Saturday, September 5, 2009

IndyCar Economics: Why they'll Race in an Alley

As the IndyCar Series evacuates to Japan, we invite citizens to consider the following numbers. They are the dreary residue of market rejection, the just sentence for failing to serve consumers. The Committee of Public Safety has every reason to trust the sources that provided this information.
  • The standard sanction fee for an IndyCar event is in the range of $1.2 million to $1.5 million. The number is highly variable.
  • The IRL incurs costs associated with racing operations in the amount of $500,000 per event.
  • The IRL distributes approximately $1 million per event to teams via IndyCar TEAM.
Therefore, the best case scenario is one in which the IRL breaks even. An Indy Lights race requires additional prize money in the amount of $360,000. The IRL does not charge the promoter because, as little market value as the IndyCar Series possesses, the Lights series offers none whatsoever.

Thus, the IRL business plan calls for an operating loss at each IndyCar event unless a supply chain can be arbitraged or a government subsidy can be secured.

Cash Flow-a-Go-Go

Of course an event sponsor can alleviate the financial burden considerably. Unfortunately, the IRL and its teams frequently sponsor their own races.
  • Honda is title "sponsor" at St. Petersburg, Toronto and Mid-Ohio
  • Honda's IndyCar participation is subsidized by teams that overpay for spec engines
  • Teams are subsidized by the Indianapolis Motor Speedway through IndyCar TEAM
Therefore, Honda receives title sponsorship for three events without incurring a net cash outflow. Why would any firm offer cash to sponsor an IndyCar race when, for all intents and purposes, Honda gets three of them for free?

Manufactured Partnership

Perhaps the teams and the IRL don't mind sponsoring their own races. Do they care that they are funding Honda's Formula Dream "sponsorship" that allows Hideki Mutoh to participate? Does Hideki Mutoh add any reciprocal economic value to the IndyCar product?

Honda might be writing the checks that pay for the series to travel to Motegi next week, but that does not mean that it is paying the freight. Does Motegi add reciprocal value to the League?

But wait! Didn't Terry Angstadt just say that Honda has agreed to reduce the price of its engine lease program next year? Was that not a significant and benevolent act of partnership?

No, it wasn't. Declining marginal cost per unit due to economies of scale is the natural result of mass producing homogeneous products, such as spec engines and parts. Honda's production costs next year will be less than they were this year. Remember, too, that the lease is really a user fee. Ilmor does much of the the rebuild work. How many new engines is Honda required to add to its existing stock in 2010? None? A few?

Honda's costs will decrease in each year that further development is not necessary. Might that be why Honda Performance Development has become enthusiastic about the IRL remaining a single manufacturer series? Of course it is.

More Deep Capture: Honda Edition

The Committee of Public Safety has been told that Honda now thinks of the IRL as a customer rather than a partner. Does that mean that Honda is cash flow-positive on its all-inclusive IndyCar project? It sure sounds that way.

If that is the case, then why is Honda still credited as a league sponsor? Why is its name on every Indy car if in fact it is extracting and not contributing revenue? Why do the team owners wear Honda shirts on race day? Did the IRL and its teams pay for those, too?

Did you notice all of those Honda commercials during race telecasts this year? Neither did we. Let's hope that nobody at the IRL earned a commission for this deal.

Is anyone asking these questions at the IRL? In the House of France, Lesa France Kennedy, proud owner of an economics degree from Duke University, is meticulously analyzing cash flows. Who is her counterpart at the IRL? Is it the salesman or the racing operations guys?

Happy Labor Day Weekend from the Committee of Public Safety


Friday, September 4, 2009

IndyCar TEAM Deep Capture

Our criticism of the IndyCar TEAM subsidy program is well established. The mere thought of adjusting appearance money distributions to improve IndyCar's market competitiveness causes profound chafing among team owners.

Money for Next to Nothing

Those are the same team owners that furnish a racing product that the market has rejected. Some received free IRL equipment as mergification gifts from the Indianapolis Motor Speedway. Others have been provided various levels of sponsorship by the Indy Racing League. Some are pressing IRL management to not only adopt new technical specifications that most teams can't afford, but also secure an underwriter to bear the risk of non-payment.

