Globonomics!

Consulting|Technology|International business

Mallya buys the Spyker Formula 1 team

with 2 comments

Lets shortly analyze the economics of this deal and to see if the struggling Spyker F1 – http://www.spykerf1.nl/ – can be turned around by Mallya who has invested in this deal in his personal capacity.

Lets also examine if talented Indian drivers such as Narain Karthikeyan get that much needed break to drive for F1 again!

Brand visibility in a global sport such as F1 is one of the foremost things people choose the smaller teams. Spyker did this in 2006 for their road cars as well through the prominence it got them through F1. Mallya might be eyeing that aspect because F1 is a truly global sport and the 1.5 hour per race spread over an entire racing season of 16 races across the world implies eyeballs are attracted to the KingFisher brand globally. Furthermore, those eyeballs are quite a few given almost 4-10 million people watch F1 globally annually.

This comes at a price though but I am sure a shrewd businessman like Mallya would have done his due diligence process before getting into this. With no frills, the cost of running an F1 team alone can be almost $500 – $600 million per annum (notwithstanding the fact that Mallya inherits Spyker’s windtunnel testing facilities etc.)

Problems that Mallya will encounter to revive this ailing team are plenty. 

History of Spyker F1

The erstwhile Jordan F1 owned and operated by Eddie Jordan was bought over by a Russian billionnaire who ran the Midland team for an year in 2005 after which it was sold to Spyker F1 in September 2006. Mike Gascoyne is the CTO for Spyker F1. Mike was earlier technical director for Toyota F1. http://en.wikipedia.org/wiki/Mike_Gascoyne

Jordan has not done too well in the field of F1 since its founding in 1991 by Eddie Jordan who coincidentally hired the great Michael Schumacher to drive for Jordan early on in his career after which Schumacher was snatched by Benneton Renault etc. under Flavio Briatore.

Jordan has only 4 wins to its credit (I rem. one of them came to Damon Hill in the historical Belgian GP at Spa Francorchamps in 1998 when half the field was taken out of the race in the opening lap during a rain soaked classic Spa race). Spa (http://www.spafrancorchamps.be/) is one of the greatest drivers circuits around the world and especially with Eau Rouge and Blanchimont (http://en.wikipedia.org/wiki/Circuit_de_Spa-Francorchamps). That race was a 1-2 for Jordan.

I am not expecting any miracles to come from Mallya. He might have deep pockets but I doubt if he will retain the Spyker F1 team for longer than his liking. He will utilize the powerful business networks that an F1 race brings to the paddock and will definitely leverage on those contacts (he already has a sponsorship deal with Ralf Schumacher and Toyota F1). F1 is a truly glitz and glamour sport and the rich and the famous often visit the starting grid. This is indeed a boon for Mallya to capitalize and push his KingFisher brand to the worldwide audience if he is to compete with the goliath’s of the world!

Everyone knows he is India’s answer to Sir. Richard Branson but just how much does he take the Indian KingFisher brand globally is anyone’s guess.

I like Mallya’s strong business sense though. Do you know that it was him who purchased the Tipu Sultan sword from a British museum and restored it to its past glory?

I only wish good for Mallya and his acquisition of the Spyker F1 team. Yes, they will still be backrunners and will not improve in terms of grid positions. Burning $500 million per year to promote one’s brand to attract 4-10 million eyeballs around the world annually doesn’t come cheap either. Mallya cannot expect a profit from this acquisition anytime soon – I am sure. Top teams with deep pockets such as Toyota and Honda haven’t been able to do well in F1.

But, with the introduction of Mallya into F1, comes a unique spice that India is indeed dreaming big and reaching out to the global audience. This is terrific news and I am glad the likes of UB, Tata’s (who sponsor the Williams F1 team) etc. are taking a stake in his truly global sport!

Asian dominance in the F1 audience will only skyrocket with the Bahrain GP, Malaysian GP, Chinese GP, Japanese GP etc. There are rumours of an Indian GP in the NCR (National capital region at New Delhi). The eyeballs that a sports crazy country such as India with over 1 billion people will generate is a huge opportunity by itself and while Mallya goes about doing business, the country will develop an almost ‘nationalistic attachment’ to him. People will remember him as the “Man who brought F1 to India”!

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Written by Naveen Athresh

September 3, 2007 at 8:54 am

2 Responses

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  1. I’ve been following F1 regularly since ’91, the year that Jordan (the original incarnation of what is now Spyker) joined the fray. I was a die-hard Jordan fan, & to watch their slow but steady decline through the early ’00s was painful. Here’s to hoping that the new owners can get things turned around and make them competetive again!

    indyandy

    September 3, 2007 at 10:32 pm

  2. Thoroughly enjoyed reading ! Though not a F1 follower, the post was gripping from the first word to the last 🙂 Looking forward to follow ups !

    Anand Saha

    September 9, 2007 at 12:34 pm


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