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Business News/ Opinion / Formula One and some missed opportunities
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Formula One and some missed opportunities

India's inability to appreciate the business significance of sport means that we have ended up hosting lame duck events

Illustration by Jayachandran/MintPremium
Illustration by Jayachandran/Mint

It isn’t a happy time for sports fans in India. On the heels of its departure from the Formula 1 circuit next year comes news that the planned Indian Premier League-styled Indian Football League has been stymied even before it could start. The ambitiously planned event, which promised to bring names like Thierry Henry, Fredrik Ljungberg, Robert Pires, Louis Saha and Hernan Crespo to Indian soccer audiences, has now been postponed by six months since a place couldn’t be found for it in the sport’s calendar. Retired though these stars are, they have the power to galvanize the moribund football scene in the country much like Pele and David Beckham did when they turned around the fortunes of two struggling US clubs, Cosmos and Los Angeles Galaxy, in the process filling out soccer stadiums in a country which till then had been lukewarm to the beautiful game.

By quibbling over the semantics of sports vis-à-vis entertainment, India has blown all the advantage that hosting the F1 successfully for the last three years had brought. In doing so, not only is the game in India poorer but it marks a huge marketing opportunity loss. Last year, Formula 1 was valued at about $7 billion. Broadcast in 188 countries, reaching 90% of households in the top 20 global markets, it has the largest TV audience of any annual global sport.

The loss by poor performances on the field and shortsightedness off it, is even more steep in football, which is the other big gorilla in the global sporting arena. The global football machinery has mined television rights, in-stadium naming rights, jersey sponsorship deals, player transfer fees, merchandising and corporate sponsorships for big moneys. According to a Deloitte report, the total European football market is worth almost €20 billion. A study, Analysing the value of football to Greater Manchester, by the Sport Industry Research Centre and Cambridge Econometrics showed that thanks to its two marquee clubs, United and City, football contributed approximately £330 million gross value added (GVA) to Greater Manchester’s economy between 2010 and 2011. The study also found if the Manchester teams continued performing the way they have done, over the next two decades, this could be worth in excess of £2.5 billion to the county.

Modern sport is all about business. Ignoring for a minute the exquisite left foot of Lionel Messi or the assured driving of Sebastian Vettel, the economy of sports, worth $480-620 billion according to an A.T. Kearney study, is a pipeline to economic growth. The world’s most profitable sports leagues like the NBA (National Basketball Association), Formula 1, English Premier League and the NFL (National Football League) are gigantic businesses aimed at turning out profits.

With the number of European circuits on the F1 calendar steadily declining, India was in a good place with its promise of potentially huge TV audiences and a high-end spectator base. By all accords the Greater Noida track met all of the criteria for a top notch race. All that was needed was a simplification of the visa regime and a soft tax structure. For India, Formula 1’s unique position, as the only global sports series with a year-round presence, presented a marvellous marketing opportunity.

It is an opportunity others have grabbed in the past. Just five years after it started, the Singapore Grand Prix is one of the highlights of the F1 calendar. While the concept of a night race was in itself a first, it is the business model whereby the Singapore government underwrites 60% of the financial risk against 60% of the returns that is unique. The Singapore Grand Prix has also improved the country’s positioning in terms of tourism with the time spent by average visitors, 40% of who come from abroad, showing an uptick.

Both F1 and football are globally dispersed sports in ways that cricket can never be. Take out the sub-continental teams, Pakistan, Bangladesh and Sri Lanka, in which Indian companies have little interest and the game’s footprint extends to only two markets of any note—the UK and Australia. Indian companies such as Tata Motors are now into high-end auto segments, which have obvious affinities with F1, as the presence of Mercedes, Ferrari and McLaren shows.

The inability to appreciate the business significance of sport (or indeed of entertainment) means that we have ended up bidding and hosting such lame duck events as the Commonwealth Games or the Afro-Asian Games. With some foresight and better business sense, the same level of exertions could go into tapping the multi-billion dollar sporting opportunities presented by other events.

What prevents India from making the best of big events? Tell us at views@livemint.com

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Published: 29 Oct 2013, 07:28 PM IST
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