I

t hardly needs saying that there has

been a downturn in sponsorship over
the past year. Speaking to The Pad-
dock in August Formula 1 boss Bernie
Ecclestone put it bluntly when he said
In every sport all I read about is what
a bomb its been this year. Clearly the
sponsorship acquisition strategies of any
company which has managed to gain
partners over the past 12 months should
be scrutinised by F1's bosses, particu-
larly if those sponsors include fnancial
services frms and brands which F1 it-
self has lost. Then imagine if this com-
pany was operating in a sector F1 will be
moving into over the next year.
Now for the big shock: this isnt a hy-
pothetical company although it is famed
for its magic. The business in question is
Disney and Lawrence Aldridge, its Se-
nior Vice President of Corporate Allianc-
es, will be speaking at Decembers Motor
Sport Business Forum North America. It
is reason enough to attend the US event
rather than the show in Monaco which
takes place at the same time.
Disney isn't renowned for its sponsorship
portfolio and there is good reason for this.
The companys partners, ranging from
Hewlett-Packard and Siemens to Nestl
and Coca-Cola, get almost subliminal
exposure across all of Disney's divisions.
Some partners work with Disney to de-
sign and brand theme park attractions
Exposure doesn't come more bold than that which Siemens gets by sponsoring Disney's Spaceship Earth attraction
Fairytale sponsorships
Among the headline speeches at next month's inaugural Motor Sport
Business Forum North America is one which may seem unusual but is
likely to be one of the most relevant and productive of the entire event
By CHRISTIAN SYLT AND CAROLINE REID
INTERVIEW
96 October 2009
while others opt for product placement
in shows on its ABC television network
or even branding at premires of movies
made by its Miramax studio.
Although it may not be well known in the
feld, Disney has been involved with spon-
sorship longer than F1 itself. In 1955 Walt
Disney himself enlisted Coca-Cola to help
fnance the then-gigantic $17m construc-
tion cost of his frst Disneyland theme
park in California. An innovative market-
ing deal was struck where Coca-Cola was
given rights to be the sole supplier of soft
drinks within the park in return for its
backing. It remains a partner to this day
and the bonds Disney has built with blue
chip businesses have blossomed.
Nine years after Disneyland opened Dis-
neys imagineers, the wizards who de-
sign its theme park rides, built several
landmark attractions for the 1964 New
York Worlds Fair. The fagship was the
Carousel of Progress, a show about tech-
nological developments in the American
family home. Nearly as impressive as the
shows centrepiece models, whose move-
ment was synchronised with speech, was
the fact that US conglomerate General
Electric had its name emblazoned on the
outside of the attraction. Even more revo-
lutionary for the time, mentions of GEs
products were woven into the storyline. It
set a precedent.
When Disney opened its science-based
theme park, Epcot, in Florida in 1982, it
took corporate partnerships to a new lev-
el. The park is split into pavilions dedi-
cated to subjects such as space, energy
and the seas, and almost every one had
a sponsor. This helped ease the gigantic
overheads of what was then the worlds
largest construction project.
Disney now has around 20 global part-
ners with around the same number of
companies sponsoring attractions locally
at its park complexes in the US, France,
Hong Kong and Tokyo. The strength of
the portfolio is down to Aldridge but he
is far from a typical fairy godmother.
Firstly, Aldridge isnt American but a Brit
who gained his BSc at Portsmouth Uni-
versity followed by an MBA at the Uni-
versity of Hull. His background isn't even
in marketing but instead, he has spent the
majority of his career in the energy indus-
try rising to become the chief procurement
offcer for oil company Atlantic Richfeld.
When BP bought the business in 2000
Aldridge was head-hunted by Disney and
moved into its strategic sourcing depart-
ment. It was a few years before he moved
into corporate alliances. As he explains, A
couple of years ago Tom Staggs [Disney's
Chief Financial Offcer] wanted somebody
without a traditional promotional market-
ing background to take a fresh perspective
on what corporate alliances was about.
Aldridge's aim was to maximise the return
for partners by ensuring that corporate al-
liance opportunities permeate the entire
company. He shook up Disney's partner-
ship structure to achieve this. When I
took the job 100 per cent of the partners
were wedded in the park and there were
other elements. What we have been doing
is looking more broadly in terms of under-
standing what the partner wants and how
Disney's assets can be used, he says.
Sports sponsorships tend to be in straight-
forward packages. Each one of our deals is
different, adds Aldridge. We craft our
deals based on what the partner wants so
if you look at what HP wants, it's going to
be pretty different to what Visa or Coca-
Cola may want. It depends on how much
of Disney they want.
Disney's sponsorships are comparable
in value to the top deals in sports rang-
ing from seven to eight fgures per year.
