Tuesday, June 29, 2010

IndyCar Future: the macro view

The gentleman pictured above is Herbert Hoover, the 31st President of the United States. Fairly or not, his is the face of Great Depression.

You might be asking yourself what President Hoover has to do with IndyCar racing?

If a growing number of economists and hedge fund managers is correct, then we might just be headed toward the type of deflationary recession that prompted your grandparents to hide cash under the mattress and to wear the same overcoat for 50 years.


Keynesians and Austrians are beginning to agree that the risk of a global economic depression has never been greater. For those who are not familiar with economic schools, I shall say only that these two typically agree on exactly nothing.

If the economists are correct - and I note that they frequently are not - then what should IndyCar do in order to prepare? I have indicated my preference for low cost leadership positioning in the U.S. motorsports marketplace. Others have thoughtfully disagreed.

If the bottom really is falling out of the global economy, then what is IndyCar's best course of action?

I look forward to reading your thoughts.

Roggespierre

16 comments:

  1. That's a bit like asking for advice on how to grow vegetables after a nuclear armageddon, isn't it?

    In the present environment, and in a potentially worsening one, the value of utilizing existing investments has already been made ad nauseum. I still forsee less healthy teams with less new capital to buy new equipment in 2012, even if economic trends stay flat.

    As disposable income drops, the case continues to strengthen for reduced ticket prices to stuff the gate. If you're looking for low cost leadership positioning, try that approach. Vibrant crowds on broadcasts look good to potential sponsors, and raise the promotors' take on concessions and other amenities.

    You previously lambasted this approach by claiming that mass incentives like the Marlboro giveaways were responsible for devaluing the full price ticket.

    We saw what 10,000 people in the stands looked like at Kansas. Put 20,000 people there for the same gross, and at least you're selling twice as many hotdogs and parking passes.

    Watkins Glen has received very little advance promotion, possibly beacause all concerned parties suspect this will be the last IRL race there. You can still buy a block of ten seats in the main grandstands for $145 each. Advance sales at a reduced price didn't get the job done, and was discontinued.

    So what do you do, in this economy or a worsening one? Everything you can think of. Invite the Boy Scouts to hold a jamboree at one of the road course events, and make money off their parents. Run busses from the Izod Center to the Glen, free buffet and meeting with the drivers, when you purchase a grandstand ticket. You plant seeds, and do it often and do it well.

    As long as you have good ground to do it in, that is. Another piece of IRL real estate gets nuked after Sunday.

    Andy

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  2. Truthfully RP??? I see it as a return to older Indy Car racing. 1 owner-chief mechanic,1 mechanic and a driver who is paid a percentage on what he wins....not sponsorship. Sponsors put up money for purses. Track promoters sell advertising on billboards. Fans buy low priced tickets and get the family a sunday outing at the races for under $50.00

    May be far fetched.....but it worked during the 30's-50's !!!

    And yes.....older cars and equipment come out of retirement and get to play again!!!

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  3. In the old days the promoter put up a "sanction fee" and a minimum purse against a percentage of the gate receipts. Simple arrangement, and the risk was all the promoter's. So he hustled his ass off, and made stuff happen. I just don't see much promotion anymore today. It's a lost art.

    Deflation is coming to this business.

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  4. Took forever for this to show up, from Sports Media Watch:

    The June 20 Iowa Corn Indy 250 drew a 0.2 U.S. rating and 400,000 viewers on Versus, not surprisingly down from last year's race on ABC (1.130 mil), and the second-least viewed IndyCar race of the season.

    Deflation indeed.

    Andy

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  5. IZOD cannot be happy with the ratings.

    And if and when IZOD bails (which I am sure they have an "out" clause in the contract if the ratings don't reach a certain threshold) the sport will be officially DOA.

    What company, in this economic environment, is going to pony up the outrageous 5-10 million dollars it takes to field a IRL team, when the ratings are beyond pathetic? Its not going to happen.

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  6. Actually, IZOD bought two things, FWIW to IZOD...the "500" and a flashy, upscale ad backdrop with some young, sporty hunks, i.e. Hunter-Reay and Marco in particular. IZOD sponsors racing; it sells upscale apparel. Check out the IZOD website...Indycar-related videos, pics, and links to their "race to the party" site - selling apparel amid this racing stuff. They certainly knew what they're getting for the money involved, especially when talking about the "series."

    What company will pony up the millions? I dunno, but there are still ride buyers in seats. Uncle Deepockets is still writing some checks, as is Hugo Chavez and Citgo. And we're talking about a substantial capital investment in new equipment coming soon.