And yet they still expect to receive evenly distributed payments for merely showing up with a car and a non-performing asset behind the wheel. IRL Commercial Division President Terry Angstadt practically conceded the point in his recent comments to Bruce Martin of

Apparently, IndyCar TEAM is indeed negotiable, so long as it serves the interests of the present team owners. We know this because Angstadt is amenable to restricting payments to a seemingly arbitrary number of teams.
"That's a 22 to 24 car number. We would need to make decisions beyond that on some kind of criteria on how you get one of those spots because that is a huge commitment from the League. If we have 28 cars not all of them are going to be able to share in the program." - Terry Angstadt
Let there be no doubt that the present teams are firmly in control of the IndyCar Series. How, exactly, does restricting car count increase the value of the IndyCar product?

Citizens who are old enough to remember the CART "franchise" system will notice the similarities. In both cases, the goal is to protect the existing participants at the expense of prospective new entrants. This is a disservice to customers who might like to see large fields at IndyCar races and bumping at Indianapolis.

In essence, the teams want the IRL to further devalue its product, approve new equipment that costs more than the product's market value, secure 3rd party financing to underwrite its development, and subsidize the teams to cover whatever cost remains. That the IMS Board of Directors might allow this scheme to come to fruition is incomprehensible. Nevertheless, because the IRL is managed by racing operations personnel and a salesman, that is exactly what appears to be happening.

IndyCar TEAM distributions should be indexed to quantifiable market demand for the portion of the product that each individual team contributes. This is a typical supply chain arrangement.

An Example of Extreme Makeover IndyCar TEAM
Dennis Reinbold might be our favorite IndyCar team owner. We shall therefore use him as an example and hope that he does not take offense.

We suspect that our proposed measures of demand would demonstrate that Buddy Rice, the 2004 Indianapolis 500 champion, contributes more than rookie Mike Conway to the value of the IndyCar Racing product. We shall not say here that Conway got the ride because his family owns FM Conway, a large construction company in the United Kingdom that happens to be one of Conway's sponsors, but we suspect that the fact might have augmented his candidacy. We would, however, propose that Dreyer & Reinbold Racing receive less appearance money for furnishing Conway than it would have received had Buddy Rice remained in the car.

Product Management is Marketing

This is an example of product management, an activity that is sorely lacking at the Indy Racing League. In our scenario, IndyCar TEAM is transformed from a subsidizing expenditure into a marketing incentive program. Every team that shows up to race would get some money, but those that add greater value would get significantly more.

We hope that the IMS Board and the IRL will consider our proposal or something similar. We wish to see IndyCar Racing grow to become a competitive product. Aggressively managing the product, using money that has already been earmarked for expenditure, would be a good place to start.


Thursday, September 3, 2009

Take the Subway: IndyCar Cost Leadership

The Committee of Public Safety today took delivery of a note from a loyal citizen. His comments bring to light a worthy argument regarding alternative strategies that would make IndyCar racing competitive in the marketplace.

Previously, Roggespierre wrote that NASCAR (sans-culottes!) has demonstrated that ample consumer demand exists for U.S. oval racers. Therefore, the IRL should furnish U.S. oval racers.
Citizen John provides a counter-argument that bears repeating.

"The market demands Big Macs also, but that doesn't mean you can establish
a competitive advantage in that marketplace by providing what the market
demands." - Citizen John

We agree. Imitation does not yield competitive advantage. We know this because we suffered along with John Amos's character in Coming to America. An independent fast-food entrepreneur, he could not fathom why customers refused to give up the Big Mac in favor his offering, the Big Mic.

Strategic Alternatives

Citizen John favors a differentiation strategy to achieve competitive advantage.

"One tactic is to look beyond your category to the larger category of your
business and your competitor's business, and develop a position where your
competitor can't efficiently compete against you. So instead of providing Big
Macs, essentially do what Subway did: they created a
category and filled it within the larger fast food category that the market
leader couldn't compete with." - Citizen John

This is a classic example of the product differentiation competitive strategy. Citizen John recommended that the IRL position itself in the broader sports entertainment category rather than the traditional motorsports market segment.