However, while sport is estimated to
have contributed 69 per cent of the total
$16.8bn sponsorship revenues in the US
last year, deals with entertainment, tours
and attraction companies comprised just
10 per cent of the market (see box). The
other big difference between the two is
that while the sports sponsorship sector
has been in decline recently, the success
Disney has been having with signing new
partnerships is the stuff of fairytales.
Everyone else may be losing sponsorship
dollars but we are gaining, says Aldridge.
In the past 12 months alone Disney has
renewed its deal with Visa in Asia until
2014 and has signed new alliances with
the AARP, a US association of 40m senior
citizens, and Frances second largest retail
bank, Crdit Mutuel.
The Crdit Mutuel deal was a huge coup
given the weak health of the fnancial ser-
vices sector which led to the Royal Bank
of Scotland (RBS) and ING announcing
earlier this year that they would cease
their F1 sponsorships at the end of their
current contracts.
Under the terms of the Disney deal Crdit
Mutuel became the offcial banking part-
ner of Disneyland Paris and is the only
bank to have branding within the theme
park. It is also the only bank to provide of-
fers for Disneyland Paris including special
deals on family resort packages. These are
marketed to Crdit Mutuels 15.3m clients
which gives the bank a competitive advan-
tage when trying to attract youth savers in
particular. In turn this gives wide expo-
sure to the Disney brand and attracts more
guests to its park.
Disney's unique and uncluttered parks are
key drivers behind the brands' decisions
to sign with the company. They also hope
that the magic of one of the world's most
renowned and beloved brands will rub off
on them and companies don't come much
more squeaky-clean than Disney.
With sports or celebrity sponsorships you
have got issues, says Aldridge, explain-
ing that You had the Tibetan issue with
the Chinese Olympics. Mickey doesn't do
that and we protect the Disney brand so
you're not going to get those issues. This
has proved to be a silver lining for Disney
during the cloud of a recession. Disney is
not synonymous with excessive spending
and so signing an alliance with the com-
pany isn't likely to be seen as frivolous
even in a downturn.
We get very positive feedback from
customers and employees saying that they didnt know
Siemens operates in all these areas

www.thepaddockmagazine.com 97
We are seeing a number of partners pull-
ing out of other sponsorships but staying
with us, says Aldridge, and industry
analysts expect that Disney's magic will
propel it to become number one in the
sponsorship sector.
Ultimately they will have a global spon-
sorship profle much larger than the Olym-
pics, says Steve Madincea, Managing
Director of Prism, the leading sponsorship
agency owned by advertising giant WPP.
He attributes this to Disneys family fo-
cus, the strength of the Disney brand and
its full range of offerings. Indeed, the
option of picking and mixing parts of the
company to sponsor is one of four core dif-
ferences between a partnership with Dis-
ney and one with sports rights-holders.
For example, German technology frm Sie-
mens has naming rights of Spaceship Earth,
the fagship attraction in Epcot. A sign say-
ing 'presented by Siemens' hangs outside
the ride which takes visitors through model
scenes explaining the history of communi-
cations. At the end of the attraction there
are high-tech educational games themed to
some of Siemens' products. Epcot stood
for Experimental Prototype Community
of Tomorrow and that idea of the future
and building and developing technologies
fts nicely with Siemens, says Tom Haas,
Chief Marketing Offcer of Siemens Corp.
But the theme park exposure is just the tip
of the iceberg in the partnership.
Siemens is a large conglomerate and their
focus is medical devices and super cities
of tomorrow. Telling that in a way that is
entertaining is what our imagineers do,
says Aldridge. Amongst the many areas
of collaboration, Disney has written books
for Siemens to help children with hearing
diffculties get accustomed to its hearing
aids. Audiologists tell us that they chose
to go with the Siemens paediatric hear-
ing aid because of this programme, says
Haas, adding That one storybook has
spawned another story which is talking
about childhood allergies. We are even
talking now about doing something on
childhood obesity.
Haas says that under the partnership the
ABC Studio screen at Times Square is
sponsored by Siemens so you will see the
Siemens logo under the jumbotron. Very
often when they are flming Good Morn-
ing America or Nightline they will often
zero in on that screen so it is exposure for
Siemens. Under its Disney deal Siemens
has even managed to get its medical prod-
ucts placed in Grey's Anatomy, the ABC
medical drama.
Refecting this diverse range of oppor-
tunities Madincea says, Where Disney
outshines most other sponsorship options
is in their collaboration and fexibility.
Haas adds that even the negotiation pro-
cess itself was not rigid.
We kept coming back to Disney saying,
'This is good but we may need something
else.' They had certain assets that they want-
ed to give us as part of the sponsorship and
we would think about it some more and say
'we are not going to use this one but what
do you have that might do this for us?' It is
the idea of looking at it in terms of what is
presented doesnt have to be accepted. It is
fexibility. Indeed and it is very different
to the limited number of opportunities for
exposure offered in sports.
