Those who have followed the ebb and flow of my writing here know that I have frequently held up NASCAR as a successful U.S. motorsports business with which IndyCar should compete in the marketplace.
In my view, that assertion is becoming questionable. Yes, IndyCar would still love to have NASCAR's problems - in particular, its television audience. However, my purpose here is to offer an opinion on a different but related subject.
The Brickyard 400 should die.
I believe those IMS officials who say that 140,000 paying customers, roughly 54% of capacity at the IMS, are sufficient to make the event profitable. The television money alone might be sufficient to ensure profitability.
The Brickyard 400 should die.
I believe those IMS officials who say that 140,000 paying customers, roughly 54% of capacity at the IMS, are sufficient to make the event profitable. The television money alone might be sufficient to ensure profitability.
However, it bears noting that the audience is dwindling with each passing year.
Blame whatever you like – NASCAR’s general decline, relatively poor viewing angles, Goodyear, the COT. The fact is that the event is waning rapidly. The Brickyard 400 is contributing to the erosion of the Indianapolis Motor Speedway brand.
I suspect that NASCAR has over saturated the market for auto racing in the United States. If I am correct, then the House of France is dealing with a very large problem that it might not be able to solve. Its shared interests with the International Speedway Corporation and the threat of lawsuits from its other promoters likely render NASCAR unable to decrease its “inventory” of racing product, at least with regards to the Cup Series.
NASCAR’s problem need not be the Indianapolis Motor Speedway’s problem. After all, the IMS is certainly not immune to the problem of over saturation. Eliminating the Brickyard 400 would enable the IMS to reduce the “supply” of dates that are available for fans to witness racing at the track. This, according to simple economic theory, would likely increase attendance for those dates – in May – that remain. This would be good for the IMS and for IndyCar racing.
The good news is that the Indianapolis 500 is still very special. We know this because, in spite of everything, its rate of decline is minuscule compare with that of both the Brickyard 400 and the United States Grand Prix.
If NASCAR sponsors want to participate at Indianapolis, then let them become IndyCar sponsors.
Roggespierre
A little hardball wouldn't hurt. If I'm IMS I don't outright pull the BY400, but I start to throw in a few minor demands during the next negotiations. More support from ICS, maybe a few shared weekends with the cabs even... and definitely get them to help out with formalizing the $20M Double concept.
ReplyDeleteIf the Frances decline to play ball so be it. It is their funeral. The end of the Brickyard would ding the speedway's prestige a bit, but it would damage NASCAR's reputation far more.
(And for the record I think the tire disaster was horribly damaging to the BY400 brand... I actually sat and watched the entire fiasco, laughing the whole time).
Demond Sanders
18to88.com
Indy was built on open wheels. I don't know if NASCAR can ever bring the glamour that the Indy 500 has. I think that it should die of its own reasons, not of those man made to support the "500". The "500" can stand on its own merits and it has done so for almost 100 years. If NASCAR drivers want to race at Indy, then get a job racing open wheelers.I don't think you can ever tarnish the Indy 500. The ICS yes. The "500" ..no! It stands simply as the biggest and best race period. It will endure all the nonsense that is presently the Indy Car Series.As it will the nonsense of NASCAR !
ReplyDeleteOldwrench,
ReplyDeleteAmen, brother!
Demond,
The House of France holds one significant bargaining chip - the television money. I have to believe that IndyCar continues to benefit from that particular cash inflow.
It is interesting that Brian France is making noise about giving the BY race date to Kentucky. That would be fine with me, but the Hulman George Family might disagree.
You are undoubtedly right about the weight of the Goodyear fiasco. The same is true of Michelin and the USGP. However, in both cases the trend line was already headed in the wrong direction. In NASCAR's case, the erosion of the fan base is fairly consistent across all of its markets.
And that gets us back to excess capacity. There are too many NASCAR races for the market to support. There are too many tracks with too many seats. That these are highly levered, fixed real estate assets only increases the problem.
NASCAR and its teams are due for a significant reset of the prices that the market will bear for participation in the series. My hope was the IndyCar would position itself to take advantage. My fear is that it is once again establishing a cost position that is strategically disadvantageous.
Perhaps this is not the case. There remains much color to be added to the new specs. The details are extremely important, and we don't know them yet.
I shall remain hopeful because, well, that's what I want to do.
Best Regards,
Roggespierre
RP,
ReplyDeleteDetails of the ICS specs already announced are more than sufficient for generating cost estimates.
The speculated participation of other engine or body "kit" manufacturers will only fuel competition and create corresponding cost increases.
The cost position...and the disincentive of thin profit margins...have been mandated by the IRL. The only question is whether a sufficient number of owners can generate enough funding to reach the required minimums.
I'd call that a revenue problem, but there is no need to keep repeating myself.
