What F1 can learn from McDonalds

With crowds at Formula 1's 'new world' races either small or shrinking, Dieter Rencken believes the sport could do a lot worse than following the expansion model of a certain fast food chain as it bids to build its popularity worldwide

Over the years Bernie Ecclestone's TV production crews have worked wonders in upping the standard of Formula 1's broadcasts, so much so that the remaining two independent productions - Monaco (hosted by Tele Monte Carlo) and Japan (Fuji TV) - are found wanting in many areas, be they camera angles, breakaway or atmosphere shots, or the simple task of identifying a race within the race, and focusing on that.

Where once F1 fans were at the mercy of partisan host broadcasters, who fervently followed the local hero's every move - even when said driver was battling away in total solitude in P26 - Formula One Communications' (FOC) grey-tented village graces 90 per cent of grand prix venues, and there is little doubt that the commercial rights holder, having introduced the 'world feed' in 2007, is aiming for a monopoly.

It makes sense; kit and cameras are owned, as are production facilities, while FOC's camera operators are well versed in the art of following cars travelling at 200mph on various circuits in all weather. Above all, the producers understand the sport, and instinctively know where to seek action, and identify dramatic situations.

Would a Magyar Televizio producer have known where to start investigating the cause of Felipe Massa's 2009 Hungarian accident, let alone identify the wayward spring that struck the hapless Brazilian? Doubtful - yet within minutes Bernie's boys found the footage, then 'slo-moed' it to a worldwide audience.

But for real skill in the cutting room look no further than last weekend's Korean Grand Prix - not for what they did show, but for what the producer kept hidden from view: row upon row of empty grandstands, particularly towards the far end of the circuit.

It has long been a cunning promoters' trick to specify brightly coloured seats fitted in random fashion in grandstands. Thus fleeting views give the impression of full houses even if the reality is somewhat different. Were only, say, white seats fitted, empty spaces would be conspicuous, even to panning cameras or in overhead shots. By contrast, the 'noise' created by coloured backdrops camouflages vacant seats extremely effectively.

Nowhere was this more evident than last year in Turkey after organisers covered swathes of grandstands under black tarpaulins, effectively screaming to the world how empty their stadium was.

A lack of helicams on raceday is another sure giveaway - full houses grant producers open canvasses; empty stands force them to be circumspect with helishots. According to a FOC source, decisions on helicam deployment are taken after bums-on-seats calculations, with many a helicopter cancelled at the last minute when sums indicate that helicam views will be little more than advertisements for emptiness.

Such sights are precisely what promoters don't need, particularly as events are increasingly championed by local big-wigs, who continuously bang on about F1's merits as a tourist magnet in a bid to justify the millions of pounds of public money that have, directly or indirectly, funded multi-million dollar wedding receptions and facilitated mind-boggling real-estate purchases across the globe.

Such sights are also precisely what the commercial rights holder does not need, particularly when the focus of his attention is to expand F1's calendar in conjunction with maximising F1's trio of revenue streams - race hosting fees, TV revenues and income from 'other' sources, namely signage, merchandising, intellectual property licensing and high-end hostage - via deals with countries with no F1 culture to speak or dream of.

Korea provides a classic example - not only does its race promoter construct an enormous stadium in a forsaken place on the country's extreme south-east coast some 250 crowded motorway miles from the capital, but they do so in a region with a dearth of hotels. How they hoped to attract folk with zero feel for F1 under those circumstances is beyond the wit of this column, with the outcome clearly visible on TV despite the best efforts of FOC's producer, who regularly showed 'atmo' cutaways depicting massively packed grandstands.

Modern broadcast technology enables wonders to be weaved, and many a journalist maliciously wondered whether generic crowd shots - recorded elsewhere - had been 'dropped' into Sunday's production to provide an impression of a full house. Certainly, before the race and during the safety car phase this writer checked out various stands, and somehow the crowd scenes did not tally.

Is it any wonder the race lost £50million-plus for the second year in succession? The promoters issued a release claiming 85,000 spectators, a figure a rather acerbic Red Bull Racing tweeter suggested was only by double-counting the fish and mosquitos in the surrounding swamps, then adding these in.