We prefer a different strategic alternative because the IRL is a subsidiary of the Indianapolis Motor Speedway Corp, a firm that, in our humble opinion, is entrenched by default in the narrower motorsports category. In our view, the lone viable alternative that remains is that of low cost leadership. John Amos should have cut costs and offered the Big Mic at a competitive price. The IRL is no different.

Take the Subway: IndyCar Cost Leadership

From its inception, NASCAR (sans-culottes!) positioned itself as the low cost competitor in major U.S. motorsports. But the Cup Series' exponential growth since the early 1990s has resulted in abandonment of that position. You simply can not be the low cost leader when championship caliber teams require annual sponsorship revenue of approximately $18 million per car.

Consequently, a secondary market has evolved for NASCAR Cup sponsorship. It is ironic that one of the participants in this market is Subway, primary sponsor for Carl Edwards' Roush Racing Ford at three races this season.

We would prefer that Subway sponsor an IndyCar team for the entire season. But that will not happen until the IRL gets its cost structure under control. We have determined that a championship caliber IndyCar team is worth 6.51% of the total value of a similar team, such as Edwards' Roush Racing team, in NASCAR Cup. Three Cup races are equal to 8.82% of the Cup season. Because 8.82% is greater than 6.51%, we must concede that Subway made the right decision. Three Cup races are worth more than 17 IndyCar races.

If IndyCar slashes its costs until they are equal to the product's market value, then the series and its teams will be able to offer sponsorship opportunities that are simultaneously equal in value and exponentially lower in price than those offered by NASCAR Cup and its teams.

That is competitive advantage. Sorry, Carl, but that pretty yellow paint scheme is going on an IndyCar for a full season of racing!

We thank Citizen John for his comments and invite others to submit similarly worthy ideas.

On behalf of the Committee of Public Safety


IndyCar Translator: Can't Sell these Guys

The Republic shall now examine another gem from IRL Commercial Division President Terry Angstadt. Read Bruce Martin's complete story at

On Other Drivers Sharing in the Attention that Danica Gets

"We have our three points leaders going to Miami Tuesday because they have earned it. We have had stability in our name drivers and it is up to PR to shed the light on those that deserve it. Ryan Briscoe is a really fair guy and a phenomenal race car driver. He is really unbelievable." - Terry Angstadt
Translation: I Can't Sell these Guys

This speaks volumes. Angstadt effectively concedes that Ryan Briscoe, Dario Franchitti and Scott Dixon have had ample opportunity to establish market demand for their talents, but have failed. Apparently, being "a really fair guy and a phenomenal race car driver" does not suffice when the goal is mass market acceptance.

If anyone should be taken aback by Angstadt's comments, then it is IRL Public Relations chief John Griffin. The Big Cheese just threw down the gauntlet, deflecting blame to Griffin for past, present and future failures to promote drivers whose talent is not in demand. Thanks, buddy.

We do not judge markets here; we observe and analyze them. If the market demands U.S. oval racers, as Tim Cindric and Michael Andretti have in essence admitted, then the IRL should do everything in its power to furnish U.S. oval racers. Why should NASCAR (sans-culottes!) be permitted to have a monopoly on drivers that U.S. racing fans want to see?


Wednesday, September 2, 2009

Danica Patrick: IMG not Buying IndyCar Pitch?

Jayski is reporting that Danica Patrick returned to the Stewart Haas NASCAR (sans-culottes!) shop Monday afternoon. Meanwhile, IRL Commercial Division President Terry Angstadt is in Brazil, where he hoped to finance the 2010 version of his overpriced product and land a season opening race in the process.

Keeping Danica Patrick in the IndyCar Series is "very important." So Angstadt told's Bruce Martin.

Angstadt's further musings on this subject require translation and analysis. We are pleased to provide these services to interested citizens. Those who are new to the subject should know that Danica is represented by International Management Group (IMG).

"We have worked hard and closely with IMG to give them confidence in our
series and her role in the future of the series." - Terry
It is unlikely that NASCAR (sans-culottes!) was required to provide such assurances. It has demonstrated that abundant demand exists for its Cup Series and Grand National Series products. Conversely, nearly all empirical evidence suggests that the market for the present IndyCar product is already small and still shrinking. Pity Terry Angstadt, who must convince a sophisticated marketing and financial firm that down is in fact up.

