Sir Richard Branson's Virgin Group is poised to strike the most extraordinary sponsorship deal with the new Brawn GP Formula One team. It has exchanged heads of agreement whereby Virgin Group will guarantee the team US$30 million in sponsorship for 2010 in exchange for exclusive rights to the team's commercial income from any further sponsorship it can gather.
It will also sponsor Brawn GP in 2009 for a nominal sum which will be additional income for a team which is already fully funded for 2009. It has an US$150 million budget provided by compensatory payments from Honda Motor Company and support from Bernie Ecclestone's Formula One Management company.
But the real meat of the deal is an arrangement whereby Virgin will guarantee the team sponsorship income of US$30 million for the 2010 season. The guaranteed income will give Virgin sole rights to sell space on the car to other sponsors. Anything Virgin receives over the US$30 million it will keep and book as profit. One insider said: "If it gets US$80 million, which it might, Virgin will keep US$50 million, it's a good deal." The deal has been negotiated by the team's commercial supremo David Butler and helped along the way by Formula One supremo Bernie Ecclestone.
The deal almost certainly means that the Brawn team will survive for at least two years in Formula One. It will recover an estimated US$40 million in TV money and with Branson's money will have enough for a basic season, albeit half of its 2009 budget and a quarter of its 2008 budget.
This deal is separate to Branson's stated desire to buy an equity stake in the team and possibly rename the team Virgin, subject to FIA approval unlikely to be immediately forthcoming.
Virgin's current US$250,000-a-race sponsorship deal is likely to be extended for the rest of the season in any event.
Branson has already admitted the deal will cost him very little in hard cash. At the Australian Grand Prix told Autosport journalist Jonathan Noble: "Sporting activities...haven't cost (me) any money as I always got someone else to sponsor it. So I am a bit of a cheapskate when it comes to these things, and make everything pay its way. We have other ways of getting our name out."
Virgin Group achieved global TV coverage worth US$10.428 million at the Australian Grand Prix according to the Margaux Matrix Digital Eye scanning system that minutely analyses every brand featured in the host TV feed from Formula One Management. The Brawn team was on screen for 42 minutes 38 seconds during the qualifying and race broadcasts and the Virgin logos were fully exposed for 8 minutes 56 seconds.
Source: SportsPro Daily Deal