"The Brickyard 400 is contributing to the erosion of the Indianapolis Motor Speedway brand." If they can't pull 150K in attendance, that's for sure.
I doubt the corporate suite revenue is better for the 500 than it is for a cab race, at least in the last year or two. Belskus can draw the line, we can't. Unless you can get your bud Lewis on the line for the answers?
"Time to kill the Brickyard 400?"
That depends on who's there at the time. Are you accepting nominations?
Andy
Wouldn't the Indy Car series be adversely effected, by less revenue generated from the BY 400?
ReplyDeleteIndy Car is already having enough troubles financially. I don't think this would help.
I will agree with the assessment that ISC has overbuilt it's seating capacity at virtually all it's tracks. This means they have to have BIG crowds to pay the overhead for all those "aluminum fans".
ReplyDeleteI too think that BY400 needs to go bye-bye. I see very little good for the track as the event detracts from the heritage and legacy of the IMS.
As for the Moto-GP event I think it is ok. It is sufficiently different from the 500 that it shouldn't detract from the heritage. Now if it would be possible to construct temporary seating in the infield close to Moto-GP course with say 100K or so seating so that the fans can see these insane athletes do their thing at fairly close range, that would be good. This of course assumes the financials would indicate that this is viable.
Good point. For example: I think the Colts were wise to build Lucas Oil Stadium at only a slightly greater capacity than the old RCA Dome (roughly 65,000 depending on its configuration)... despite the fact that they could probably sell out a stadium of 80,000+ seats every game until #18 retires.
ReplyDeleteYou have to plan for the down years in the future. I guess you could argue that NASCAR has failed to do this.
Demond Sanders
Yes you are right, dump the brickyard
ReplyDeleteYou dump the Brickyard, and you might also have to dump IMS.
ReplyDeleteFolks, the Hulman's are in financial trouble. They need the BY, no matter how many empty's there were on Sunday, to keep their shorts right now. The BY still makes them BIG money.
TD: Sad but true! Without the BY 400 the revenue flow would bring IMS to a halt. We do not need another "after the war" senario at Indy. This time around the real estate developers will be licking their teeth at a prime piece of property for .....are you ready for this......another shopping mall!!!!
ReplyDeleteoldwrench
future real estate agent for A. Bernstein & Assocs.
Dover Motorsports, Inc. (NYSE: DVD) announced today that its wholly owned subsidiary, Gateway International Raceway has notified NASCAR that it will not seek 2011 sanctions for its two Nationwide Series and one Camping World Truck Series races.
ReplyDeleteVice President and General Manager of Gateway, Terry Harmeson stated, “This was a difficult decision in light of the many years of earnest and continued efforts on everyone’s part to develop a viable market for these events in one of our nation’s greatest cities. We remain committed to fulfill the balance of our 2010 schedule including our October 23rd NASCAR Nationwide race which will provide our fans the opportunity to see Danica Patrick compete here for the first time. We also plan to explore various ways to change the economics at Gateway both from the revenue and expense side.”
Denis McGlynn, President & CEO of Dover Motorsports, stated, “We have a group of extremely dedicated and talented employees who make Gateway a great destination and we deeply appreciate all the support we have had from the racing community over the years – from racing fans and drivers to sponsors, team owners and sanctioning bodies. However, economics dictate that we evaluate all of our options for this facility, including its possible sale.”
Something is going on. Bernard talking with Milwaukee; Mid-Ohio being sold to ISC or SMI; and who knows what's going on with the Panoz tracks.
ReplyDeleteThen sometimes I wonder if IMS isn't being shopped around.
John: Any leads on this or you just getting scuttlebutt from around the horn?
ReplyDeleteIf you are not familiar with the author of the IBJ article linked below, this personal opinion:
ReplyDeleteHe sometimes writes commentary that has little apparent basis in fact. This article is not one of those occasions, thanks to some of the quotes contained therein.
http://www.ibj.com/nascar-decline-not-good-for-openwheel-racing/PARAMS/article/21414
My bad, I forgot to put my name on the post above this one.
ReplyDeleteAndy
"The Miss In The Engine Bay" contains a lot of information previously discussed here. Have a read if you wish, and please leave any comments on the site of the blog post below:
ReplyDeletehttp://bleacherreport.com/articles/428064-indycar-series-the-miss-in-the-engine-bay
Andy
" The speculated participation of other engine or body "kit" manufacturers will only fuel competition and create corresponding cost increases. "
ReplyDeleteWhat sort of madness is this? The claim flies in the face of economic logic.
The quote below is from Erik Berkman of Honda Performance Development and was reprinted from Gordon Kirby's article of 4/26/10:
ReplyDelete"The number that we've been talking about has been about a 25 percent reduction from the current lease price. You can do the math, but the current lease price is $935,000. If we have competition, I want to use that number. If we don't have competition, and I've got guaranteed sole supply for the entire field for two years, I can probably do better than that. I don't know how much better right now. I'll do my math after I know that and then we'll come back and give the best good-guy price we can to the League because fundamentally we want to be here."