"I really respect the magnitude of this decision for her... That is why we
are respecting that as best we can with IMG." - Terry Angstadt
With all due respect, we have no idea what this means. Perhaps we can infer that failing to manage one's product tends to reduce one to pandering.

"It is sales, marketing, PR, venue selection, where she feels most
competitive... IMG challenges us and we respond accordingly." - Terry

These comments are fascinating. Danton suggests that Angstadt's list of generic activities is intended to imply that IndyCar knows how to maximize returns to Danica and IMG. That is, after all, why IMG is involved.

The reference to "venue selection" lends specificity and intrigue. For example, the IMG Speakers Series markets Danica's public speaking engagements. This effort is unlikely to yield favorable results in Japan and Brazil. In addition, we doubt that IMG has much enthusiasm for Edmonton. Who could blame IMG for suspecting that Danica's participation at these venues would cause her to forfeit significant revenue opportunities?

Is Danica in over her Head?

It is clear that the IRL hopes that Danica will stay because she has a greater probability of winning races in the IndyCar Series. Danica seemed to be leaning that way less than two weeks ago. Now, suddenly, she is silent and the issue remains unresolved.

If Danica intended all along to use NASCAR to get a better deal in IndyCar, then she must realize by now that she hired the wrong firm to represent her. This is not the starstruck IMG that Mark McCormack founded. Today's permutation is an aggressive profit maximizer that exists for the purpose of distributing abnormal returns to Ted Forstmann and his investors. In this case, that would mean taking Danica to NASCAR.


IndyCar Chicagoland Attendance Analysis

The graph below is intended for citizens who still believe that U.S. drivers are not essential in order for IndyCar racing to be competitive in the marketplace. Before viewing the chart, please consider the data it represents.

Red represents IndyCar attendance at Chicagoland Speedway from 2001 to 2009. Bruce Martin reported that crowds have declined to 30,000 today from 60,000 in the early years of the event. We calculated the Compound Annual (negative) Growth Rate (CAGR) and indexed the results from zero to 100 based on percentage of the largest crowd, 60,000 in 2001. Note that CAGR assumes smooth year-over-year declines that are intended only to approximate the actual numbers.

Blue represents the number of U.S. drivers in the starting field at Chicagoland from 2001 to 2009. We indexed the actual totals from zero to 100 based on percentage of the greatest number of U.S. drivers in a given year, 19 in 2001. This is factual data from

Blue = Number of U.S. Drivers in Chicagoland Starting Field
Red = Attendance at Chicagoland IndyCar Event

The data suggest a strong correlation between attendance at the Chicagoland IndyCar event and the number of U.S. drivers in the starting field. Causation should not be inferred. Nevertheless, this snapshot supports our claim that U.S. driver participation and U.S. consumer demand are indeed correlated.


Tuesday, September 1, 2009

Angstadt & Roggespierre on Raising IndyCar Value

This quote from IRL Commercial Division President Terry Angstadt was originally published by Bruce Martin at

Raising the Value of the Series

"That is through big investments by key partners. Just like every other sports property raises their value it is a combination of efforts through team sponsors, our sponsors, and our direct investment." - Terry Angstadt

We shall now explain why Angstadt is wrong on every level. His statement includes the following four implicit assumptions. Each is unsound.
  1. Sufficient demand exists for the current IndyCar product "like every other sports property." In fact there is no evidence of this.

  2. Quantifiable (in dollars) demand is greater than the total cost of producing the IndyCar product. "Value" is created not with financing, but rather with positive cash flow from operations. If total demand does not exceed total cost, then there is neither positive cash flow nor value creation. Such is the present state of IndyCar racing.

  3. The product would be successful if it were sufficiently financed by "big investments by key partners." Robust financing does not increase market demand. For example, Phillip Morris USA and the Target Stores Supply Chain overpay for IndyCar team sponsorship. This does not mean that the value of IndyCar team sponsorship is greater than other potential sponsors might have believed. It means only that Penske and Ganassi figured out how to sell sponsorships in different markets.