Coincidentally, Siemens deal with Disney
began in October 2005, around the time
that it ceased its estimated $20m annual
partnership with McLaren. Haas says
that Disney approached Siemens
Fairy godmother: Lawrence Aldridge is Disney's
senior vice president of corporate alliances

INTERVIEW
98 October 2009
1. How long has Siemens been a
partner of Disney?
It goes back to June or July of 2004 when
we had some initial discussions and then
we signed our agreement with Disney in
October 2005.
2. Why did Siemens choose theme
park sponsorship over other types of
sponsorship?
We were looking to nd a way to show-
case our technology but also help Ameri-
canise the brand and Disney would help
do that of course.
3. How does Siemens monitor the
return on investment from the deal?
We do an annual evaluation of what the
brand exposure has been in terms of
advertising equivalence. All of Disneys
alliance partners get a certain allotment of
tickets and they get the discounts on food
and beverage. Then theres other assets in
the relationship. One of them, which was in-
cluded in this agreement, was that the ABC
Studio sign at Times Square is sponsored
by Siemens so it is exposure. We tally all
those things up and we are pleased to say
that we are at a break-even point.
4. What are Siemens targets for the
sponsorship?
We are looking to get increased brand
awareness and increased familiarity for
Siemens. We have already seen that
because we do an entrance and exit
survey each year. We are seeing a lift
in the awareness but, more importantly,
familiarity with all that Siemens is capable
of doing.
5. Does Siemens provide anything
to Disney other than nance e.g. Prod-
ucts?
We provide some water ltration systems
for the Disney pools, the parks and hotels.
The lighting in the parks is provided by
Sylvania lighting, one of our companies.
They buy ride controls from Siemens
Energy and we do re safety and security
systems. Likewise we have done some
things with their Cruise Lines.
6. What are the biggest challenges
with being a theme park sponsor?
The challenges are always coming up
with new ideas and keeping it fresh.
7. What are the biggest benets to
being a theme park sponsor?
The very positive feedback from custom-
ers and employees that they didnt know
what Siemens did. We also see there is
a benet in what it is doing to encourage
that next generation of scientists to get
into technical careers. It does a great job
in brand awareness and helping to remind
people how strong Siemens is here in the
US and there is a business opportunity
as well.
8. What advice would you give to a
prospective theme park sponsor?
Do your homework and analysis. It has
got to t your needs but at the same time
youve got to be open to some ideas.
Youve got to be creative at how you look
at telling that story. You have to challenge
your own marketing team to be more
creative.
9. How did Siemens come to hear
about the opportunity of becoming a
Disney partner?
Disney approached us with the idea that
it was looking for a technology partner. My
understanding was that it had been deal-
ing a lot with General Electric a lot over the
years and when General Electric acquired
Universal Studios as well as the theme
parks at the time, Michael Eisner, who was
chairman of Disney, had said that it was
one thing when it had television stations,
now it also competes with us in theme
parks and it competes with us in lm. Its
more of a competitor than anything and we
need to separate that relationship so it was
looking for a technology partner.
www.thepaddockmagazine.com 99
BRAD TAYLOR - Global
Director of strategic
partnership marketing,
Coca-Cola north America
1. How long has Coke been a
partner of Disney?
Ever since Disneyland opened back
in 1955.
2. Why did Coke choose theme
park sponsorship over other types
of sponsorship?
Because theme parks are one of the
key places consumers go to have fun...
and they get really thirsty doing so.
3. How does Coke monitor the
return on investment from the deal?
We measure the volume of beverages
we sell and the quality of consumer
impressions we get inside the parks.
4. What are Cokes targets for
the sponsorship?
For our product sales to offset as
much sponsorship costs as possible
and unique opportunities to engage
consumers with our brands.
5. Does Coke provide anything
to Disney other than nance e.g.
Products?
We provide unique beverage products
and packages to better meet the needs
of Disney's guests and to enhance the
guest experience.
6. What are the biggest chal-
lenges with being a theme park
sponsor?
Identifying the right opportunities to
sell all of our beverages in different
theme park environments.
7. What are the biggest benets
to being a theme park sponsor?
Being able to sell all of our beverages
to theme park visitors and doing so
in unique ways that help enhance the
consumer experience.
8. What advice would you give to
a prospective theme park sponsor?
If you don't have money to activate
the sponsorship both in-park and in-
market, then you probably won't get a
reasonable return on your investment.
9. How did Coke come to hear
about the opportunity of becoming
a Disney partner?
We were the exclusive advertiser on
Walt's rst TV show One Hour in Won-
derland on Christmas Day in 1950.
