Mixed signals on Formula One

Plans to scrap Malaysian race meet with various reactions

PETALING JAYA: Plans to scrap the Malaysian Formula One (F1) Grand Prix from the circuit calendar are being met with mixed signals - even if it is for a temporary period.

There are those who feel the Government should have done more to promote the F1 in Malaysia to make it a bigger success.

A source who has been involved in the management of the F1 in the country said it costs the Government US$55mil (RM231mil) annually just to host the event.

“The F1 rights fees is funded by the Government, which is around US$55mil per year. The escalation clause is painful. It started at US$12mil (RM50mil),” he said.

Malaysia started hosting the F1 in Sepang in 1999.

While the fee the Government pays to host the F1 appears steep, one industry observer said the spillover effects of the F1 are also tremendous during the race weekend.

“The F1 helps to pull in tourists. Hotel takeups see a pick up and many retail outlets also register a rise in sales,” he said.

However, some feel that the relevant authorities are not doing enough to reap the benefits of the F1.

“Unlike Singapore, the Malaysian Government just pays the annual fee and that’s it. The Singapore Government gets very involved in all the side activities, including The Singapore Summit,” said an industry observer who requested anonymity.

“So, the week is filled with events, with the economic agenda a priority. So, the intangibles are immense if there is a concerted effort by all parties to take advantage of the congregation of people in one place over the weekend.”

He added that there has not been sufficient support from the relevant authorities to capitalise on the F1 brand.

“It’s difficult because there is little Government support. They just don’t want to use it as an economic and networking platform.

“Over here, many ministers just want to attend as guests. In Singapore, they are hosts for a lot of guests.

“During the F1 week in Singapore, hotels and food and beverage outlets are full and there are plenty of concerts and entertainment. It’s a packed week and weekend. The Singapore Government invites big business personalities and other Government heads.”

Still, as glamorous as the Singapore F1 scene might be, ticket sales have been on the decline.

In a news report on Monday, Sepang International Circuit (SIC) chief executive officer Datuk Razlan Razali was quoted as saying that ticket sales of Singapore’s F1 were down 20% this year.

The situation with Malaysia’s F1 has been no better. On top of steadily declining ticket sales since 2014, Razlan also revealed that viewership in Malaysia was the lowest in history.

On top of escalating costs, ticket sales for the yearly event and television viewership have also been dwindling, with Razlan saying on Monday that the F1 was “no longer exciting”.

This criticism is despite Malaysia’s state oil company, Petroliam Nasional Bhd (Petronas), being both the major sponsor of the Mercedes team and the naming-rights sponsor of the local Grand Prix.

According to reports, Petronas’ involvement in the F1 has given the brand extensive global awareness and visibility. Between 2012 and 2015, Petronas’ media exposure grew by 400%, making it the number one oil and gas (O&G) brand in the F1 through ‘live’ broadcast coverage.

In 2015, the partnership earned Petronas approximately US$901.08mil (RM3.8bil) in global media exposure. On average, the media impact for O&G companies in the F1 is estimated at just US$200mil (RM840mil).

Beyond branding, Petronas’ involvement with Mercedes has also evolved into an effective platform to accelerate its technological advancements and capabilities in the research and development of fuel and lubricants.

With interest dwindling locally, the SIC’s major stakeholder, the Finance Ministry, is considering shelving the Malaysian F1 race temporarily. Based on a search on the Companies Commission of Malaysia, the SIC registered a net profit of RM8.5mil for its fiscal year ended Dec 31, 2014. Revenue stood at RM100mil.

Razlan was quoted in local reports on Tuesday as saying that a temporary withdrawal from the F1 could be beneficial for the country, adding that the annual Motorcycle GrandPrix (MotoGP) race seemed more promising in terms of attracting spectators and its potential spillover effects.

“Last year, we saw 85,000 spectators for our MotoGP. This year, as all the tickets have already been sold out, we target a record 90,000 spectators, inclusive of the hill stands,” Razlan said.

Renewal of the MotoGP licence, which expires this year, is expected to be finalised soon. Malaysia has a contract to host the F1 through 2018 but an early exit could be negotiated, as the F1’s new ownership seeks to expand its presence in the United States without extending the season schedule.