The actual figure was around 50 per cent of the claimed attendance, with a well-connected source before the race allowing that a local shipyard had been granted a tax incentive to purchase 20,000 tickets at 20 per cent of face value, then distributed these to employees for their family/friends. So, a maximum of 25,000 payers, but only after prices were discounted by 30 per cent from 2010 levels to boost crowds. It sounds reasonable given the admitted losses, and certainly not a good advert for the world's fastest and most glamorous sport.

A merchandising concession holder wailed about his losses after selling 80 per cent less than in Japan the previous week. "Put it this way," he said. "Even if we got the stand free we would still lose a shed load of money." The stand rental? The standard £20,000 for a 6mx3m area for three days!

F1 as an entity - including the commercial rights holder, governing body, teams and sponsors - needs to take serious stock of this situation. Fourteen years have passed since a Max Mosley-led FIA hived off F1's commercial rights to Ecclestone, effective January 1 1998, who subsequently sold control to a capital venture vulture.

The original lease (for 13 years running to 2010; later extended by 100 years at no additional cost) effectively gave Ecclestone carte blanche over F1's commercial aspects. Thus the FIA, which owns the championship, has no right to intervene. In addition the CRH was able to sell the rights with the FIA's permission, a right that could not be unreasonably withheld.

During enquiries into the deal prior to approval by the European Commission, Mosley gave a commitment to commissioners that the FIA would not involve itself in F1's commercial matters - thus the current custodian of the sport is faced with a situation akin to a house owner granting a leasssee unfettered use of a building for an unlimited period, then finding himself powerless to prevent it becoming a house of horizontal refreshment after the initial leassee hived the lease to a third party.

Never was this prostitution of F1's appeal more evident than in the 'love motels' that housed F1's workers while management resided in five-star establishments some distance away. Where did Ecclestone stay during the grand prix weekend, you ask? In London...

That F1 has every right to conquer pastures new is a given, just as McDonalds has every right to expand globally - and has, as proven by its (successful) foray into China. This comparison is not far-fetched, either: just as the burger franchise permits businessmen to market its products within laid-down territories for a fee, so Ecclestone's companies licence promoters to market the F1 franchise within their territories for gain.

Until 20-odd years ago McDonalds was unknown in China, as was F1 then; probably more so given Chinese palates. However, through a programme of controlled growth with particular attention paid to sustainability, the company is opening a new restaurant daily. By 2013 McDonalds hopes to add 700 outlets to its existing base of 1300. Not bad for a product totally unknown 20 years ago.

However, where McDonalds diligently undertakes studies within prospective territories to ensure its franchisees are able to build sustainable and profitable businesses to the benefit of all - including other franchisees, whose long-term success depends as much upon their efforts as all the links in the chain maintaining equally high standards - there is little evidence to suggest that such feasibility studies are part and parcel of the F1 process.

Where McDonalds initially targeted central business districts when it hit China, for its showcase stadium F1 selected swampland a greater distance from civilisation than average Chinese couples travel on honeymoon. Any wonder McDonalds is ultra-successful, while Shanghai's F1 stadium finds itself a quarter-filled once a year - with soldiers ordered to attend a sporting event they have no understanding of - while its empty stands act as billboard for upcoming Expos, etc? Korea tried the same trick with three grandstands last weekend...

According to one prospective grand prix promoter - still negotiating for a race - the only questions posed by the CRH during the 'diligence process' related to his company's financial clout, whether his local/national *河蟹* would underwrite hosting fees, whether said authorities would commit to 10 years, and how quickly a circuit could be built. That was it.

The real growth record of F1 since Ecclestone was granted the commercial rights is far from glittering, despite the spin regularly put on the issue by the sport, and the platitudes about needing to be here, there and everywhere. The fact is that in order to expand from 16 or so races 14 years ago to the current 20, many traditional events were dropped, as a 1991 versus 2011 calendar comparison shows (in order):

1991 - USA, Brazil, San Marino (Imola), Monaco, Canada, Mexico, France, Britain, Germany, Hungary, Belgium, Italy, Portugal, Spain, Japan, Australia (16)

2011: - (Bahrain), Australia, Malaysia, China, Turkey, Spain, Monaco, Canada, Europe (Spain), Britain, Germany, Hungary, Belgium, Italy, Singapore, Japan, Korea, India, Abu Dhabi, Brazil (20)

Thus the newcomers are Bahrain (cancelled), Malaysia, China, Turkey, Europe, Korea, India and Abu Dhabi, with the USA, Imola, Mexico, France and Portugal falling off. Thus eight have come in, with five dropping away, one of which (USA) returns next year. Now consider the success of each newcomer:

Bahrain: No comment, save to record that BIC has yet to attract 40,000 spectators eight years on.