2008 North American sponsorship spending by property type
9%
10%
69%
5%
4%
3%
Sports
Entertainment, tours and attractions
Causes
Arts
Festivals, fairs and annual events
Associations and membership organisations
Source: IEG Sponsorship Report
TOM HAAS - Chief marketing ofcer, Siemens corp
about becoming its technology partner
after its previous sponsor General Electric
(GE) acquired Universal Studios. Haas ex-
plains that Michael Eisner, who was then
the chairman of Disney said that it was one
thing when GE only had television stations
but now it also competes with us in theme
parks and it competes with us in flm. Its
more of a competitor than anything and so
we need to separate that relationship.
Haas adds that Siemens contacted a mar-
keting agency to compare the Disney op-
portunity with others in terms of the brand
exposure, advertising equivalence and as-
sets you get, it might be tickets, it might be
a hospitality suite at a stadium.
And he explains that, In every case there
is always some kind of marketing gap and
then the question becomes what do you do
to make up that gap? In other words, what
can you do to leverage the relationship so
that in effect you come out whole? I seem to
recall that an NFL sponsorship might have
a 50 per cent marketing leverage gap. The
Olympics might have 100 per cent because
you pay all the money for the sponsorship
and then youve got to spend that much
more to execute and implement. By this
analysis we saw the Disney sponsorship
in terms of an opportunity gap of about 17
per cent and that was not taking into ac-
count any of the sales that we might realise
through the relationship.
The value for money is matched by the
quality of exposure which is the second
differentiator of a Disney deal.
When people think of sponsorship they
think of sport and that's limiting because
for one it's getting very congested, says
Aldridge. In the park you're connecting
with the consumer at a time of heightened
emotional engagement. It's a magical envi-
ronment, an uncluttered environment and
it offers product exclusivity, he adds.
The number of eyeballs they attract is
equivalent to the top sports events with
Disney's parks having over 100m visitors
annually. Its parks occupy the top eight
positions in the rankings of the world's
most visited theme parks and with 34,000
hotel rooms onsite at its parks, Disney is
also able to get demographic data on its
visitors that most rights-holders would
dream of. It makes a tantalising package
for sponsors.
Over the last few years we have advised
several companies moving from major
sports programmes, says Xander Hei-
jnen, Chief Operating Offcer of consul-
tancy frm CNC which has worked with
all of the car manufacturers participating
in F1. He adds In every case, the com-
pany was willing to exchange the quantity
of eyeballs for the quality of the commu-
nication. A high share of voice in a small
entity can be more valuable than a whisper
in international football.
But what makes visibility in Disney's
parks particularly effective is the sublimi-
nal way that the brands are incorporated.
Innovation is Disney's hallmark and it is
the third contrast between its sponsorships
and those in sport.
Testing stations offer free samples of
new Coca-Cola favours to guests who
give feedback on the taste and with 3,000
brands globally the company is well-
placed to make the most of this. Brad Tay-
lor, Coca-Colas Global Director of Stra-
tegic Partnership Marketing, says that one
of the biggest benefts of being a theme
park sponsor is being able to sell all of
our beverages to theme park visitors and
doing so in unique ways that help enhance
the consumer experience.
At the most exotic end of the spectrum
HP, another former F1 sponsor, collabo-
rated with Disney and NASA to create
Mission Space, a ride in a giant centrifuge
which simulates space travel. As with all
Siemens sponsors this spectacular son-et-lumire
show in Florida
INTERVIEW
100 October 2009
Disneys partners, HP doesn't sell products
in the theme parks but the opportunity to
bond with its target audience doesn't come
much better.
Disney guests perfectly ft HP-buyer pro-
fles. They generally have middle and up-
per-level incomes and most are married
with children, which allows HP to build
early relationships. Disney even has Mis-
sion Space-themed merchandise to take
the message home.
Aldridge won't state the level of return on
investment (ROI) achieved on the partner-
ships and he simply says The ROI depends
on what they are trying to do. For example,
measuring the level of return based on the
number of times the partner's logo is viewed
in the park will produce a different result to
measuring return according to sales driven
by the sponsorship.
Disney also offers partners the opportuni-
ty to get a tangible return that they would
struggle to get with any other sponsorship
and this is the fnal difference with a Dis-
ney deal. Disney spends $12bn a year on
goods and services and its partners are
often at the front of the queue when the
company comes to place orders. We've
outsourced some of our print managed
services to HP, says Aldridge but this is
nothing compared to Disneys shopping
list of products purchased from Siemens.
