Benetton is heard by 450 million people across the world during the eight months of the Grand Prix season without the company itself having to invest a penny. Shrewd, indeed.
BAT’s motivation for buying a team, on the other hand, is the impending ban on tobacco sponsorship. Herrick of CSS explains: “Perhaps BAT believes that as a team owner, it is unlikely to face the same restrictions over tobacco branding as other sponsors are.” There is also a shortage of prominent slots for tobacco brands, especially now that Formula One is one of the few places left where tobacco companies can show their colours. “There were no top teams available that were without a cigarette sponsor,” adds Herrick. “And there’s no point being a huge manufacturer at the back of the grid.” This left BAT with no choice but to do the Victor Kiam thing and buy the company. “It’s an expensive way to go,” says Herrick, “but then tobacco companies have found that the international branding they get from Formula One is very valuable.”
Mark Gallagher, marketing manager of Jordan Grand Prix, acknowledges that BAT has more control by owning the team: “It runs the show and can do what it pleases with the team. And it will be interesting when we reach the watershed where the ads come off cars in 2006. Will it give BAT any further loophole beyond the ban on brands appearing on cars?”
Another unresolved issue is over what will happen about tobacco sponsorship in the rest of the world when the European ban comes into effect. One of the arguments that convinced Prime Minister Tony Blair to exempt Formula One from the European ban on tobacco advertising last year was that the sport might move out of the country and out of Europe. The British Grand Prix, one of the most important fixtures of the UK sporting calendar, could cease to exist, threatened FIA president Max Mosley. In its place we would see events in China, South Korea, Malaysia, Indonesia and South Africa, among others. What’s more, added Mosley, most of the Asian countries are far more relaxed about smoking than the UK, so we might face the prospect of even more blatant branding on the side of cars if these foreign events are broadcast on UK television.
This argument has been weakened by the crisis in the “Tiger” economies. Most of the countries that were touted as prospective Grand Prix hosts are in no position to be staging an event just now (last month, China was forced off the 1999 schedule because its proposed track was considered inadequate), so Europe’s supremacy is guaranteed for the moment. This year, races will be held on four continents, but the only Asian events will be the Malaysian and Japanese races at the end of the season. “It’s all been played up,” says Gallagher of Jordan. “There’s little money coming from Asia while spend within Europe and America is very strong.”
The FIA’s latest announcement on tobacco suggests it is prepared to discuss a worldwide ban on tobacco sponsorship, Asia included. The statement, issued last month, said: “The FIA World Motor Sport Council is considering a worldwide ban on tobacco sponsorship of Formula One that would be consistent with the full implementation of the European Commission’s Directive on tobacco advertising.”
This would help to protect Europe’s interests in Formula One beyond 2006, because there would be no advantage for tobacco companies if races were staged in Asia.
The FIA statement defended its tobacco sponsors by placing a hefty condition on its promise to consider a ban: “The FIA is interested to receive information as to whether there is clear and convincing evidence that, as a result of tobacco brand name sponsorship identification displayed in connection with Formula One motor racing, a significant number of individuals who were not and would not otherwise have become smokers made the decision to smoke.”
Action on Smoking & Health (ASH), the anti-smoking pressure group, says this latest statement is a big step back from promises made nine months earlier. ASH director Clive Bates explains: “In March 1998, the FIA made a promise to phase out tobacco sponsorship by 2002 if it could be proven that advertising causes people to smoke. The date has moved and the test of evidence has changed. If you think how such a specific link could be established (try to design a study that would show what the FIA wants) then I think it is clear that the offer is not sincere.”
If the ban comes into effect only in Europe, could it lead to the prospect of one set of sponsors covering European races and a different set dealing with events elsewhere? Most people believe this is unlikely.
Gallagher of Jordan explains: “Sponsors appreciate that you must have a consistent presence to achieve results. And what teams want is long-term secure sponsorship. Jordan did some one-race deals in its infancy, but it doesn’t any more. It’s not good to change the appearance of the car.”
“Companies now realise that if you use sponsorship, you should do it properly,” agrees Argenti of Benetton. “Selective sponsorship happens less and less, even in Japan, where it happened the most.”
“A company that was only interested in one or a few events would be more likely to seek signage packages around the courses or packages with the drivers,” adds Herrick.
Companies can also dip into Formula One for hospitality reasons. Corporate events held at Silverstone during the British Grand Prix, for example, are always popular. Sponsors can be associated with the excitement of Formula One without having to make the enormous investment required to be a team sponsor. And the team owners are happy because they don’t have to get out the paint pot before each event.
It remains to be seen whether BAR will win its battle to retain its two liveries or whether it will have to get the paint brushes out before the first race of the season in Melbourne on March 7.