  4. The product will be successful with increased 3rd party promotion. This silly notion is a traditional and cherished belief among IndyCar participants. 3rd party firms get involved in racing to sell and promote their own products, not the racing series.
Built to Last: Raising IndyCar Value

Here's how we'd do it.

First, identify the present value of the IndyCar product relative to the competition. We did that here and found that a championship caliber, one car IndyCar team is worth approximately 6.51% of a similar NASCAR (sans-culottes!) Cup Team. Therefore, our valuation is $1.3 million.

Second, slash that team's annual cost of operating until it corresponds with the team's value, $1.3 million for 17 races. We recognize that this will not be possible until new specs are introduced in 2012.

Third, having benchmarked operating cost to market value, the IRL and its teams may undertake the following activities in order to "raise the value of the series."
  • Teams acquire sponsors at market price rather than via supply chain arbitrage

  • IRL reduces subsidies via IndyCar TEAM program

  • IRL reduces sanction fees, increasing the number of promoters wanting IndyCar events

  • IndyCar adds ovals, attracting U.S. drivers that can be sold to a U.S. audience

  • Team owners hire competitors to drive their cars rather than to finance their operations

  • New teams enter and current teams expand, improving on-track competition

  • Sponsors spend more on activation and promotion and less on team operating costs

  • IRL reallocates portion of TEAM distributions to direct promotion of IndyCar Series

  • Financial risk is reduced for all IndyCar stakeholders

Why the IRL Needs Managers

Such are the results of effective strategy, customer focus, product development, and supply chain management, activities that the present IRL structure does not permit. That is why Terry Angstadt has little choice but to hope for "big investments by key partners." He must rely on team and league sponsors that either 1) do not exist, or 2) participate only because they acquire something of greater value in another market altogether. Angstadt possesses little capital for direct investment because he must burn cash to subsidize teams that provide a product that the market has rejected.

Indeed, Terry Angstadt's comments are wrong on every level. His is a sales plan that would recapitalize the IRL. It will not raise the value of the IndyCar Series.


IndyCar: More Madness from IRL Management

We appreciate that Versus hired Bruce Martin to write about IndyCar racing on its website. His stories have not disappointed, although the same can not be said about their subjects.

Martin's latest edition features Terry Angstadt pontificating on a variety of subjects. The IRL Commercial Division President's words are frequently banal, sometimes evasive, occasionally nonsensical, and always maddening. We remind you that this is not always his fault.

We shall analyze Angstadt's musings thoroughly because they are important. First, however, we suggest that citizens read Martin's entire story. He gathered the information and distributed it to race fans, a service that the Republic appreciates very much. Martin and Versus deserve your patronage.

The Committee of Public Safety shall commence with its analysis soon enough.


Monday, August 31, 2009

IndyCar Growth depends on IMS Board

Your faithful IndyCar Montagnards recently perused this Roundtable Report from the Minnesota Chapter of the National Association of Corporate Directors. We invite citizens to read the following conclusion, keeping in mind the present state of corporate governance at the Indianapolis Motor Speedway and its related entities.

"Too often, family businesses maintain an informal, 'family only' board
long after business needs have outgrown this structure. Growth of the
business and the shareholder group eventually require governance with a level of
objectivity, discipline, and strategic focus that family members alone can
rarely provide."

We are not here to tell the Hulman George family how to run its business. But we do care deeply about the future of IndyCar racing and the Indianapolis 500. Therefore, we shall briefly consider IMS corporate governance, the one issue that must be resolved satisfactorily if IndyCar is to have a viable future in the competitive marketplace.

The More, the Scarier

The business of the Indianapolis Motor Speedway has grown substantially since Tony Hulman re-opened the track for business in 1946. New events, product lines and strategic business units (SBUs) have been added. Like the business, the family has grown. In a sense, Tony and Mary Hulman had it easy; they handed the family business to one daughter. Predictably, Mari Hulman George has had a more difficult time, balancing the interests of her four children.

The job now becomes even more complicated as a new generation of the family comes of age. Who will be in charge? How will equity in the company be distributed? What rights will equity holders have? Will family members actively manage the company; if so, then which family members? These questions are the first of many that are extremely difficult to answer.

