Wednesday, October 19, 2011

It's here, but can the Formula 1 Indian GP return?

The inaugural Formula 1 Indian Grand Prix is just over 8 days away. Given all the controversy and high costs, can it come back after the initial contract runs out.

The Jaypee Group has invested close to $400mn on building the track and related infrastructure. Annual operating costs & license fees are expected to hit $50mn on the lower side. Over four years, by when Jaypee hopes to break even on operating costs, the total cost of building and operating the Buddh International Circuit would hit $600mn - well over half a billion dollars.

Jaypee plans to make money from two sources:
1. F1 ticket sales (no sponsorship money is given to circuits)
2. Hosting other motoring events at the Buddh International circuit

Let's take these one-by-one.
With 100,000 spectators, Jaypee will at most make $16 mn in ticket sales. It plans to roughly double seating capacity. Let's assume this happens within two years. By 2013, the BIC should earn $32mn in F1 ticket sales. For the moment, I've discounted the small matter of an entertainment tax exemption granted by Uttar Pradesh's Mayawati government for the F1 race. A certain Amit Kumar has challenged this exemption before the Supreme Court. Given the IPL precedent, things don't look good for Jaypee's margins.

Now, let's look at revenues from other motor sports events. The official website for the Buddh International circuit says it hopes to start more international racing events from 2012. None, so far, have been confirmed.
That leaves local events. Motor sport is a very small community in India. Formula 1 attracted just 10 million Indian viewers last year. Cable TV viewership alone for the cricket world cup finals hit 67.6 million viewers. That figure does not account for India's 31 million DTH subscribers and hundreds of millions of Doordarshan viewers.

In a nutshell, outside of the F1 race tickets, Jaypee has no confirmed revenues.


Let's do the math as it stands, then
Fixed and recurring costs over the next four years: $600mn
Income from F1 tickets over next 4 years (Jaypee's breakeven point) = $96mn ($16mn in '11 & '12; $32mn in '13 & '14)

That's a net loss of $504mn

Last time I checked, the Jaypee Group was a for-profit enterprise. They claim they will recoup costs from selling flats in nearby residential plots. But can they really afford a half a billion dollar loss?

P.s. I am a Formula 1 aficionado. I want the Indian Grand Prix to succeed. I just don't see how that's possible in the long run at this stage.

13 comments:

  1. Dude,

    First of all, it would help to know your real name. You are in PR business. Second, why did you block me on twitter dude? I hardly interact with you, let alone abuse. Pls, don't act so intolerant like those crap celebrity journos.

    ReplyDelete
  2. @Deshdaaz You were blocked because:
    1) You posted extremely bigoted comments about Muslims when replying to my friend on Twitter.
    2) You use an alias and won't use your real name. I think this is cowardly given what you're saying.

    I will unblock you if you have the courage to own up to your comments with your true identity.

    On another note, Google me. You'll find that this is my real name and that I am not from the PR business.

    ReplyDelete
  3. Dear Mr. Smart Journalist,

    I am more than happy to share my identity in private. The only reason I have a pseudonym is because I work in US corporate world and would like to keep personal and professional stuff separate(technically if I am tweeting 4m my office laptop, that's traceable)..Tell me your email address and I will happily own my comments without hesitation with my real identity.

    Be mindful, all I said was, Hindus/Christians/Sikhs(Non Muslim Indians) respect call 4 prayers FIVE times a day from mosques every single day without whining/complaining throughout the country. He should do the same with all the noise and buzz around Diwali. Was that too much to ask for? There cannot be any simpler logic to digest this for any adult.

    Have a nice day.

    ReplyDelete
  4. I would like you to revisit the exact language you used. It's that language combined with your desire for anonymity that makes it all the more cowardly. Why not send that exact tweet using your real ID from a personal computer or smartphone?

    Hmmm. I think I know why. US visa is nice to have isn't it Mr 'Desh'daaz?

    ReplyDelete
  5. Humm...That tells me you have no idea about the work culture outside India, visit a country or two, if not at least make a real friend outside from well placed NRI pool.

    I have asked you for your personal email ID so I can share privately and own my words. U are the one evading proper way to communicate, not me.

    Never mind!

    ReplyDelete
  6. Yes, I have no idea about work culture outside India because I have only worked in three different countries and traveled on work to more than a dozen. Poor, small-town me.

    The US is more than tolerant of bigoted speech. I don't see how "work culture" affects you airing your views from a real ID via a private phone AT ALL.

    And no, I prefer debating in the open. I'll continue the conversation here if you feel like.

    ReplyDelete
  7. Pierre - I have always respected your thoughts and writing as well as your patience and professionalism as a journalist.

    As your friend, fan, reasonably smart person, and "NRI friend" I can tell you that (which I am sure you already know) - you are being way to nice answering to this person who is disrespectful, has no idea how IT traces actually work, or for what matter Google searches, who does not understand basic difference between PR and journalism, doesn’t know how to express sensitive opinions in a public forum and the appropriate words for that, and totally violates his employer's/bloggers time.

    Tee!

    ReplyDelete
  8. Thanks Tee. I know, I guess I give people a long rope. Looking forward to this year's visit. You are coming, aren't you? :)

    ReplyDelete
  9. Sunshine and Pierre,

    Why don't u guys focus on core issue? Yea, I don't sugarcoat sensitive issues, big deal? Just because you are not used to people putting blunt facts on ur face, I am classified 'disrespectful'....hummm

    Just answer the central question, will u? Why was Pierre's Muslim friend complaining about noise around Diwali time? Oh wait, I get it, he is true secular dude...so Sunshine's concept of "how to express sensitive opinions" does not apply to him!!

    Poor me, the Hindutva-vadi, the saffornizer, the bigoted one. So slap all the allegations from the secularism rule book!

    ReplyDelete
  10. Ok, let me see if you understand this. In my very first comment, I said You were blocked because:

    1) You posted extremely bigoted comments about Muslims when replying to my friend on Twitter.

    AND...

    2) You use an alias and won't use your real name. I think this is cowardly given what you're saying.

    That's an 'AND', not an 'OR'. Get it now? No? Too bad. Don't waste my time.

    When you're ready to debate with your true ID without hiding behind some totally lame excuse of "foreign work cultures" you know where to find me. Until then, thanks for keeping the hit counters rolling on my blog :)

    ReplyDelete
  11. Just as expected, you did not answer the question about why ur buddy was crying foul..jane do..I had only re-entered the debate to reply to Sunshine.

    ReplyDelete
  12. Ok... I will attempt this ONE, FINAL time.

    The 'central questions' Mr 'Deshdaaz' are the ones that STARTED this comment thread; questions asked by YOU. If you look back you will find I have answered both those questions adequately.

    You asked:
    1. What is my real name? - It is in fact, Pierre Fitter
    2. Why did I block you? - You posted bigoted comments ANONYMOUSLY.

    Now, YOU want to DEBATE me on a DIFFERENT matter.

    I have made my condition crystal clear. Reveal your real name HERE if you want me to debate you. You are not a friend or an acquaintance. Therefore You shall not have my email address.

    As expected, YOU have chosen not to reveal your real identity. The debate you want will happen when you do so.

    ReplyDelete
  13. deshdaaz@gmail.com....Move the debate over there! My emails carry real name in the signature :)

    ReplyDelete

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