Saturday, October 10, 2009
Yes, it's hot at Homestead-Miami Speedway. The heat is sufficiently oppressive that it is radiating through my television screen.
Still, given the amount of promotion that was dedicated to this three-way championship battle, the crowd has to be considered something of a disappointment. As I have written before, it is clear that the IRL can't sell these guys.
The product - the whole product - is the problem. We know this because not enough people are buying it. A product that is not in demand is by definition flawed. This must change.
Let's hope for a safe and entertaining race.
Friday, October 9, 2009
Fans of IndyCar racing will likely witness a historic first Saturday evening at Homestead-Miami Speedway. I only learned of this factoid this evening.
Since the Indianapolis Motor Speedway opened in 1909, there has never been a season on the "Indy" championship trail quite like this one. This, the sport's Centennial season, will likely be the first to run to completion without an American driver having won a single race.
I can not speak authoritatively about the early years of IndyCar racing. However, I do know that Carl Fisher, the man pictured above and the driving force behind both the Indianapolis Motor Speedway and Miami Beach, would not have allowed the cars that race at Indy to become irrelevant. Tony Hulman and Wilbur Shaw are in the photograph to the left. They, too, would likely be saddened by the state of contemporary IndyCar racing.
Tomorrow, IndyCar will crown a champion. Most racing fans in the United States will not care.
Perhaps some day IndyCar will once again have leaders such as Fisher, Hulman and Shaw - executives who possess acute business instincts and who care about the sport as they care about themselves. I am proud to know that individuals such of these are frequent guests and contributors here.
Beginning Monday, we shall endeavor to construct a plan that might honor the fathers of the Greatest Race in the World. We do not expect significant rewards for our efforts.
We write "As If".
It is nice to know that good people can work hard, do things the right way, and achieve positive results. Such is the case at Sarah Fisher Racing, a fledgling IndyCar team that is poised to expand in 2010.
I encourage you to read the story in Curt Cavin's excellent Pit Pass in the Indianapolis Star.
Organic and Sustainable Growth
Fisher will increase her IndyCar participation to include nine races next season. Even better, Dollar General Stores, a holding of storied leveraged buyout firm Kohlberg Kravis Roberts, has signed on for another year of sponsorship. Somewhat surprisingly, Fisher, a USAC veteran and oval track specialist, told Cavin that her schedule will include a mix of ovals, road courses and street circuits.
Sarah Fisher Racing took delivery of a new Dallara last month, courtesy of associate sponsor Hartman Oil. That enabled her to sign former Indy Lights Champion Jay Howard to drive in four races in 2010. The Englishman will be sponsored by Tire Kingdom, a subsidiary of TBC Corporation.
Sarah Fisher works just as hard away from the track as she does when she is in the race car. She has established a following on Facebook and Twitter. She has built an impressive array of associate sponsors including Direct Supply, IUPUI, AAA Hoosier Motor Club, autotex PINK, and the aforementioned Hartman Oil.
Congratulations to Sarah Fisher, John O'Gara, Andy O'Gara and everyone at SFR. They are making significant inroads without the benefit of government subsidies and APEX Brasil. Instead, they merely serve customers.
Perhaps the IRL might learn something from them.
Thursday, October 8, 2009
This is absolutely hilarious.
First, let me explain that, if you have never been in a media room at a race track, then you are missing quite a treat.
Motorsports reporters are, on balance, a motley collection of misfits. They tend to be slovenly, poorly dressed, and malodorous.
Until now, they have typically been well fed. However, California Speedway has determined that the scribes will have to pay for the privilege of manning the buffet table. The following excerpts are from an email that was distributed to angry members of the the American Auto Racing Writers & Broadcasters Association.
"As some of our members may be aware, California Speedway (nee Auto Club Speedway) has decided to charge for meals during the upcoming Cup weekend, October 9-11. I wish to encourage AARWBA member not to pay the $25, and instead to seek other alternatives."Horrors! I am a former news reporter. In the news business, reporters do not get free meals. They do get to spend a lot of time in awful neighborhoods, knocking on doors to obtain bits of information about the daily murder and mayhem. That is one reason why I am not a reporter anymore.
Sports reporters are the envy of newsrooms everywhere. Those guys get to hang out with athletes, attend cool events, and chow down on free food.
Let's just say that my sympathy for motorsports reporters is, well, limited. Frankly, $25 for three days of meals sounds like a pretty good deal to me.
"The track is owned by International Speedway Corp (ISC), and they are making plenty of money. A few years ago, the fall race had a gross margin in excess of $30 million. But that’s apparently not enough for the controlling shareholders."This quote helps to explain why the writer opted to cover auto racing rather than work for the Wall Street Journal. The term, "gross margin", actually means something. It is the difference between sales revenue and production costs. It is not operating profit because overhead is not included in the calculation. Because racing facilities incur significant fixed costs, they tend to have substantial overhead liabilities.