Deliberations among the five members of the Hulman George family who currently serve on the Board of Directors must achieve certain goals if the Indianapolis Motor Speedway and the Indy Racing League are to thrive. Professor John A. Davis of Harvard Business School identifies them here.

  • Clarity on roles, rights and responsibilities for all (family) members...
  • Encouraging family members, business employees, and owners to act responsibly
  • Regulating appropriate family and owner inclusion in business decisions

Professor Otis Baskin of the Graziadio School of Business at Pepperdine University puts it this way.

If family relationships are divisive, those negative relationships carry over
into the business and often are more destructive than they would be between
co-workers or managers who have no other relationship.

Recent empirical evidence suggests that this is indeed the case at the IMS. A well defined system of corporate governance can alleviate such problems, allowing family members to trust each other and empowering professional managers to lead the firm toward market competitiveness. We hope that this is currently Job One, Two and Three at the Indianapolis Motor Speedway.

IndyCar racing will not thrive without an empowered, knowledgeable product manager. Sales and racing operations appear to be in good hands, but that is not nearly good enough. Salesmen will sell whatever and whenever they can, regardless of whether or not it is strategically advantageous. Racing operations is a cost center that at best aids business growth via operating efficiency. Direction, strategy, customer focus, product development and supply chain management are all severely lacking.

It does not have to be this way.


Scott Dixon: IndyCar is a Spectator Sport

The Committee of Public Safety was informed today that Scott Dixon is less than pleased with the style of racing we witnessed Saturday night at Chicagoland Speedway. We can only assume that the defending IndyCar champion became frustrated the moment he realized that he could not win the event by making fuel. Dixon went public with his complaints on Speed Report.

A supposed star of IndyCar racing, Scott Dixon has failed to achieve nominal acceptance in the consumer marketplace. His complaints about the most scintillating race of the season allow all citizens to better understand why.

When will IndyCar drivers and teams recognize that in order to succeed, the IRL must attract lots of U.S. racing fans? Dixon is to IndyCar racing what Ivan Lendl was to men's tennis - a skilled participant whose immediate retirement would, at worst, have no effect on the sport's ability to compete in the marketplace.

Functionaries in every business must do things that they don't enjoy. It's called earning a living, and Scott Dixon earns a good one. If he dislikes high speed, wheel-to-wheel racing, then there are many other options - sports car racing, for example - where spectator support and mass market acceptance are not necessary.

Dixon, like most IndyCar drivers, wants to make NFL money for playing soccer in the MLS. Sorry, guys, but that's not the way it works. You and your teams do not get to determine what is valued in the marketplace and what is not.

We sympathize with Scott Dixon. As difficult as it might be to believe, he is not the first to discover that there is a very limited market for his talents and wants. Try getting a job as a political philosopher, and you'll know what we mean.


IndyCar Maxim #5

Roggespierre's Maxim #5
Courtesy of Philip Kotler, Northwestern University Kellogg School of Business

"Who should ultimately design the product? The customer of course."

This begs the question: who is "the customer" with regard to IndyCar racing? We have argued that race fans in Middle America would be a good place to start because the Indianapolis Motor Speedway needs to attract hundreds of thousands of them over the course of a month.

The Target Audience has Spoken

These consumers have proven to be a robust market for NASCAR (sans-culottes!) Cup and Grand National. There is no reason to believe that they would not also enjoy an IndyCar product that is designed for them.

Begin with cars that are low-tech in terms of aerodynamics and electronics. These technologies have proven to add more cost than market value. The schedule should consist primarily of oval tracks, although road courses and street circuits should not be taken off the table so long as they enhance market competitiveness.

Of course, the IndyCar product requires easily detectable elements of differentiation - it should not be an open wheel imitation of NASCAR. Engines that are either turbocharged or supercharged would be helpful in that regard because they would lend a distinctive sound to IndyCar racing. Open cockpits must be kept. Conversely, wings and chassis tunnels are costly and unnecessary.

