Mike King is a nice guy and a competent announcer for the IMS Radio Network. He is also a pliant company man. Citizens can therefore assume that his public statements provide a reliable approximation of whatever it is that the IndyCar bosses are thinking.Right now, they are apparently thinking that more road and street racing is a splendid business proposition for the IndyCar Series.
Pete Pistone of CBS Sportsline recently argued that IndyCar should embrace ovals because the racing is fantastic. We agree with Pistone's conclusion, even if it is the product of hopelessly muddled logic.
King responded in Pistone's mailbag this week, suggesting among other things that road and street circuits are preferred because they have attracted greater attendance than ovals this season.
Mike King, Market Analyst: "Ovals, Bad"
King offers arguments that are convincing only on a strictly prima facie level. Attendance at IndyCar oval races at Kansas, Kentucky and Chicagoland was undeniably awful in 2009. But he seems to conclude that these tracks are somehow unable to draw an audience that would match those that attend events at road and temporary circuits.
We know that this is false because Kansas, Kentucky and Chicagoland have attracted large IndyCar crowds in the recent past. We know this not only because it is confirmed by data, but also because we were there.
Recall, too, that races at Kansas, Kentucky and Chicagoland early this decade drew better TV ratings - the primary profit lever, by far, for any racing series - than the non-Indy events today. Moreover, those ratings were achieved despite the presence of an exquisitely capitalized competitor and captured media that dedicated more effort to destroying the original IRL model than to growing its own business.The problem is that IndyCar racing is no longer a product that is
designed to appeal to fans of oval racing. It is a road racing product. There is no counter-argument: one need only examine the schedule and the roster of drivers. - Roggespierre
Incidentally, many of those guys are now pulling the strings that manipulate the Indy Racing League.
Like we said, King is a pliant company man.
Mike King, Market Analyst: "Road & Temporary Circuits, Good"
King also engages in puffery, suggesting that the crowds at St. Pete, Long Beach, Edmonton and Mid-Ohio were "phenomenal."
Frankly, attendance had better be phenomenal at those events. We reiterate that IndyCar is a road racing product. Therefore, if it fails to attract crowds and television viewers who enjoy road racing, then IndyCar is an even greater market failure than we had previously believed.
The crowds looked just okay from our vantage point. Attendance at Mid-Ohio obviously declined year-over-year despite ample comp ticket distributions by Honda and Firestone. Edmonton, insolvent and requiring subsidies from more than one government entity, drew a crowd that would be considered mediocre at a large oval track. But it looks fine at an airport, where seating capacity can be adjusted for appearance's sake.
The course at St. Pete renders audience estimation nearly impossible, and we suspect that is the idea exactly. We can report that the locals in the Tampa Bay region are not particularly impressed. If not for the rivalry among local municipalities, then the event likely would not survive. It might not survive, anyway.
Warning to the IRL - St. Petersburg, Florida is engaged in a heated mayoral race. Citizens there are not pleased with the direction. This is unfortunate because your event is and has been part of that direction. If there is to be a new mayor, then we suggest that you begin smooching his derriere with some haste or risk losing public assistance. You might also want to contribute to the campaigns of each mayoral candidate, just in case.
Mike King: Taking what they're Giving & Working for a Living
King does make some salient points. For example, he wrote to Pistone that IndyCar events that are paired with ARCA and other stock car series have not been successful. We agree. IndyCar is not a stock car series and is unlikely to draw many stock car fans.
Unfortunately, King's overlords would like to have us believe that Stock Car Fans and Oval Racing Fans are one and the same. This is false.
If such an assumption were correct, then the early IRL would not have been a more successful television product than the present iteration. It would not have earned crowds of approximately 60,000 at Kansas, Kentucky and Chicagoland - each without the benefit of government subsidies.
If NASCAR Fans and Oval Fans were homogenous, then the Indianapolis 500 could not possibly exist. Perhaps that is the intent.
By the way, 60,000 was the estimated attendance at the "phenomenally" successful Edmonton event this year. Is there any reason to believe that St. Pete and Mid-Ohio attracted 60,000 paying customers?
Like we said, King provides a reliable approximation of whatever it is that the IndyCar bosses are thinking.
He will never be a market analyst. But he will keep his job.
Roggespierre
It is very clear that no one seems...make that is capable of making this series work well enough to draw paying customers. On one hand, it suffered a decade's worth of abuse and dismissal by motorsports scribes, like RM. When it became apparent the IRL was the survivor the drumbeat continued to diminish the product, including its only asset, the "500". Now it is an unfocused mess, and each iteration causes more diffusion.
ReplyDeleteTime to jettison this series mess and open up the "500" to restore the International Sweepstakes with $25 million purses and some interesting competition.
Mike King is a nice guy, but if you oppoae anything done by Barnhart, or the formula for the series, or you might be so unkind as to suggest that a cheaper engine formula is available (and it is), or that the present chassis/engine combination--hence the racing less than stellar---he will soon turn testy, or just ignore your emails--pleading 500 emails a week making it impossible to answer.
ReplyDeleteI sent your website to him---suggesting he might learn something different from what is the party line.
He and Davie Hamilton promote races at "The Action Track", and they do a nice job. Which makes it even more interesting since they see 800 HP engines---but can't see them in the IRL.
Following F1 by having to have highly developed sophisticated engines and only ALLOWING, one or two engine producers--in the name of making everything equal--is fool's work and will only perpetuate the Penske-Ganassi teams making their "equal" cars better than all the rest.