Notice that ISC announced its quarterly results Thursday. They were not very good. We will not know ISC's gross margin until the company files its financial statements with the SEC. Nevertheless, we can say with certainty that it is a number that will not attract the attention of Wall Street analysts.
But it most certainly is the focus of that gluttonous band of motorsports reporters.
- Admissions Revenue - down 15.96% to $53.35 million
- Motorsports Revenue - down 18.22% to $105.96 million
- Food & Beverage Revenue - down 31.38% to $12.62 million
Wednesday, October 7, 2009
Several promotions have been mentioned in this space, although I have been critical of what seems to be an overabundance of free tickets. Distributing a few freebies can enhance event promotions, but distributing too many free tickets can also further devalue the product.
Sarah Fisher will make an appearance from 5pm until 7pm this evening at TGI Friday's in Miami. She, too, is giving away tickets. However, I shall not criticise in this instance because the beneficiary is Susan G. Komen for the Cure. Furthermore, I encourage that you give generously if you are so inclined.
Danica Patrick's recent soiree with NASCAR teams has provided additional intrigue.
Increased television ratings would be much more economically beneficial than increased attendance at race tracks. Nevertheless, if what we are hearing from South Florida is true, then I think that we should commend the IRL, Homestead-Miami Speedway, the participating teams and drivers, and, of course, APEX Brasil. Promotion does cost money, after all.
Tuesday, October 6, 2009
Courtesy of Ken Homa, Georgetown University McDonough School of Business
Note that I do not include Tony Cotman in my analysis of IRL management because his responsibilities and authority are unclear to me.
- Pursuing arbitraged sponsorships that are intended to preserve the status quo despite the absence of demonstrated demand for the racing product.
- Establishing a race promotion contract with the publicly subsidized promoter of the undersized Barber Motorsports Park.
- Attempting to convince the City of Baltimore and the State of Maryland to subsidize a 2011 street race.
- Renewing a Honda engine and sponsorship arrangement that forces IndyCar teams to work with a rent-seeking supplier that is bleeding the IndyCar enterprise of much needed cash.
- Attempting to secure robust financing in exchange for a non-strategic race in Brazil.
- Seeking corporate dollars rather than consumer acceptance.
- Allowing powerful teams disproportionate influence with regard to selection of the new specs that are to be introduced in 2012.
- Failing to realign IndyCar TEAM so that it might improve the IndyCar product to achieve market acceptance.
- Chasing short-term pay days rather than establishing a sustainable cost structure that might lead to a more salable product and increased U.S. television ratings.
- Choosing to believe that it is incapable of competing with the dominant market leader.
- Turning its back to virtually all empirical data and pursuing a market position that has very limited upside, at best.
- Attempting to force a demonstrably unwanted product on the market, rather than recognizing and adapting to consumer demand.
Toward a Market Competitive IndyCar Series: Fell the House of France!
I would like to see an IRL management team that might reside at the bottom of Professor Homa's list and the top of the U.S. motorsports market. The IndyCar Series needs Revolutionary managers! However, leadership of that type will require expertise in fields that have little or nothing to do with either sales or racing operations. I believe in all sincerity that the future of the great Indianapolis 500 Mile Race depends on it.
Acquiring such a management team is in the interest of the Indianapolis Motor Speedway Board of Directors. Now that the 2009 IndyCar Series season is nearly complete, I hope in earnest that the Board will commence with the job at once.
...the mayor of Rio de Janeiro, Eduardo Paes, said that the city will not
compete to be the Brazilian home of the IndyCar Series.
- The 2016 Olympics foiled everything.
- There was just not enough time to find a suitable racing venue.
- The global economic recovery did not begin soon enough.
The more likely reasons for Angstadt's South American struggles are almost certainly very similar to the primary obstacle that is preventing IndyCar from competing in the North American marketplace.
"We saw the costs and decided to step away from IndyCar. It is a very
costly event." - Eduardo Paes, Mayor of Rio de Janeiro
Monday, October 5, 2009
"We look forward to helping Vitor Meira and Nelson Piquet make the transition into NASCAR." - Tom DeLoach, Owner of Red Horse RacingThis is strange for several reasons. For one, Meira was one of several IndyCar drivers promoting the IndyCar finale at Macy's in Miami October 2. Incidentally, IZOD and APEX Brasil used the event to give away 50 free tickets to the race. The freebie count is steadily climbing.
