NEW YORK The Indianapolis Motor Speedway, known for its Budweiser-loving Indy 500 crowd, received an infusion of Champagne and Continental glamour yesterday with the Formula One U.S. Grand Prix. Nascar-loving Americans, who prefer their scrappy races round and round an oval track, aren't as familiar with the European F1 teams, who maneuver their machines at higher speeds on more difficult courses. Nonetheless, F1 is the biggest annual sporting series in the world, drawing some 580 million fans in 185 countries each year. That makes it a popular global platform for marketers seeking to share the spotlight in one of sports' most glamorous—and wealthiest—events. F1's 11 teams, in 2006, spent nearly $3 billion on their racing.
F1 is a clubby world unto itself. (That, in part, reflects the longtime influence of Bernie Ecclestone, the crony of Sir Frank Lowe, who helped orchestrate Interpublic's money-losing affiliation with the sport in the late '90s. Ecclestone still effectively maintains financial control through his Formula One management companies.) For the last four decades, a mainstay of the sport has been its sponsorship by tobacco companies, but with the exception of the occasional use of the Ferrari team's Marlboro backer, this is the first year those marketers are not allowed to participate. Lining up sponsors is now making F1 an even greater competitive sport, on and off the track.
One of the improbable players behind the scenes: American Idol impresario Simon Fuller. In 2006, Honda, which spends more than $400 million each year on F1, hired Fuller's 19 Entertainment to fill the void created by the loss of flagship sponsor Lucky Strike.
Fuller has the Midas touch when it comes to foreseeing and capitalizing on the next trends in pop culture. He's reshaped the entertainment industry through sponsorship deals, with American Idol now the world's most valuable TV property, worth $2.5 billion. Before the ubiquity of Paris Hilton, Fuller was marketing celebrities such as Victoria and David Beckham as brands in their own right. (He was behind the jaw-dropping transfer of Beckham from Real Madrid to the little-known L.A. Galaxy.) Fuller is now setting his sights on expanding 19 into the sports world.
For Honda, Fuller has seized upon the zeitgeist, developing an environmentally friendly strategy to attract partners for the company's F1 team. But since Honda signed off on the Earth Car concept in December, 19 has not disclosed any big partners. And, along the way, Honda's F1 Earth Car has attracted unwelcome scrutiny of the sport's huge carbon footprint. Fuller, the outsider, may well have miscalculated F1, from its insular dealings and politics, to media less malleable than entertainment reporters and gossip columnists.
Fuller, who started out as a London music agent in 1985, has expanded his business into an entertainment and marketing group of over 20 companies, which he sold in 2005 to the U.S. concern, CKX. (Its chief assets are the name, image and likeness rights to Elvis Presley and Muhammad Ali.) With little sports marketing experience and no prior F1 involvement, 19 arrived on the racing scene last year, all sharp elbows in the chummy paddock that is F1's cluster of sponsors, agents and teams. It has an exclusive deal representing Honda, unusual in this sport, where other agents with ties to marketers deliver those valuable associations to racing teams—agents who began to feel alienated from Honda's team, sources said.
So there was already little love lost when Honda unveiled its "My earth dream" strategy in February. Gone was the time-honored tradition of plastering sponsors' logos on a team's car. Instead, Honda's RA107 car is wrapped in an image of the planet, a visual reinforcement of the manufacturer's own commitment to developing more environmentally friendly technology and an invitation to marketers who share that goal. 19 spiked the sport's traditional sponsorship model, substituting one built around licensing rights. In exchange for their support, marketers can use Honda's Earth Car image in their own advertising and merchandising. In addition, fans can make donations at Honda's F1 Web site, myearthdream.com. Their names remain on the site and are also pixilated on the actual Earth Car.
While 19 has added two new partners, Universal Music and Gatorade, to Honda's F1 existing roster of marketers—for a total of 40 so far—none have used the Earth Car image yet in its advertising. Shaw says a couple of undisclosed merchandising efforts are in the offing; he also says the company has signed up additional sponsors who can not yet be publically identified. (One company, Italy's Inercond, did not renew its relationship with the team.)
Execs at 19 argue that given the increasing restrictions on tobacco advertising in recent years, traditional industry assumptions are outdated and irrelevant.
"The Formula One sponsorship is a tired and broken model based on tobacco, which paid over the odds for years, far more than a P&G or Unilever," explains 19's Chris Shaw. (The company's executives do not have titles.) "Formula One cars are all funny shapes, going very fast—that's not the best place to put sponsors' logos. Renault's car is plastered with logos; it looks like someone's been sick. Compare the advertising price of that exposure against the value of a [Honda F1 sponsor's] 30-second TV spot [featuring the Earth Car]." Shaw adds that a licensing model provides more flexibility than the previous one-size-fits-all global offering to sponsors.
Fuller, who generally declines media interviews, was not made available for this piece.
Two other instruments for Honda's F1 Earth Car that are characteristic of Fuller's marketing toolbox: the use of personalities and publicity. At this year's kick-off race in Australia in March, Honda drivers Rubens Barrichello and Jenson Button went to a primary school there and changed lightbulbs while talking about the climate and environmental issues. "You launch a Formula One car and get coverage in the Formula One press. We launched the Earth Car and ... it's not [just] in the sports pages," says Shaw.
