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So what is the impact of the Bahrain GP being cancelled on Formula 1 teams’ sponsorship income? Some commentators seem to have published rather crude calculations that put this at 1/20th of the teams’ total sponsorship income in rebates. If that were the case, it would stand to reason that the teams also received over 5 per cent uplift in contracted sponsorship fees this year in respect of the new 20 race calendar. In reality the financial consequences to the teams are likely to be minimal at worst and in some instances perhaps even positive due to the savings of not shipping cars, equipment and people to the Middle East.

Formula 1 team sponsorships are generally built upon the principal that the team participates in the Formula 1 World Championship: this has comprised a number of races between 16 and 19 over recent years which has had little correlation to the value of team sponsorships. If any team sponsorship contracts specifically reference the number of races then they refer to a minimum of 16. Some might include a right of termination in the event a key race for that sponsor is removed from the Formula 1 calendar, but it is unlikely that any would specify Bahrain or that it would even be applicable in these circumstances.

Even the largest Formula 1 sponsors typically focus their activation programme around 6 to 10 races each year and to date Bahrain has not established itself as a key event on the calendar such as Monaco, Singapore or Abu Dhabi. No doubt, for those sponsors that did have plans for the Bahrain GP, the cancellation of the race is now the least of their concerns in respect to any business they are involved with there.

The cancellation of a race does raise questions from a sponsorship evaluation perspective as discussed in last month’s column. Relying solely on an “Advertising Equivalent Valuation” Formula 1 team sponsors could, overall, expect 5% less value or seconds of TV brand exposure. However, this discounts the potential negative brand association that might have occurred had the race proceeded against a backdrop of protests and violence, in theory that would even have been a cost to the sponsor.

Overall, the remaining 19 Grands Prix should reach broadly the same individuals in the same number as 20 – by race 16 of the season almost all are repeat viewers. So it seems unlikely that the real sponsorship value: that is the change measured in the audience’s positive perception of the sponsors’ brands would be affected by as much as 5%, but we’d love to see the research!

In any event, subject to a peaceful resolution being found, it’s fully expected the race will be incorporated into the calendar towards the end of the season, probably a week after Abu Dhabi.

One area it’s too early to comment on is the impact the unrest may have on sponsorship from the region, especially if it spreads to any other gulf states. In that case one would expect it would naturally curtail growth of sponsorship from the region. However, assuming the troubles are settled, the affected states will surely want to quickly promote themselves again as safe, attractive and stable places to visit and do business. Formula 1 is a great way to do that…

Naturally, the most essential factor is that the Middle East region stabilises and that its inhabitants are safe and secure. It would be wonderful if a postponed Bahrain GP could then become a symbol to the world of renewed peace and harmony as the country embraces a global sporting event with the passion and enthusiasm of past years. Certainly that is what Formula 1 teams and their sponsors will now value most of all.

[Author: Tom Potter]

[Source: Paddock Magazine]