Citizens, we must expose the entrenched interests that threaten the future of IndyCar Racing!
We know that the correct price of sponsorship for a top IndyCar team is $1.3 million. However, recent comments by Terry Angstadt make clear that the IRL hopes only to reduce costs from their present level of $7 to $8 million per season.
Not Good Enough
The cost of operating a top IndyCar team must be no more than $1.3 million. Otherwise, there will be no new sponsors for IndyCar Teams. Advertising decisions are made by MBAs who are trained to do what their spreadsheets tell them to do. The secondary market for NASCAR Cup sponsorship (think: Subway) will continue to be of greater value.
Robin Miller has floated a $3-$4 million dollar target. We believe that Robin has very good intentions, but his figure is still at least double the market value of the product. Furthermore, we believe that his valuation was likely provided by Target Chip Ganassi Racing, an organization that distributes abnormal economic returns to Chip Ganassi and Mike Hull precisely because TCGR competes in an overpriced series.
Unlike Team Penske, Target Chip Ganassi Racing is financed with a sponsorship artifice that is divisible. TCGR does not have to compete with other IndyCar teams for consumer products sponsors. Why? Because TCGR can offer something of much greater value than team sponsorship - namely, concessions from a large national retailer. Therefore, Ganassi and Hull would act irrationally if they were to accept a cost structure for IndyCar teams that is equal to the promotional market value of those teams. They do not have to lose sponsors outright in order for their individual returns to decline.
We are confident that TCGR has contacts protecting its interests inside the IRL and the IMS; it would be foolish not to because so much is at stake. Ganassi and Hull have every incentive to see that the IRL manager who dares to bring operating costs in line with market value loses his head.
To the IMS Board of Directors
Please consider the individual economic interests of your suppliers of racing teams, which vary greatly. The interests of Target Chip Ganassi Racing are not at all aligned with your own. Do your managers defer to them out of fear for their jobs? If not, then you have marvelously courageous managers.
We would not blame you for disregarding the pseudonymous writer of an obscure website. We therefore encourage you to hire a consultant to provide analysis and protect the Board of Directors - not management, not partners, not suppliers, not customers, and not family members who are not Board members.
This consultant should not be someone who knows racing, but rather someone who knows business. He or she should be a complete outsider who does not travel in racing circles. Contacts of "friends" should not be trusted because "friends" have interests that are not aligned with yours. We can provide the names of several candidates that are highly respected in industry and academia. They have no interest in auto racing. Therefore, they are free to look out for yours.
Our email address is provided.
Roggespierre
Roggespierre: How does one get information as to cost of equipment and operating expenditures for a small racing team such as Sarah Fisher Racing? I would like to review the information to do a cost analysis and benefit ratio analysis. I believe you can make the financials work based upon your value of 1.3 million. Any thoughts to this matter??
ReplyDeleteHey Oldwrench,
ReplyDeleteSend me an email at indyidea@mail.com. I'll respond after I see what I can find out for you.
Roggespierre
oldwrench,
ReplyDeleteNot particular to any one team, but the numbers are fairly representative across the board for a competitive ride. I'd take off 25% or so for a 'not-really-competitive' effort like Sarah's.
975,000 engine cost
376,420 personel
427,750 driver
376,420 tires
307,980 hotel
273,760 parts
220,000 car
188,210 license/fees
179,655 event costs
111,215 shop
102,660 travel
85,550 tools & equipment
76,995 transporter
59,885 transporter fuel
34,220 fuel
3,795,720 total
-John
John,
ReplyDeleteThank you for providing this information.
Is the gearbox included in your parts cost?
Is the $220K for the car for a roller or ready-to-race?
Again, thank you for providing this information.
Roggespierre
Yes John, Thanks!! I will get back to both of you via this Blog. I am going to run a cost analysis and a ROE,ROI etc. I think that it would not only help in this website but maybe with the recent events of Robin Miller and Roggespierre this actually may hit the IRL office straight in the face! Looks like others who want to participate are flowing to this site also. I dropped a few lines on the Indy Nation website and looks like more are coming!! Keep the good stuff coming Roggespierre. Will let you know upon completion.
ReplyDeleteRoggespierre,
ReplyDeleteThe numbers aren't representative of hard start-up costs; they're used for cash-flow. For example, (and this is based on my speculation): if a gearbox case lasts 2 seasons and a gear pack 3 races, the gearbox would be chassis equipment depreciation and the gears parts cost. It's hard to pin down any details, namely because I don't know them and each team categorizes items in a different manner.
-John
John,
ReplyDeleteIf you're depreciating, then you're accounting on an accrual basis, not cash flow.
I do see what you mean, however. There are periodic capital outlays, some of which are predictable and other (crashes, for instance) that are not. It's understandable how this could get confusing.
If I were doing it, then I would forget about depreciating anything and book everything on a pure cash basis. The unpredictability is part of it. Also, the timing of sponsorship payments is a cash flow contingency in the revenue column. Finally, if I need something now to put the car on the track, then I need to pay cash for it now.
Penske and Ganassi probably don't have to do it this way. But I suspect that I would if I were running any other team.
Thanks again for the information. It is much appreciated.
Roggespierre
Oldwrench,
ReplyDeleteMany thanks. Robin's column was compelling - they usually are - but I disagree with his conclusion. There are many examples of Versus pulling a very competitive audience. I have tried to list some of them here. I'm putting more up tomorrow.
Robin gets most of his information from insiders. That's what reporters are supposed to do, of course. But insiders have vested interests, and they tend not to think that they are part of the problem. I would guess that there isn't a sole in the garage area or the IRL office who thinks that he or she is part of the problem. They can't all be right.
Thanks again for everything. I have definitely noticed more traffic since you put the word out. I'm doing this in my "spare" time while working and raising Little Roggespierre. I think I'm beginning to annoy Mrs. Roggespierre (with regard to the blogging, that is).
Best,
Roggespierre
Falling under there's more than one way to skin a cat: the cost to run a 16 race Formula 2 season is $350,000.
ReplyDeletehttp://www.grandprix.com/ns/ns21521.html
http://www.formulatwo.com/default.aspx
-John
John,
ReplyDeleteWow! Do the IRL drivers know about this? Can we send some of them over there to make room for talent that can be sold to an audience?
I kid, sort of.
Roggespierre