Returning to the matter at hand, A.J. Foyt confirmed last week that Meira would return to the cockpit of the ABC Supply Co./AJ Foyt Racing Dallara in 2010. Why, then, is Meira participating in a Camping World Trucks test next week? I suppose that he could just be looking to run a few Truck races in addition to his 2010 IndyCar schedule. However, given the desperate economic straits of the IndyCar Series, I do wonder about Foyt's sponsorship commitments for next season.
Piquet had been rumored to be looking at Eric Bachelart's Conquest Racing team in IndyCar. But you can't blame the son of the former world champion for checking out a NASCAR opportunity. The Truck Series is not only less costly than IndyCar, but also more popular, typically beating IndyCar's television ratings by about 45%.
NASCAR suddenly finds itself struggling with declining Cup ratings and attendance amid a still sluggish economy. The TV ratings decrease is most important because it devalues the NASCAR product at the firm level rather than the systemic level. We are therefore likely to see ride buyers migrate to NASCAR because it is still a much better deal than IndyCar.
I was told a few years ago that Vitor Meira brought no money to the table. I have no reason to believe that is not still true. However, if those who are driver-financiers go away, then how will the IRL sustain its overpriced and unwanted product?
Cheap fuel is a sure crowd pleaser at any location in the United States. IndyCar driver and team financier Mario Moraes is not. Therefore, having Moraes sign autographs for those who seek cheap fill-ups is a shrewd move. The IRL will be able to tout the hundreds, perhaps thousands, who showed up to get Moraes's autograph.
Of course, few if any of those folks will be in the stands this weekend to watch Mario drive his car. But, thanks to APEX Brasil's ticket purchases, that's not a problem. Everybody gets paid, anyway!
This is how you prop up* a product that consumers have rejected. Why are the Indianapolis Motor Speedway Board and IRL management allowing this to happen to the series that races at the Indianapolis 500?
*Originally, this line read, "This is how you prop up a lie, a product that...." BC argued that my choice of words was inappropriate. Reading it again, I agree. IndyCar racing is not a lie. It is a product that has been rejected. The latter wording suffices and is not needlessly inflammatory. Thanks to BC for rightly suggesting that I rethink my original language.
Sunday, October 4, 2009
Some have asked why I dedicate so much of The Indy Idea to analysis of television ratings. This is a good question that warrants a serious answer. I shall do my best to provide one here.
I believe it is important that IndyCar participants recognize how bad things have become. They do not want to believe it. That is why they prefer racing venues such as Toronto, where the urban backdrop allows for a "major league" feel and a crowd consisting of 30,000 to 40,000 spectators looks good enough. That is also why they will be very excited about "phenomenal" fan turnout at Barber Motorsports Park, never mind the fact that the place can only hold approximately 30,000 spectators.
The Barber race would not exist if not for government subsidies. Toronto might be similarly subsidized, although I freely admit that I do not have evidence of it. Nevertheless, these events allow IndyCar participants to fool themselves into thinking that they are part of something that is cool and popular.
The IndyCar Series will not make the changes that must be made until those in power have no choice but to admit that change is necessary. They tend to like the dream world that they currently occupy. They want to keep it intact for as long as it is possible.
Many in IndyCar do not want to lower themselves to the point of serving an audience. IndyCar racing has no history of purposely serving anybody except for a very small group of insiders. Those insiders still exist and exert significant influence over the Indy Racing League and its feckless managers.
That is why IndyCar always blames others - race promoters, television partners, NASCAR, International Speedway Corporation, and sponsors that do not execute grand activation strategies on IndyCar's behalf. Versus is only the latest in a long line of pariahs. IndyCar participants like what they do and believe that others should, too. Any evidence to the contrary must therefore be the fault of someone else.
One of my goals here is to turn a mirror to those who are destroying this once great sport. Serious economic analysis leaves no doubt that IndyCar has failed in the competitive marketplace. I want the participants to know that they are not only not cool, but also not relevant. They act more like spoiled brats, having inherited market acceptance and then thrown it away so that they could spend what they want to spend and do what they want to do.
IndyCar's failure is directly attributable to those who have exercised power over the sport for more than 30 years. They refuse to believe it. My goal is to leave them no other alternative. The time for truth and reckoning is now.
Beginning Monday, October 14, I intend to begin looking to the future. The off-season at The Indy Idea shall be all about what IndyCar racing could and should become. It will be subject to economic discipline. Otherwise, I invite your thoughts about how IndyCar might become competitive in the marketplace. We shall continue, "As If."
Currently, IndyCar racing ranks fifth in the competition among auto racing series in the United States. NASCAR Cup and NASCAR Grand National are the undisputed Number One and Number Two players. The National Hot Rod Association and the NASCAR Truck Series are third and fourth. IndyCar is fifth, followed by ALMS.
Together, we can work to improve IndyCar's competitive positioning. I hope that you will contribute your good ideas, dispassionate analysis, and constructive debate.