TL;DR – Bernie should wake up his idea…
F1 chief, Bernie Ecclestone, was reported as telling a German magazine this,
He apparently told the magazine:
“Look at what we have done for Singapore. Yes, the Grand Prix has cost Singapore a lot of money, but we’ve also given them a lot of money. Singapore was suddenly more than just an airport to fly to or from somewhere. Now they believe they have reached their goal and they do not want a Grand Prix anymore.”
What? Singapore was “just an airport to fly to or from somewhere” before we hosted F1? Really? Well even if we were, we are a really great airport. So there. Grr.
But quickly after that report was published, Bernie seemed to done a U-turn. In an exclusive phone interview with Straits Times, Bernie said:
“F1’s stand is to hopefully continue in Singapore. Everybody is happy to be in Singapore and (we) don’t want to lose Singapore. Negotiations are ongoing and will be sorted out shortly.”
But, is everybody really happy that F1 is in Singapore?
F1 has undoubtedly brought some glitz and glamour to Singapore. It was a really smart move to package the race in Singapore as a mega party with numerous concerts headlined by megastars. It made the whole event into something more than just fast cars zipping around.
In fact, Dan Parr, director of Fast Track Asia, a part of CSM Sport & Entertainment, has said that the Singapore Grand Prix is one of the flagship F1 events and has become far more than a car race. “Singapore has set the standard to which all other cities now strive to reach,” he said. “There are more people that travel to the Singapore Grand Prix for the music than for the car racing so it’s much bigger than just the F1.”
And, as a Singaporean, I felt really proud knowing that millions of people all around the world will see Singapore’s downtown skyline. The event was definitely a good branding exercise for Singapore.
But were all these benefits really worth the costs? Let’s look at some of the numbers.
First let’s look at the F1 as a whole. It’s global viewership has dropped from 600 million in 2011 to 425 million in 2014. That’s a drop of 200 million. The Singapore F1 race has plateaued at 80.7 million international TV audience. So it seems that Singapore’s race contributes to close to 20% of F1’s global viewership. Keep this number in mind.
How much is the licence fee that the Singapore government and event organiser have to pay F1? According to Financial Times, it’s S$50 million (or US$41 million). This is higher than what Australia has supposedly paid.
That’s just the licence fee paid to the rights owner of F1. How much does it cost to host the race in Singapore? It is estimated to cost $150 million to host the race. The government (i.e. taxpayers like you and me) pays 60% of that bill. That’s $90 million. That’s right. Even if you didn’t watch the F1 race, you paid for it.
How do we compare to other hosting countries? Well, I was not able to find much statistics on this, but Australia’s quite possibly one of the few hosting countries that has been quite transparent about the cost of hosting the event and all. It has been reported that the Australian Formula 1 Grand Prix cost them A$62 million to host last year (2015).
Don’t think that’s all. There’s also the cost of building the circuit, although in Singapore’s case, we did not have to build a dedicated circuit and we use what they refer to as the street circuit. But still, there are costs in converting the streets for F1 use, and there is still a need to build some temporary structures or even upgrading existing ones to F1 standards, etc. Staffing is also another cost consideration. Here’s an interesting article on the race fees and cost to host a F1 Grand Prix.
So far, we have only talked about the costs that can be more directly accounted for. The negative externalities aren’t accounted for yet.
What are the negative externalities?
Those are costs suffered by a third party as a result of an economic transaction. In this case, the negative externalities would include:
- Loss of business by retailers in the Marina Bay area. Retailers report that they see their business plunge by up to 50% during the F1 race period.
- Lost of productivity as a result of the inconvenience caused by road closures. The road closures cause bus routes diversions and thus also inconvenience those who take public transport.
These costs aren’t taken into account.
What about the benefits? What have we gotten out of hosting the race?
Each race supposedly generated $150 million in incremental tourism receipts. But that’s for previous editions. We still don’t really know how much the latest edition generated. And that’s important. Because the F1 Singapore race in 2016 had only 219,000 spectators over the entire three days of the event. That is 15% lower than the 2015 edition.
Does it make sense?
So at best, the Singapore F1 race breaks even, although I seriously doubt it. But are we, the taxpayers, getting enough bang for our buck? How much of the benefits from the F1 race flow back to us, the taxpayers? If, at best, we break even, are there better areas we can spend that money on? $90 million is a lot of money. Instead of spending on hosting the F1 race, there are a lot of other things that money can go to which bring greater benefits to Singapore… like paying people a subsistence salary as they go for skills upgrading.
In other words, Singapore can indeed do without F1. We won’t die. In fact, there are very good reasons for us to NOT continue hosting the F1. Especially not if Bernie wants to up licence fees and wants to talk like he did.
On the other hand, Bernie really needs us. Remember, we accounted for close to 20% of F1’s global viewership. Perhaps that’s why Bernie once said that Singapore is the “crown jewel” of F1. And Singapore will only be more important to F1 in the future. Malaysia has announced that they won’t continue hosting the race from 2018 onwards. There are also talk of Canada and Brazil dropping out. If F1 loses its crown jewel, it will certainly be in a very precarious position.
So F1 needs us more than we need them. If Bernie wants Singapore to continue hosting F1 races, he had better give us a much better deal.