A new (cheaper) formula may still be dominated by P-G, but at least it'll be in cars that may look different, sound different, and driven by perhaps an American or two.
Mike King points to the closeness of racing on ovals--but it is only close between two teams with a blind pig (Carpenter) finding an occasional acorn.
He also points to 21 (if memory serves me correctly) cars on the same lap at Indy, but forgets that "yellow flags" as soon as the leaders caught up with anyone but Milka, (who was too slow even to benefit from the yellows), they'd have a yellow flag. There was no "green flag" pit stops during the race---hence very few lapped cars.
To improve racing perhaps "green flag" pit stops only except for fuel under yellow if the car is running out of fuel, and then only enough to make it till the green flies.
As long as I am on the subject of pit stops, pit-selection, should not give a substanital advantage to the best car. I have finally come to the conclusion that a blind draw might work best--or at least blocking the exit of the first pit so they too have to go around something like every other pit position requires drivers to do.
Talking to an old driver---he continues to insist it is the lack fo American drivers that causes fewer and fewer people watch the races.
He suggests Kyle Busch, if he was in the IRL and racing Marco, Graham, Danica, and several other Americans--the TV package would soon be attractive---and VERSUS would be declared a "great network" to watch racing. (He by the way raced on bikes, in NASCAR, USAC, and at Indy--so he talks the walk he did!)
The IMS board actually funds the life support machine for the IRL, and believe me they are NOT inclined to continue to support it.
Things will get worse before we see material changes---but they are coming. I have said it before lose Danica right now--(love her, hate her, but you can't ignore her), and the IRL will soon be toast.
Too much to fix---too little time!!!
osca
Brian & Osca,
ReplyDeleteI'm in a hurry this morning, so I will thank you both for your comments.
I do have one proposition to consider. What if the IMS Board is the problem? We tend to avoid thinking that because it would leave the entire IndyCar enterprise without hope. But do we really have any evidence to the contrary, at least with regard to operating a racing series.
The IMS is one of the world's best managers of facilities and events. There is no shame in this; indeed, it is something in which the Board should take great pride.
But that does not mean that the IMS Board is capable of running a series. Look at the people it hires. They tend to be classic bullies - week and deferential to those above, heavy-handed and dismissive of those below.
The IRL has a classic agency problem. There are many consultants who could help the Board solve this problem. But I am not so sure that the IMS Board so much as understands exactly what its agency problem might be.
This is perpetual frustration.
Best Regards,
Roggespierre
Roggespirre,
ReplyDeleteYou've got it right and I have reasons to believe the Hulman clan--expect Tony George, want nothing to do with the sanctioning of races--hence the IRL is in jeopardy of being dumped.
Tony Hulman understood that owing and running the speedway was job enough--the IMS Board wants to get back to that--and as soon as possible.
They have a time frame for getting this "money burning machime" off their back---and it is not a LONG TERM project.
osca
Osca,
ReplyDeleteThis fascinates.
Do you think they might go back to USAC? The business case is reasonably compelling IF USAC has its act together. I have always been much more impressed with Mike Devin and the technical guys there than with the "business" side.
Might they sell the IRL? It has on value on any quantitative basis - NPV, WACC, CAPM. It likely has no debt because it is subsidized. It has no positive cash flows. A buyout analyst would tell you that it is worth less than nothing.
That doesn't mean that somebody wouldn't pay for it, however. But it does mean that the venture would be 100% speculative.
How do I get in?
Best Regards,
Roggespierre
Roggespierre,
ReplyDeleteYou are correct--it has no value, but neither does the NCAA, NFL, MLB, except for the funds PLACED in it by the various interested parties.
The IRL on the other hand PAYS TEAMS from money placed in it by IMS.
It wasn't created (IRL) to be a profit center--but it was expected to become self sufficient--which it is not.
If the formula were to be changed---more teams, lower costs, better racing, an increasing fan base, increased TV viewership, a fee based IRL paid by the teams could not only survivce but prosper.
In the old days USAC had a very small staff, and that was augmented for races by volunteers--except at Indy where both employed "temps" and volunteers were used.
That is not a workable solution in the modern era, but if IRL is going to survive every part of what the series is and isn't, as well as what it should be (A REAL BUSINESS PLAN), which may well conclude that a sale, must be the first step.
The NFL, MLB, NHL all have fanchises--which are based on locality--racing doesn't fit this scenario--and since the auto industry is going through it's own reformation--franchising seems unlikely.
I have been pondering your sentence, "How do I get in?", and you may have an idea--could an IPO be designed to appeal to fans, with a long term payout--say by the use of a 10 year Zero Coupon Bond coupled with equity, and then be sold?
Hmmm!!!
osca
Hmmmm?
ReplyDeleteWhen in the Course of human events...
-John
Hi Osca,
ReplyDeleteI think you're on to something with the hybrid security idea. But I'm not sure that getting fans involved is a good idea. They're too diverse in their opinions and they tend to want what they want regardless of whether or not it is economically advantageous.
Just look at all the fans who stuck with their CART shares until the bitter end. I wish that I had shorted it, but there probably weren't any shares outstanding that a small investor like me could borrow.
I do think that something akin to a small general partnership with a secondary mezzanine financing vehicle might work well. Keep it closely held - relatively big, serious players only - so that management can focus on the job rather than the shareholders. Fans could be let in through a derivative fund that contributes at the mezzanine level.
But the real key is professional management. New ownership won't matter if the series is still run by a race mechanic and a salesman.
Best Regards,
Roggespierre