Caveat Emptor for the next promoter of the FIA World Rally Championships  !!
Lessons from Formula 1

Photo by Tim Barkey

I picked up the in flight BA Business Life magazine last week and there was a cracking article about Formula 1, its financials, stock market flotation and how Bernie has created an undeniably amazing brand with impressive future growth potential.
Credit where it is due, the article was entitled "I'm, Bernie, buy me" and was by Christian Sylt and Caroline Reid. Have a read because it is fascinating: http://www.babusinesslife.com/Tools/Features/Formula-One-the-big-sell-off.html

Photo by Tim Barkey

In essence World Rally Championships (WRC) has been in a pile of the proverbial from every perspective since North One Sport (NOS) had their contract rescinded by the FIA in January 2012; not that North One Sport made any money from being the promoter with a £2m reported loss in 2011, and not that NOS was the holy grail for WRC. The FIA have yet to announce a new promoter currently saying that an appointment will be made no later than September's World Motorsport Council Meeting. 


Many comments have been made, one most notably by Gerard Quinn (@WRCgerardquinn) of Ford WRC in Autosport magazine calling WRC, "a sinking ship", and that September is far too late to appoint a promoter. I agree totally. The sport has been knocked back by 2-5 years and it will take a significant change to re-establish itself. Gerard says "The WRC is a great sport but it needs to be run like a business." 




Now I know I am not exactly being fair by comparing F1 to WRC but the business model need not be dissimilar, nor the learnings, irregardless of the scale of each brand and the massive income from F1.

"According to F1 industry monitor Formula Money, the sport's Jersey-based holding company, Delta Topco, had a turnover of $1.6bn in 2010, with race hosting fees being the biggest single source of revenue at $567.5m. This was followed by $470m from the sale of television rights, $243m from trackside advertising, $153.5m from corporate hospitality, $90.5m from sponsorship and $62.5m from other sources"

Formula One generates around $500m a year in profits and is a truly global sport with South Korea joining in 2010, India in 2011 and in 2014 the first Russian race will take place. Next on the calendar will be South Africa and Mexico, with Argentina and Thailand. 


F1 has 20 races with a fee paid by the host of up to £30m per race. No need to do the maths but this sum alone would run WRC for several years! 




The WRC has 9 teams and 4 major manufacturers rallying in 13 races globally - Ford, Citroen, MINI and VW, with VW not running a full season with their ex Citroen driver Sebastien Ogier.


NOS as promoter received zero cash from each race on the calendar and actually used to pay each local promoter a fee to have their inventory on site!

In fact each of the 13 WRC events are run at the individual promoters risk, although they receive ticket sales from fans, charge the teams for their service park space etc. Hospitality was run by NOS but agreed with each event who also sold hospitality!!


The FIA recently sent a memo to the 13 WRC race organisers imposing a race fee of £100,000 to stage WRC in their respective countries, whereupon the race organisers told the FIA where to go.


The sport is in such disarray that each individual rally promoter charges the teams different fees for space at each rally. On top of this not every event has a service park or "hub" for fans to see the cars and drivers and soak up the rally atmosphere. It also doesn't help for monetising the brand that as a sport rallying is run in remote locations in forests and mountains. This makes the races hard to access, hard to create a brand and hard for new and exisiting fans to see.


Since Jean Todt wants to have longer, more extreme rallies for the future, this means even more "remote" service parks which will hinder brand development.


F1 on the other hand is track based in glamorous locations and has the superbly exclusive and glamorous Paddock Club with a 3 day ticket selling for about £4,844. The estimated revenue for Paddock Club alone for 2012 is £190m -  a sum that would keep WRC running for 20 years.


However what is stopping WRC from being more city-centre based, creating rally exhibitions, rally expos, and being closer to major cities?! Barcelona actually features in the season finale this year...hurrah!




WRC's issues are several:
The sport is disorganised and sponsors have now left the "sinking ship" - only Michelin and Edox remain. No sponsor will join with the sport in current disarray, and quite frankly even if a promoter joins in September you may as well write off 2013 and most of 2014.


TV broadcast needs to be in both terrestrial and pay per view - look at F1's success with Sky HD and the BBC. NOS was due to broadcast key stages of virtually all 2012 rallies live, and initially free, on the internet for the fans. This would have been incorporated into a new website with lots of new fan-centric information.


WRC is not a global sport - of the 13 rallies 10 are in Europe, 2 in S.America, 1 in New Zealand/Australia. This limits the audience, fans and reach, more importantly the manufacturers to sell cars in new regions which in turns limits the WRC brand. The virtuous circle is not virtuous, but vicious...in some cases quite literally!


The FIA also has a lot of the rights tied up in an extensive contract that ultimately inhibits the sport for the promoter, the FIA themselves, and as a consequence the teams and the manufacturers. Given the FIA's loss of control over rights with F1 they are seemingly reluctant to hand over rights for WRC without lengthy legal contracts.


Fan insight - there is little understanding about who the fan is, what they love about the sport, and how this varies by region. No insight = no way to write a strategy. No strategy = no viable sport business.






WRC is an amazing sport with drivers pitting their wits and courage against the clock, the changing environments of snow, ice, gravel and tarmac and against each other. It is an epic motor sport adventure truly waiting to be unlocked.


However any sport that limits its commercial and brand exploitation with lengthy legal contracts, over-protectiveness of rights, under-utilisation of potential rights and lack of understanding of the end fan, will limit the growth of the sport for the short, medium and long term. Good luck to the next promoter of the FIA World Rally Championships, and very sincerely good luck to the teams and manufacturers - WRC is a superbly exciting sport.