Malaysia: After early flurries, numbers dropped dramatically, with 40,000 now considered a good crowd.

China: The world's most populated nation and largest car market fails to attract 40,000 payers to a race

Turkey: last year attracted less than 20,000 payers despite being 'F1's gift to Europe'; now off the calendar.

Europe: An anomaly through being Spain's second GP (since 2008); talk that the race will be canned.

Singapore: Roaring success through simple expedient of being where the crowds are; night race.

Korea: see above

Abu Dhabi (UAE): Space-age facility last year failed to fill despite the race being a four-way title showdown.

Interestingly, save for Malaysia and Spain (for obvious reasons), the incomers have failed to deliver an F1 driver, while the drop-outs have since provided at least one each, with France providing a winner (Olivier Panis).

Of these Singapore's race alone has been a success, this despite bordering Malaysia, which has without doubt been the best of the rest, having delivered not only Alex Yoong, but sponsors such as Petronas and the Malaysian Tourism Board, plus, of course, the Tony Fernandes/AirAsia/Team Lotus/Caterham effort. For the rest: forget it. Why, then, has Singapore's race succeeded where all others have failed?

Simply put, the McDonalds factor was applied on an island whose commercially-savvy inhabitants live in the real world: take the product to the people, provide a quality show, add value by way of good sideshows and, above all, protect the brand - in this case Singapore's - with, though, positive rub-off for F1 and other promoters. Ever seen dirty toilets in McDonalds, any place? Ever seen dirty toilets at grands prix?

Against that background, why, then, is Valencia a commercial disaster? Again McDonalds provides the answer: feasibility studies identify catchment areas according to strict criteria, and exclusive territories are strictly enforced. Sure, there maybe two outlets within the same block, but only if passing trade warrants the same; if not, a second shop in the same street are no-go, regardless of the short term profits. Spain has two grands prix on circuits 300 kilometres apart scheduled for within five weeks of each other. A recipe not for a Big Mac, but a disaster...

Clearly, then, had F1 followed the doctrines of a fast-food franchise for its fast-car show, the mistakes known as Bahrain, China, Turkey and Korea - and Valencia - would never have happened. F1 sure could learn a lot from burger flippers. And, FOC's producers could bring us the whole show...

Source: autosport premium

A great read there Nando, did you write that?

I am not sure what sort of analysis is carried out by team bernie or local organizers before an event is given the go ahead so it is hard to comment on whether they could learn from McDonald. Although it seems Mcadonalds do no more then employ the lessons of page 1 introduction to economics of industrial organisation. So not really rocket science.

I think a lot of an F1 events success must lie in how many people are watching on tv the rest of the year. Without a latent fan base people are just not going to turn up while being relieved of $200+. I wonder if it is not the location of the venues but rather the lack of 365 days a year F1 promotion which has caused these new races to fail commercially.

They need to make sure F1 is a big event on local TV and get people watching and understanding the sport. When visiting the US for example I am often unable to find the races when they are on.

i saw it in the Autosport Premium section and wondered what it was so took a look at it was a good read and thought people here might enjoy it so copy and pasted it over

Good article fernando. In his quest for world domination (and an ever-fatter bank balance)it seems Uncle Bernie has forgotten a few of the most basic business tenets.

While he and FOM might be getting rich off licencing fees, government subsidies, merchandising etc. the new circuits are losing money hand over fist.

I think it won't be long before something akin to the "dotcom bubble burst" happens in F1 and most of these new state-of-the-art showcase circuits are mothballed because its simply no longer worthwhile for them to host races.

Not a bad thing IMHO.

I watched the recent Korean GP the other day on an American channel. Commentator David Hobbs mentioned an incident he'd heard from one of the crews. This particular crew was assigned to the exact same garage as last year. The place looks like it'd been locked up from the checkered flag last year until the present. Sure enough, when they opened the fridge there was last year's food.