The novelty of the Earth Car generated coverage in the mainstream press, but the tone was set in the sports pages with journalists viewing the idea as controversial and dismissing it as a cynical marketing ploy. Also, rival teams chafed as the environmentally unfriendly sport's dirty little secrets were aired in the press. The perception of excess in a sport where cars get 4 miles to the gallon wasn't helped much by the Honda team's own behavior, as it unveiled the Earth Car concept in February. Barrichello and Button, known for using private jets and chartered aircraft, respectively, as they jet around the circuit, flew from Bahrain to London for the launch and right back again, rather than participate through a video conference.
"This is a bold step, but one with consequences," says Bob Varsha, host of F1 coverage on the Speed Channel and Fox. "Maybe if the car was performing better it would be different, but the team is struggling and the car is not good, so the whole scenario has the atmosphere of a clown act."
Varsha interviewed the Honda team in Indianapolis last Thursday. Button was asked if he liked the Earth Car colors. He responded "yes" and then asked fans around him what they thought. Taking in the responses, he laughed and declared the reaction "half and half."
Indeed, the U.S. Grand Prix is the seventh race in a 17-event circuit and so far, Honda's F1 team has had its ups and downs.
Says Henry Rischitelli, CEO, Nextmarketing, which works for Champ Car, a North American version of the Grand Prix: "Formula One is the antithesis of 'green.' Honda [runs] two small wind tunnels [24/7] just to get a few more seconds of speed; the [F1 team's] cars are flown around the world; the people who participate travel around the world in private jets, luxury coaches, private helicopters. They fly around chefs, servers, Champagne glasses from location to location. Formula One, as an environmental platform, is a disaster. That message is terribly convoluted and I think there's been a negative backlash. This is a function of [the Honda team's] inability to get a sponsor."
Shaw denies that, saying 19 looked at sponsorship models, but it was not what Honda wanted.
Alistair Watkins, the former corporate marketing director for the Honda F1 team, who developed the Earth Car livery with 19, defends the concept. He says he and the company spent 10 months developing the idea and researching five key markets before and after its launch, and the response has been "very positive." In May, Watkins left the Honda team to take a marketing job with Alinghi, the Swiss entry in the Americas Cup.
"F1 is all about technology, and future technology should be environmentally friendly. ... It's also an issue-based marketing concept that fits with Honda's corporate values," Watkins says. He also says that the Earth Car adds a dimension to the sponsorship for a team that has performed inconsistently the last few years: "Marketers tend to support teams because of performance. What we've created gives us something beyond performance. It maximizes our potential."(Now that Watkins is gone, Honda team boss Nick Fry is left to take the heat from critics.)
Nonetheless, sources contend that the Honda F1 team, over the past three years, has unsuccessfully gone after Emirates Airline, Intel, Orange, RBS, Samsung, UPS and Vodafone as sponsors.
Another source says it's no accident that the Earth Car imagery resembles Google's Earth symbol. According to this industry executive, a third party, close to Google, made overtures about the Internet giant sponsoring Honda's F1 team. More than cash, that sponsorship would have provided a high-profile association and help remove any lingering stigma from its tobacco past. (At one point, the Honda car was actually owned by British American Tobacco.)
Shaw denies the Earth Car concept has any connection to Google or that a third party initiated contact with the Internet giant. However, he says that they're having ongoing talks with the company.
Shaw denies any intent to alienate other F1 marketing agents, but allows: "We actually saw loads of agents, but 90 percent of them were a waste of time."
Now, though, execs at 19 may be realizing they can't afford to go it alone.
According to Zak Brown, a former racing driver who runs one of motor sports largest marketing firms, Just Marketing International, "The [Earth car] model is still early. ... But my assumption is they're not hitting the ball out of the park. 19 has reached out to us, saying if you have any [sponsorship] partners, bring them to us. [Contacting other agents] may not have been happening 90 days ago, but it's happening now." Brown adds: "We don't have clients interested in that Earth message."
In an industry of high-speed sponsor "billboards," the car itself is proving to be a disappointment. Stripped of marketers' logos, the Earth Car blends into the background of the track and has not fared well on TV or in still shots.
"If you're standing next to it, it looks like something interesting, but at 200 mph it looks like a greenish-blue blob coming past you," notes Just Marketing's Brown
19 has a five-year agreement with Honda, with the first cancellation clause next January, sources say. (Shaw declines to comment on that.) Fry's team is still spending more money than most of its rivals, but without great effect. Honda's inconsistent performance—Button couldn't even get his car started on the grid in Montreal on June 10 because of gearbox difficulties—does little to enhance its appeal to sponsors. What's more, Honda executives are said to strongly disagree over the Earth Car's marketing strategy. Honda F1 reps declined interview requests.
Shaw, a top exec at Universal McCann, London, for the past 10 years, isn't bothered by industry backlash and refers to other successes at 19. "This is such a different twist; it's hard for people to understand," he says. "Sometimes you have to trust your instincts."