We would like to see the fuel tanks reduced to 10 gallons eventually and 15 gallons immediately. Fuel conservation leadership in U.S. motorsports would give IndyCar a relevant advantage over NASCAR. That is not to say that Indy cars should be slowed to NASCAR speeds; they absolutely must remain faster.

If the teams want an engineering challenge, then they would certainly have one, trying to simultaneously increase mileage and speed. More important, the challenge would be correlated with something that has become important to many fans. The same can not be said for the "overtake button" and wicker adjustments.

Tire supply should be severely restricted - one or two sets per race is reasonable. This would save money and put a premium on the drivers' ability to maintain pace without wearing out the tires. Danton notes that he is unimpressed with Firestone's ability to build a racing tire that is great for all of 80 miles. He would prefer that the teams run the same set of tires in all 17 races, just as the rest of us expect a set of tires to last at least a year.

But that would be too much, too soon. Limiting each team to one or two sets of tires (plus spares) per race is change enough, for now.

This is a brief and incomplete outline, we admit. But it would give the league a differentiated, relevant product that is designed to attract drivers that could draw the core fans that IndyCar racing desperately needs. Some teams would hate it. So what? The days of creating racing series for teams rather than customers are long gone.


Sunday, August 30, 2009

IndyCar: Light Flickers at Penske & AGR

Apparently, management at Team Penske and Andretti Green Racing has figured out something that we've been trying in earnest to explain for the better part of a month.

The American public does not care and likely will not care about the present roster of drivers in the IndyCar Series.

According to Curt Cavin of the Indianapolis Star, the Penske and AGR teams have requested that the 2010 Indianapolis 500 take the green flag at its traditional 11am start time. But this isn't about tradition. It's about making it possible for NASCAR (sans-culottes!) Cup drivers, who U.S. race fans do care about, to race at Indy.

Cavin reported that Team Penske's Tim Cindric requested the change in a meeting between team owners and IRL management prior to the IndyCar event at Chicagoland.

Needless to say that we agree with the underlying logic of Cindric's proposal. Television ratings at Indy were lousy this year. Television ratings for the entire series have been lousy this year. The Indianapolis 500 needs an infusion of drivers that are in demand among consumers.

However, Cindric's idea is the wrong kind of solution. We are not prepared to admit that the Indianapolis 500 is subordinate to a run-of-the-mill Cup race. We would hate to see the Indianapolis Motor Speedway concede this point and move the start time when a much better solution is possible.

What might that solution be, exactly?

We suggest that IndyCar teams hire IndyCar drivers that might appeal to U.S. racing fans.

Teams are responsible for the IndyCar racing product just as Delphi is responsible for the products of its auto manufacturer customers. IndyCar teams like to think of themselves as customers of the series, but they're wrong. They are suppliers to the series - and if you're not convinced, then ask yourself who pays whom.

As suppliers, IndyCar teams are responsible for enabling the IRL to put a product on the track that appeals to end users (fans). Drivers are a fundamental component of that product. This is true at every IndyCar race, and particularly at the Indy 500.

Of course, IndyCar teams can't afford to hire NASCAR Cup stars. That is both a problem and another reason to make the next generation of IndyCar chassis and engines much, much less costly than the present specs.

We applaud Tim Cindric and Michael Andretti for recognizing that IndyCar racing is not competitive in the marketplace. That is why team financing is not correlated with the value of the racing product. Solutions will come with structural change, some of which the present IndyCar teams will certainly not enjoy.

U.S. race fans will tune in to Indy again when it is re-established as a destination - and not a diversion - for racing drivers that are accepted in the marketplace.


IndyCar Versus Ratings Analysis

We have written that IndyCar Series ratings on Versus are a mixed bag. Now, let's attempt to put that statement in its proper context.
  • The first eight (8) IndyCar events on Versus averaged 273,108 viewers

That isn't much of a national audience. However, it's no secret that Versus is a fledgling sports network. Perhaps we should compare the IndyCar numbers to those of other sports properties on Versus.

  • Versus 2008 Prime Time average audience was 278,000

  • IndyCar Prime Time events (3) averaged 293,333

IndyCar is competitive with other prime time programming on Versus. Unfortunately, this is due to the audience that tuned in for the race at Texas Motor Speedway. Both Richmond and Kentucky failed to match the network average in prime time. Texas more than made up the difference. IndyCar races at TMS have been very good since the track opened. It is apparent that the series has earned some brand equity at TMS.

