Martin Galpin | Racing Driver | number66.net

If you were asked the question: How is A1GP really doing? - you could justifiably give two entirely different answers.

Answer 1: A1GP is experiencing more growth than any other international race series in the world. In under two seasons of racing, the series has expanded into more than 150 countries where an estimated 12 million people watch each championship round. It has a healthy grid of 23 cars, each racing for the individual pride of their nation and its unique business model has allowed future stars the opportunity to demonstrate their ability in equal equipment, a concept previously non-existent in motorsport at this level.

Answer 2: A1GP is financially struggling. To date, the series has lost over US$270 million against an income of just US$58 million, according to its published reports. It has largely failed to secure free-to-air broadcasters and in many regions this is inhibiting growth. Whilst it has enjoyed sell-out crowds at Brands Hatch and Zandvoort, the majority of the 2005/06 rounds were met with an embarrassingly poor attendance due, largely, to a failure to appropriately advertise each event. The first season was dominated by just one nation, France, who were engineered by DAMS, who also ran series runner-up Switzerland. Whilst it provided some entertaining racing along the way, all too often the overall result was easily predicted.

Personally, I think the real answer lies somewhere in between. There is, however, one thing which worries me deeply about A1GP at the moment and that is: Where are all the sponsors?

It’s important to understand why the A1 business model is discretely unique. A1GP operates a capacity of 25 franchises, sold as commercial entities which represent international teams. The initial sale price of each franchise is proportional to each country’s economy thus allowing smaller nations such as Singapore or Indonesia to be financially competitive with Germany or say, the USA.

Refreshingly, A1 franchises are not allowed to accept money in return for drives. In theory, therefore, personal wealth no longer guarantees a driver a race seat. However, this isn’t always the case and if you take A1 Team Indonesia for example – the family just bought the entire franchise instead!

The money which cannot be asked of a driver is therefore supplemented by private investment and an equally unique prize fund of USD$1,000,000 at each round. As a further incentive, A1 maintains ownership of the cars and provides the necessary worldwide transportation. The result is that after an initial investment, most franchises are expected to operate on or around USD$3 million per annum.

To illustrate my concerns, I have compiled the following table which demonstrates the extent to which each nation has or has not gained sponsorship. In addition, it also shows the total prize money earned in 2005/06 and also if that nation has played host to the championship, highlighting another possible source of revenue. The final column contains who the franchise seatholder is and any other relevant information. It is sorted first by the number of sponsors and then by the total prize money. (skip table)

So let’s look at the facts. Out of 23 national teams I would say seven have acquired serious sponsorship. A further three run with decals on the car, although I have chosen to ignore these as they as either insignificant in terms of impact or in A1 Team India’s case (Sahara) are the previous franchise owners.

Those seven teams, collectively, took 32% of the overall prize fund (excluding driver winnings) and all but one (Ireland) have played host to a round of the championship. Could you, therefore, conclude that the remaining six nations which too have hosted rounds of the championship have missed a major opportunity to get commercial partners involved?

Interestingly, those teams which display the most proficiency in finding sponsors overwhelmingly are either owned-by or have a significant involvement from an established sports marketing company. Czech Republic and BPA Sports Marketing, New Zealand and ROAR Group Ltd, Ireland with Eden Rock Sports and now India with Nimbus Sport. Others such as A1 Team South Africa have television coverage which far surpasses that of any other country.

So what is it that makes it so hard for the 70% of A1 nations which currently have no commercial sponsors at all? Ironically, I guess you could argue that it’s the unique nations concept which makes A1GP so special, that is also why it’s difficult to sell. A1 Teams need global brands which benefit from a national association. For instance: Skoda (Czech Republic), Czech Airlines (Czech Republic), Telkom (South Africa), Telmex (Mexico), Proton (Malasyia) and perhaps the best example – Fosters (Austrailia).

If I were Stewart Bain, A1 Team Great Britain Commercial Director, I’d pursue a similar strategy. For example, British Airways had an annual spend of almost USD$70 million in 2005 and were amongst the UKs Top 50 advertisers. I would find it extremely supprising if no dialogue had been initiated.

Jan 19: A1 Team Great Britain have today announced a commercial partnership with Quintessentially, the world’s leading private members club and concierge service. Stewart Bain is confident of the “global brands Quintessentially can introduce us to” suggesting further possible business to business agreements in the future.

Or could it be something else? A more fundamental problem with the ownership and management of the majority of franchises? Could it be that there are too many engineers where there need to be business people, a problem Flavio Briatore has remarked on in Formula One? A1 Team Ireland principal Mark Gallagher concurs when he says, “the established racing teams…typically rely on drivers to bring money whilst other people pay the bills”. Could it be that the majority of A1 Teams and their management have little real understanding of what is global marketing?

This is A1GP’s biggest problem and the A1 management needs to make its franchise holders aware. All franchises need to be profitable. For whatever reason anonymous consortiums of investors have bought into their national teams, they will not be around for long if they continue to lose millions. Tax advantages or not, it’s simply not sustainable.

In April, A1GP intends to offset much of its startup debt by an Initial Public Offering, supposedly somewhat forced by the banks. Even if, centrally, the books can be creatively balanced it will ultimately remain academic because without careful attention, soon, incompetence could lose the majority of its core franchises. Without them, A1GP is finished.

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