- 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.
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.
- 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
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?
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?
More Deep Capture: Honda Edition
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.