Brian Barnhart gave a figure for the engine lease cost anticipated for 2012. I'd have to dig it up, I believe the figure was in the $600K range.
With no apparent competition, I believe that would be the "good guy price" Mr. Berkman was referring to.
If another manufacturer can provide an engine with equal performance and reliability to the Honda, and match the availability and sponsorship requirements mandated by the IRL, that will be a good thing.
If they can do so at a lower price than Honda, that will be an amazing thing. Berkman's statement indicates that competition with another manufacturer will raise costs, not lower them.
If a number of body "kit" manufactures submit approved designs, each will have to invest significant sums for R&D, prototyping, testing and production. Some kits will prove to be less competitive, and not get sold.
Teams will invest in "kits" that will prove to be obsolete, and replace them with the most competitive "kit" as soon as regulation and finances permit the update.
True open markets encourage cost competition, and can create a deflationary spiral between competitors for market share. I think I got that right, correct me if I don't.
Racing open markets are a different nut. The best R&D and construction techniques will yield the best aero components, and the best engines. Lower cost competitors will only remain in the market if that's all the customer can afford.
The more the body kits, the more the losers. Unless careful regulation and full cooperation between engine suppliers can be established, the same will be true for engines, too.
It's a process of natural selection, and it is decided on the track. That is not a scenario in which open competition will insure reduced costs.
You're welcomed to point out flaws in that logic, or respond with reasons that would establish a different view of cost projections.
Right now, I don't see a reason to believe the results will be different.
Andy
I respectfully agree and disagree. I agree you need to get alternative suppliers in the field but costs can drop if you have small operations in competition. To said point, If you can produce a racing unit that will produce the required HP and a life span of 1000 racing miles for $50,000 US Dollars you have the first point. Most ICS races run 150- 225 miles. Only the Indy 500 is the biggy. So, with practices laps, you get approx 3-4 races out of a unit. 3 Engines buys you roughly 9-12 races, add 2 rebuilds per unit and you now have 18 races. Barring any major diasters and you can figure roughly 25k per rebuild. That adds up to $ 225,000 US Dollars for a total season. Ideal situation, but not reality. Toss in about another 150K for the ugly side of engine failure and your up to 375K US Dollars. I do believe if the keep a lid on the HP numbers these numbers are realistic, but if you start the infamous "more,more,more" philosophy then fasten your seat belts because the costs will go to the moon. Now Andrew, after working for "Uncle Bobby", what do you think is going to happen?? My bet, the engine costs will triple the forementioned number you spoke of. Racing is never cheap and competition is that ugly word that gets in the way of sanity.
ReplyDeleteoldwrench
used race engine supplier
Wrench, that last line is a keeper.
ReplyDeleteI missed a much easier example when I wrote in this morning.
All five chassis constructors were virtually within 1% on their cost estimates for complete chassis.
All the constructors were asked by the ICONIC panel for an estimate in an open source market, where at least two chassis would be in competition for market share and victories.
All said the cost would be double.
The IRL can mandate a cost for an engine lease program, or a body kit, but the cost of R&D and production is under the control of the supplier. The smartest guy, which is usually the guy who can pay the best people to do the best research and production, wins.
What decreases is the profit per unit. The more competition there is, and with a fixed sale price cap in place, the less attractive the game looks to any new players.
You have to spend so much to win that it isn't worth enough to win. Or play.
Wrench, I think your angle is valid but doesn't apply to the way these guys want to run the show.
Roll the Falcon off the truck with a 600HP Duratec in the back, rip of a few 227's, and everybody walks out of the garage to see what in hell is going on.
That wouldn't even be a $500K rig, with a spare engine included.
But now, you have to be able to supply half the field if you want to get an engine approved, and "pay to play" with an added sponsorship fee(my term, for lack of a better one. IRL wants cash).
To be allowed to run the chassis, you'd have to be able to supply at least half...maybe all comers, not sure on that one. And pay to play.
I think that's what tips the scale the wrong way. That's what makes it a major manufacturer's game, and I don't see how the "win at all costs" mentality goes away. Agree or no?
Andy
I agree!!! I can't see how ANY manufacturer is going to drop that large of an amount on a series that can't draw. I have done a cost analysis on the Falcon and it could be dirt cheap, but you are absolutely correct, they don't want it, you, or me. They want a bunch of cash heavy cows that go moo when you tell them to pay this or pay that. I believe they want ego rich,cash rich, CEO's looking for a tax write off, not racers, engine builders, chassis builders, etc. I think that is why we see no signs of anyone coming up to bat in this series. Even for them, it is a no win situation.