We do some water fltration systems for
the Disney pools, the parks and hotels,
says Haas adding that, Sylvania light-
ing is one of our companies which does
the Disney parks lighting. Disney buys
ride controls from Siemens energy and
automation and we do fre safety and secu-
rity systems. Likewise we have done some
things with its cruise lines so there is a lot
we provide and we are continuing to fnd
new opportunities. In just over four years
Siemens has got involved with every divi-
sion of Disney, even working with it on
lighting its theatre productions.
Siemens next task is to develop radio chips
to track Disney products and it is also bid-
ding on water fltration, building security
and energy effciency products for Disneys
new vacation club in Hawaii. Bulk orders
like these serve to keep partners happy,
particularly during a downturn.
Not only does Disney have an arsenal of
sponsorship assets second to none, it con-
trols and manage these valuable assets
better than others with similar offerings,
says Madincea. The best proof that Disney
and its partners are having a positive effect
comes from the punters themselves.
We do an entrance and exit survey each
year and we are seeing a lift in the aware-
ness of Siemens but, more importantly, fa-
miliarity with all that Siemens is capable of
doing, says Haas. He adds that the spon-
sorship is paying for itself.
We do an annual evaluation of what the
brand exposure has been in terms of ad
equivalence. All of Disneys alliance part-
ners also get a certain allotment of tickets
and they get the discounts on food and bev-
erage. We then put a value on the assets and
the saving we get. We tally all those things
up... and we are pleased to say that we are
at a break-even point, says Haas.
Critics may also claim that the target audi-
ence is too focussed on children but Dis-
ney's studies show the beneft of this. We
know from our research that 80 per cent of
the household budget is controlled by wom-
en and infuenced by kids, says Aldridge,
adding, I had no idea how to use text mes-
saging until it was taught to me by my kids.
You see that with the plasma screen TV too
- quite often it's the kid nag factor.
Disney has the kids' market pretty much
sewn up but Aldridge also spotted a gap in
the market for targeting sponsorships at fe-
male executives after research showed
Testing stations in Disney's Florida theme park offer guests new
formulations of Coca-Cola

www.thepaddockmagazine.com 101
that they are rapidly increasing in number.
Most business-to-business entertainment
is geared to guys... they need to start look-
ing to complement that in a way to tackle
women, he says.
Disney's solution is hidden in the heart of
each of its attractions where there is a cor-
porate lounge exclusively for the partner's
use. Top employees and clients are invited
to the lounges which offer free refresh-
ments and queue-cutting ride access 365
days a year. A lot of the business-to-busi-
ness entertainment at sports events is very
similar. If you are targeting something
differential how about a presence at the
parks, says Aldridge.
The Siemens lounge inside Spaceship Earth
commands sweeping views across the cen-
tral plaza in Epcot. Its space age design was
the brainchild of Siemens' skilled Director
of Strategic Marketing Alliances Darren
Sparks who also came up with the lounge's
name: Base21. Base refers to the lounges
use as a platform for exploring the parks
whilst the '21' relates to Siemens produc-
ing a range of technology needed in the 21st
century. The lounge showcases this latter
point perfectly since the technology inside
it is all provided by Siemens.
We are a complex company with complex
technologies... much of what we do is be-
hind the wall, under the ground and in the
back room making things work. This was a
way to bring it to the forefront and give peo-
ple a better appreciation of how Siemens is
making the world work, says Haas. Sur-
prisingly the sponsorship is aimed at both
internal and external communication.
Siemens employees can log into an online
system to book access to the lounge. When
they arrive they are greeted by name since
the online system stores it along with their
geographic origin and even the Siemens
department they work in.
Sparks says that the lounge has hosted over
34,000 employee visits and 334 events
since it opened in June 2007. Siemens
chief executive Peter Lscher has even vis-
ited. We bring customers to Disney and
we have a lot of events there, says Haas,
adding that In the evening every night
Siemens sponsors the freworks at Epcot.
You do a customer event there, fnish with
dessert around the lagoon and watch the
freworks. When the Siemens name goes
up in lights on the globe people are very
impressed. Its an understatement.
The Refections of Earth son-et-lumire
display at Epcot is one of the most impres-
sive shows of its kind in the world. Its high-
light is a globe wrapped in an innovative
LED screen which displays stirring images
in time to dramatic music and freworks.
The show is believed to cost $20,000 per
night to stage giving a good indication of
the high production values involved. At its
fnale the Siemens logo is projected by la-
ser on to the 180 ft tall Spaceship Earth. It
makes the ultimate statement to clients and
employees alike.
We get very positive feedback from cus-
tomers and employees saying that they
didnt know Siemens operates in all these
areas, says Haas. It is common to see par-
ents explaining to their children the sci-
ence being showcased in the games after
the Spaceship Earth ride so it clearly rubs
off on the guests too. Haas has high hopes
for this: We also see there is a beneft in
what it is doing and can potentially do to
encourage that next generation of scientists
to get into technical careers.