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  7. But can teams like Sarah Fisher's and others cut that big nut to pay for new equipment?? I don't think so, and I would believe that even if they can, who is going to watch ? I agree with TD, I can't see this staying afloat much longer. If this is just subsidized racing......then I guess its time to switch to another form of entertainment permanently. Now....where did I put my fishing rod?

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  8. "Bernard mentioned Sunday a series of demands that will put pressure on all of its series promoters, including Watkins Glen. Those include an increase in sanctioning fees and a request for tracks to be more aggressive in promoting its events to get more fans in the stands."

    Well, there you go then. That probably didn't take four months to figure out. Throw in a demand that more fans show up, and free new cars for all the teams, and everything is golden.

    Excerpt is from:

    http://www.pressconnects.com/article/20100704/SPORTS10/7040362/1003/SPORTS

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  9. OOps, that was my anonymous post.

    Andy

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  10. Bernard also says "they have to reduce the number of races by a minimum of 1".

    So we are going to "grow" the sport, by running fewer races?

    Bernard seems to say a lot of different things, depending who the audience is.

    And now we want to "co-promote" races. More financial suicide.

    Just run the Indy 500 and screw the rest of the series and be done with it. Nobody gives a damn about Indy Cars after Memorial Day anyway. No sponsors are willing to pony up. Where are the new teams?

    Spend the money you have left to put on the biggest, kick-ass Indy 500 you can. Save the rest of your money to completely rebuild the sport from the ground up in 2012. Its a dead sport. Time to revive it.

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  11. FTA Andy linked:

    Bernard mentioned Sunday a series of demands that will put pressure on all of its series promoters: an increase in sanctioning fees and a request for tracks to be more aggressive in promoting its events to get more fans in the stands.

    Printup said in a talk at the International Motor Racing Research Center in Watkins Glen in March that the track's IndyCar race has not made money.

    'Of course, when you run a business, you want to make money.'"


    I was looking at ISC's 2009 Financial Report. So, the way it works is that track and event sponsors put up big $$$, the series extracts a sanctioning fee and stages the event, and the rest doesn't matter much. What an interesting "business model."

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  12. Looks like it didn't take Printup four months then.

    Any deal would have to have contractual language to protect both sides, don't you think? Likes IRL saying "We want $1.5 mil, and we're alotting $300K for our event promotion".

    Or the promoter dedicating the $300k where they see fit and paying the IRL $1.2m

    The IRL business model is to expect a higher sanctioning fee and free promotional investment to boot? To draw hundreds of pup tent campers?

    I'm not buying the spin that says Bernard is interviewing prospective promoters to groom a list down from 24. It's more likely that four are gone, two have been added and the move is on to get to 17 or 18. Edmonton might be gone too.

    Andy
    Afraid to know what "FTA" means.

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  13. OK , fair is fair. If this deal is going to make a step in the right direction, here is a good measuring stick:

    Bruce Martin (of Versus, reporting for S.I.com:)

    "Bernard is certain of one thing, however -- Homestead-Miami Speedway will not be the final race of the 2011 season. Bernard is currently in negotiations with officials at Las Vegas Motor Speedway and the Las Vegas Visitors Bureau to make that location the series finale."

    Once again the IRL conducts too much of their negotiations in public, as if that was a preferred method. Wait until the chassis announcement is made next week, and remind me what a good idea that is.

    One of the solid connections that Randy Bernard brought with him from PBA was the Las Vegas Visitors Bureau. They aren't eyeing an IRL race, they are trying to court a Nascar "Chase race" for the fall...and offering Bruton Smith $5-$8M as an incentive.

    So the style is demonstrated and the substance is promised. This will be a fair issue on which to evaluate Mr. Bernard's execution of both, n'est pas?

    Bruce Martin's full article:

    http://sportsillustrated.cnn.com/2010/writers/bruce_martin/07/05/IndyCar.Watkins.Glen/

    Las Vegas Review-Journal article on Nascar:

    http://www.lvrj.com/sports/second-cup-event-creeps-closer-97141274.html

    Andy

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  14. Well.....All I know is this, they drew more fans at Watkin Glen for a F1 race in the 70's than for an Indy Car race. Besides, no bus burning, no rain and certainly no "stars". And now we want to "demand" more promotional money in the deal.Gooooooood Luck with that one!!! Ohhh Uncle Bernie!!!! Can I borrow your motor coach for a few hours?????

    Oldwrench
    pyro technics director-Indy Car

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  15. I love Keely Matlock's tits.

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  16. I love Amber Campbell's monster titties.

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