  • NHL games in 2008-09 averaged 326,000 viewers

Texas easily beat the NHL average, which was also topped by Long Beach. Again, TMS and the Toyota Grand Prix are established events that have achieved some brand recognition. Indy 500 Pole Day (385,000 viewers) and Bump Day (349,000) also beat the average NHL game. This is impressive; the NHL should have an advantage because most of its games are in prime time. Less impressive is the fact that Kansas and Kentucky combined to draw fewer viewers than Indy Pole Day.

  • Tour de France 2008 live coverage (8:30-9am) averaged 267,722 viewers
  • Tour de France 2009 live coverage averaged 529,926 viewers

These numbers lend significant insight. Let's hope that IRL management is paying attention. As a function of television viewership, the Tour de France with Lance Armstrong among the leaders is worth almost 98% more than the same event without Lance Armstrong

The bicycles and the race stages were largely unchanged. Most competitors and teams were similar year-to-year. It was Armstrong's comeback that increased the Tour de France product's competitiveness in the U.S. television market by 98%.

This is why the IRL must actively manage its product. In most firms, this is considered a core management activity. Unfortunately, it seems that the IRL is more interested in serving its suppliers of racing teams than serving its U.S. TV distribution customer.

Now that it knows what one American star can do for ratings, Versus should press IRL management to provide competitors that might do the same for IndyCar racing. Currently, management is moving in the opposite direction. New cars that are too costly will necessitate more drivers who are also financiers. Additional road and street races will attract more competitors that can't be sold to a U.S. television audience.

We're guessing that Versus will soon become the latest excuse for IndyCar racing's failure to perform in the marketplace. The league and its teams will talk about limited reach and explain that they need time to make the partnership work. The latter might be true, but there is little hope for the long term or any term if the product is not changed in any substantive way.

Do not believe for a moment that Versus is not capable of drawing a credible audience right now if it has a product that U.S. television viewers actually want to see.

The 2008 Oregon v. Oregon State football game on Versus averaged 1.6 million viewers

DirecTV contract negotiations notwithstanding, Versus has increased its reach since the 2008 Civil War football game. The IRL would have to increase its average audience 586% in order to match a rating that Versus has already achieved.

Therefore, we shall restate the obvious. If IndyCar fails to increase ratings on Versus, then it will be the fault of IRL management and its suppliers of IndyCar racing teams.


IndyCar Brazil 2010 Schedule Rumor

Is the 2010 IndyCar event in Brazil in trouble? Maybe. The Committee of Public Safety has learned that teams were told to hold off on any immediate plans to purchase airline tickets for the race at an Brazilian undisclosed location.

Do we not recall that the collapse of a certain race in Brazil was the first real sign of trouble at Championship Auto Racing Teams, Inc? Perhaps memory fails us, but we don't think so.

IRL Management: is this really a good idea?

Marat is currently checking sources for The Indy Idea. If you have inside info, then we would love to hear from you (not anonymously, but of course confidentially) via email at

Yes, that's the same that's owned by Jay Penske, and yes, that's why we use it.

Briscoe Tops Dixon in Chicagoland IndyCar

Now that was some outstanding sports entertainment! Ryan Briscoe fought his way to the front after falling to 13th position and nosed past Scott Dixon to win the Peak Antifreeze and Motor Oil Indy 300 at Chicagoland Speedway by .0077 second.
Briscoe increased his lead in the IndyCar points standings with two races remaining in the season. Dario Franchitti finished 3rd at Chicagoland and is 2nd in points, 25 behind Briscoe. Dixon trails Briscoe by 33 points.

The race featured wheel-to-wheel action throughout. Side-by-side racing was the norm and three-wide battles were not unusual. The lone disappointment was that the top three finishing positions once again went to the teams that have figured out how to sell a $1.3 million product for more than $7 million. This remains a fundamental problem, but it is more easily forgiven in light of the quality of racing witnessed by IndyCar fans Saturday night.
One question: why such a late start? Waiting for the end of Shabbat?