Time will tell how much of an impact
Siemens sponsorship can have on the ca-
reers of American youth but it isnt out of
reach as the sky is the limit when it comes
to a Disney sponsorship. You're really
limited by your imagination in terms of
what we can do and, that's really unique,
says Aldridge.
It remains to be seen whether F1 can make
the most of the reciprocal sales benefts of-
fered by a theme park since it lacks a car-
toon, comic and kids merchandise. And
with the sports teams already crammed
full of sponsors a park such as the F1-X
Theme Park planned but currently stagnant
in Dubai could be cluttered with branding
and so its organisers may need more than a
sprinkling of pixie dust to attract the level
of sponsorship enjoyed by Disney.
Ultimately, the diversity of the options
available could be the biggest challenge for
Disney's partners. Every different element
of the deal needs effective promotion and
Taylor cautions that If you don't have mon-
ey to activate the sponsorship both in-park
and in-market, then you probably won't get
a reasonable return on your investment.
Haas adds that prospective Disney partners
need to Do homework and analysis. It has
got to ft your needs but at the same time
youve got to be open to some ideas. Youve
got to be creative at how you look at telling
that story. You have to challenge your own
marketing team to be more creative.
Heijnen suggests that Disney's Very
American image and its lack of certain val-
ues such as competition, are the key points
which may put off prospective sponsors.
This may not always be an obstacle, though.
Haas says that Siemens specifcally chose
to partner with Disney to help American-
ise the brand and adds that We feel that
it is helping us in the long run build our
business. It is adding positive values to the
Siemens brand, it is gaining sales for Sie-
mens, in many different areas, not just with
Disney. There is certainly a positive effect
with being associated with such a strong and
wholesome brand as Disney. Nevertheless,
those expecting results with the wave of a
magic wand may be disappointed.
These kind of things take time and
you have to have patience, says Haas.
Heijnen adds that prospective sponsors
need to Have a proper PR strategy to sell
the partnership in a professional and effec-
tive manner. Disney doesn't even leave
this to chance as Aldridge says that it has
an account team on hand to manage and
advise partners. It is this kind of magic
touch which has turned Disney's corporate
alliances into fairytale marriages.
Sports sponsorships tend to be in
straightforward packages. Each one of our deals is different
we craft our deals based on what the partner wants
INTERVIEW
102 October 2009
R
aces dont come much more
blockbuster than this months
inaugural Abu Dhabi Grand
Prix. The bespoke-built Yas Island cir-
cuit has unique touches such as a run-off
area stretching under a grandstand and
an adjoining hotel encased in a colour-
changing shell. The complex also com-
prises a 143-berth marina, a water park,
an 18 hole championship golf course
and Ferrari World, the worlds largest
indoor theme park. It makes a state-
ment in true Middle Eastern style and
it comes at a price.
Construction of the circuit alone is be-
lieved to have come to $250m with the
government bankrolling the bulk of this
cost as well as the estimated $45m annu-
al sanction fee. It seems hard to imagine
how the government could justify this
spending during an economic downturn
but, according to new research by F1s
industry monitor Formula Money, mak-
ing a return on investment for a country
hosting a Grand Prix is as good as a rac-
ing certainty.
F1 racing is equivalent to almost three percent of Bahrains GDP
With often no share of F1's $265m take from trackside advertising or the
$130m from corporate hospitality, many race promoters have to cover
multi-million dollar hosting fees from ticket sales alone. They rarely make
a proft, and some have gone bust. However, in contrast, the governments
which choose to cover the costs of their home Grands Prix are coining it in
The real Grand Prize
By CHRISTIAN SYLT AND CAROLINE REID
104 October 2009
FEATURE
Abu Dhabi typifes the new world which
F1 is racing into. The Grand Prix will be-
gin at sunset and end under foodlights in
order to be broadcast at peak time in Eu-
rope which is still F1s biggest single tele-
vision market. Moreover, the $45m host-
ing fee is higher than the sports average
of $28m and the government is prepared
to cover this cost in order to market Abu
Dhabi to F1s 600m TV viewers.
F1 is saddled with $1.8bn of net debt
following its leveraged buyout in 2006
by private equity frm CVC so the sport
needs every extra dollar it can get. Sanc-
tion fees bring in around a third of the
$1.4bn revenues of the F1 Group but the
teams prevent its chief executive Bernie
Ecclestone from increasing the number of
races. So, in order to raise revenues, Ec-
clestone has taken the sport to countries
which are prepared to pay more instead.
In turn this has made it tougher for Euro-
pean promoters to afford the fees when it
comes to renewing their contracts.