ReplyDeleteThat's why, if you draw the line that you and I stand on...and you draw the line that the IRL stands on...there is a vast no-mans land in between.
ReplyDeleteThe plan about inviting independent engine builders to show manufacturers what they have already developed is a plan that establishes a middle ground.
With the roundtables, the IRL attracted guys like Baretzky to talk about his GRE, or other engines which don't exist. Dynos don't speculate, they prove.
I had a conversation Monday morning with a guy you would know, and it wasn't B.U. He saw merit in the idea, and I'm hoping this isn't just another sliver of contact that amounts to nothing. But he's on the inside, and he listened.
Pretty much running out of cards otherwise. One other dude just got in touch... he started before we did (stayed 25 years longer than me), and still had a hand in the game until at least '08. Hopefully he'll have a lot of insight to add on this topic and many others discussed here. As if.
Andy
Here's a different topic, and one which is right up RP's alley and maybe John's, too.
ReplyDeleteHonda's current annual engine lease is $935K per team. That covers facilities and parts procuction, staff and tech support. They haven't done major R&D or retooling since 2006.
The new price mandated by the IRL is, in round numbers, a $300K reduction per lease. So Honda has to design and produce a new pool of engines, and will be billing $7.5M less for the privilege ($300K reduction x 25 leases).
How is that loss of profits reconciled?
Right now, Honda serves as title sponsor for the races at St. Pete, Toronto, Edmonton, Mid-Ohio and Motegi. I think that's accurate, catch me if I'm falling.
So perhaps Honda says to the IRL: "Fine, we'll cut our profit and make your price point. But don't expect us to contribute the missing $7.5M back into events to help pay your sanctioning fees." At five of the 17 races on the schedule.
$1.5M x 5 = ...uh oh, $7.5M.
Isn't that a valid concern? The dollars being recycled all have to come from somewhere, and there will be a big chunk missing once all the team owners have paid their invoices.
Andy
Solar-powered calculator
I would say that in either case....engine future or Honda dollars, "It ain't lookin pretty in Schaefer city" !!!! The GRE has merit but as you pointed out the Duratec is a buy & drive package already. Why reinvent the wheel when you already got one? I see it this way...We just have a new version of the same thing. It's called repackaging. Throw some new bells and whistles on it and call it "all new" !!! Like that is going to bring them in, huh??
ReplyDeleteoldwrench
carnival huckster
Dallara/ Honda V6? Same taste, two cylinders less filling.
ReplyDeleteSchaefer...reminds me of Pocono. And Connie Mack stadium.
Even when the Phillies changed stadiums and clothes, nobody paid to watch. Until the quality of the baseball got better.
Andy
Richie Allen fan.
Here is a home coming for you....Piels Real Draft, Schmitts of Philadelphia, Ortliebs and the mother of all Philadelphia Philles fans....Balentine!!!! The three ring beer!!! Makes you homesick doesn't it? Now that we have covered 4 defunct beers and there offerings to society,can we but Indy Car in there too?
ReplyDeleteoldwrench
professional beer taster
Wrench, this blog is as flat as a Spectrum vendor's brew. You should drop in on mine sometime, we can bore each other stooopid.
ReplyDeleteSeriously, if you have any thoughts on the specs Erikkson provided, pop in a comment. Cheers.
Andy
Clay Dalrymple baseball card owner
Milwaukee's apparently back on the schedule...announcement to be made Friday.
ReplyDeleteMilwaukee......well I can at least get a good Brat!!!
ReplyDeleteoldwrench
exceptional brat taster
And now we have an unbalanced schedule with road/street courses the majority. Where have I seen this before?
ReplyDeleteDoes this mean we are going to see another demise of a sanctioning body in the near future??
ReplyDeleteWhat's fascinating is how they backed into Milwaukee from Chicago. IRL/IICS has a major problem - fewer and fewer ovals will have them at $1.5 mil. They apparently backed off the "request" for $400k from state of Wisconsin. Look to be in a venue jam.
ReplyDeleteAnd with fewer ovals a decling fan base. I could see Road America, but Milwaukee?? With this and the new rules package, I see the end of the road in plain site. As Dandy Don Merdith said years ago....."turn out the lights the party is over."
ReplyDeleteIs this blog dead?
ReplyDeletepretty much!!!
ReplyDeleteAin't dead yet...
ReplyDeleteHey wrench, email me. Your box is dead.
ReplyDeleteThe guy dropped his price on the bird again.
Andy
blog eez faneesh'd
ReplyDeleteOui, mon ami.
ReplyDeleteHas anyone ever wondered about why we have Indycar and Mainstream racing when we know both kind of feels like mainstream in the other way? Never has this question been more apparent than in this article.
ReplyDelete--Ri of Change Rules F1 website