Since most European countries dont
require a race to get global exposure,
their governments are reluctant to foot
F1s fees and in the past decade the sport
has moved from being a principally Eu-
ropean event to a true world champion-
ship. In 1997, more than 70% of races
were in Europe but this year it hosted
less than 50%.
The intangible exposure to hundreds of
millions of TV viewers is one thing but
the economic impact driven by the av-
erage 86,412 spectators who visit each
race is another. It means that not only
do the races cover government costs but,
according to Formula Moneys research,
they generate an average return of 710%
(see box). There aren't many kinds of
print or television advertising that can
do that in addition to offering exposure.
Perhaps surprisingly, the Japanese GP
gets the greatest return on investment
(ROI) and gets some of the lowest gov-
ernment funding at an estimated $3m.
The $70m local economic impact gives
it an estimated 2,333% return, just short
of that in Monaco where the state puts
in $4m more than Japan but gets $120m
back from spending in the country.
Even Singapores street circuit, the race
which has the lowest ROI, still gener-
ated a return of 208%. Its lower than
average performance is largely due to
the high cost of lighting the city streets
for the night race. Nevertheless, its cen-
tral location close to the shops, hotels
and restaurants enabled it to generate
the third highest local economic impact
with $125m being spent in Singapore
during the race weekend.
Only four circuits have no state assis-
tance but the importance of support is
refected in the fact that the 14 govern-
ments which are involved invested overall
a massive $299.5m in their home Grands
Prix. Finding a replacement for this level
of funding is increasingly tough and so it
is more likely that future races will have
to be government backed.
The economic benefts the countries re-
ceive don't just come from spending in
restaurants and shops. A study in 2005
showed that the Australian GP created
the equivalent of 3,650 full year employ-
ment positions and generated 194,994
additional visitor nights.
Indeed, the visitors don't just come for
the race itself but afterwards too with
race fans returning to the site of the on-
track battles. This effect is magnifed
when the circuits are on city streets as
local landmarks can become insepara-
ble from the racing action. And whilst
purpose-built racetracks take years to
build, street circuits take just over a year
to prepare. This gives their hosts quick
access to the attractions of F1 and gives
CVC a fnancial boost sooner. It also al-
lows the cities to use existing facilities
for the race with no fears of being left
with a white elephant if they decide to
quit when their contracts expire.
And using the city itself as a backdrop to
one of the worlds most popular sporting
events is the ultimate advertisement. Sin-
gapores race takes place in front of some
of the citys most famous landmarks, in-
cluding 11 top hotels such as Raffes, and
attracted 80,000 spectators last year.
Whilst Singapore showcases existing
landmarks, South Korea, like Abu Dha-
bi, is building features around its track
which will join F1's calendar next year.
The race will take place in a picturesque
but underdeveloped region of the coun-
try. F1 could change that.
A $265m semi-permanent track is being
built in South Korea's region of Jeollan-
am-do and it will run along a harbour
promenade utilising a pit complex that
for most of the year will house shops,
restaurants, cafes and exhibition fa-
cilities. According to Jeong Yeong-jo,
president of the Korean Auto Valley
Operation, it will not only vitalise the
provincial economy, but also positively
affect the development of the countrys
high-tech motor industry.
Location is the secret to making the most
of this. On average 40% of spectators at
F1 races are not from the local area and
the higher this fgure, the greater the
promotion and the bigger the spending
on local hotels. The more populous the
local area, the fewer the tickets that are
likely to be sold to people foreign to it.
So whilst a race in a densely-populated
renowned city makes a great advertising
fagship, one in an area with outlying cities
stands a greater chance of having higher
local visitor spend. Bahrain, with a popu-
lation of just 700,000, is the best example
of the latter. In 2008 the Grand Prix was
a 43,000-spectator sell-out and brought
$395m of local economic impact the
highest amount made by any F1 race.
Indeed, so significant is the money
made by the race that it is equivalent to
almost 3% of Bahrains gross domestic
product.
Bahrain's race is held at a purpose-built
$150m circuit but, according to Mar-
tin Whitaker, its chief executive,
On average 40% of spectators at F1
races are not from the local area and the higher this fgure, the greater
the promotion and the bigger the spending on local hotels

www.thepaddockmagazine.com 105
the economic impact generated by the
Grands Prix that have taken place to
date have covered the construction costs
many times over. The knock-on effect
has been even bigger.
The circuit is now seen as a world class
venue for a diverse range of business and
tourism related initiatives, says Whita-
ker. Automobile product launches are
a regular feature with just about every
major automobile manufacturer using the
circuit or its off-road course for media,
dealer and customer related launches.
Tourists are also focking to Bahrain
and not just for the Grand Prix itself.
The popular Australian V8 Supercars
Championship has held a round at the
circuit in a rare excursion out of Austra-
lia drawing in a completely new audi-
ence measured in thousands who would
not normally have considered travelling
to the country, says Whitaker.
Perhaps the best indication of the value
of Grands Prix to governments is that
they keep coming back. The Belgian GP
at the Spa-Francorchamps circuit was
missing from the 2006 calendar after
its promoter went bust due to poor at-
tendances and the costs of circuit reno-
vations. However, it returned to F1s
calendar after just one year with the
government backing a $37m project to
get the circuit up to scratch.
The $25m in local economic impact made
by the Belgian GP gives it a low ROI at
just 357%. This is is largely due to its ru-
ral setting with fewer hotels, shops and
Government contributions to and returns on the 2008 Grands Prix
Race Circuit 2008 government spending 2008 local economic impact Return on investment*
Australian GP Melbourne $27m $125m 463% ($4.6m)
Malaysian GP Sepang $33.5m $125m 373% ($3.7m)
Bahrain GP Bahrain International $45m $395m 878% ($8.8m)
Spanish GP Barcelona 0 $125m** 833% ($8.3m)
Turkish GP Istanbul $34.75m $150m 432% ($4.3m)
Monaco GP Monte Carlo $7m $120m 1,714% ($17.1m)
Canadian GP Montreal $9m $70m 778% ($7.8m)
French GP Magny-Cours
$8m
$100m 1,250% ($12.5m)
British GP Silverstone 0 $60m** n/a
German GP Hockenheim $5m $55m 1,100% ($11m)
Hungarian GP Hungaroring $10m $65m 650% ($6.5m)
European GP Valencia $8m $100m 1,250% ($12.5m)
Belgian GP Spa-Francorchamps $7m $25m 357% ($3.6m)
Italian GP Monza 0 $55m** n/a
Singapore GP Singapore $60 $125m 208% ($2.1m)
Japanese GP Fuji $3m $70m 2,333% ($23.3m)
Chinese GP Shanghai International $42.25m $125m 296% ($3m)
Brazilian GP Interlagos 0 $100m** n/a
TOTAL $299.5m $1,990m
Source: www.formulamoney.com
* Figure in brackets denotes million dollars invested in the local area because of the race per million dollars invested in the race by the
government.
** Not included in total for the purpose of calculating return on investment since no investment was made by the national government.
Total including the local economic impact of Grands Prix where governments make no investment is $1,990m.
Sports sponsorships tend to be in
straightforward packages. Each one of our deals is different we craft
our deals based on what the partner wants
106 October 2009
FEATURE
restaurants nearby than the more modern
circuits. The government owns the circuit
and funds it which also diminishes its abil-
ity to give a higher economic impact.
However, the majority of the European
race promoters depend purely on ticket
sales with no assistance from the govern-
ment to cover F1s fees. Local authorities
tend not to give them money since the
countries already have global exposure
and their circuits are more likely to be
in the countryside rather than tourism-
friendly urban areas.
It makes it tough to turn a proft. Even a
race like the British Grand Prix, which
has a lower than average hosting fee of
$17m, still has total costs of around $35m
after taking into consideration manag-
ing, staging and marketing the event,
plus maintaining the circuit. The success
of Britains superstar driver Lewis Ham-
ilton has driven the crowd at the race to
one of the highest of any Grand Prix with
90,000 spectators attending last year.
Nevertheless, ticket sales still only pull
in $30m and with an additional $5m from
corporate hospitality it only just breaks
even. In all but a handful of cases, the
vast majority of the money from corpo-
rate hospitality and race advertising goes
directly to F1 Group.
It fuels a vicious circle since the more Eu-
ropean governments need to put money in
to host an F1 race, the less likely they are
to do so. This in turn will send more races
to emerging markets which have bigger
budgets and need the promotion.
There are even signs that cash rich na-
tions are becoming more averse to F1s
cash-guzzling ways. For example, in Sin-
gapore the government itself only foots
60% of the $100m costs of the race, with
leisure industry billionaire Ong Beng
Seng covering the rest. Both beneft im-
mensely from the local economic impact
of the race in a way that traditional pro-
moters cannot. Beng Seng owns several
hotels on the Grand Prix route, while the
the countrys trade and industry ministry
levies a 30% tax on trackside hotels dur-
ing the race.
As Karl Josef Schmidt, managing director
of Germanys Hockenheimring, predicted
earlier this year, unless fees are lowered
Formula One will disappear not just
from Hockenheim but from Germany as
a whole. Then it will only be run in Arab
countries. It may be music to Abu Dhabis
ears but F1s die-hard fans in Europe will
be hoping that this ominous prediction
doesnt come true.
Bernie Ecclestone has had to take F1 to new markets with bigger budgets
www.thepaddockmagazine.com 107