Saturday, June 5, 2010

Briscoe foils potential huge night for IndyCar

The Texas race was pretty good, in my opinion. There seemed to be solid action throughout the pack all night long. Penske and Ganassi did not finish 1st, 2nd, 3rd, 4th and 5th, which I had feared might occur.

Unfortunately for IndyCar, Ryan Briscoe won the race. I say unfortunately because, had Danica Patrick finished 1st rather than 2nd, IndyCar would have been the lead story on Sports Center and would have owned the front pages of sports sections throughout the United States.

Victories by Ryan Briscoe, a nice guy and a talented driver, are typically deemed to be irrelevant.

I suspect that this one shall be no different.


Friday, June 4, 2010

Who wants to Promote Edmonton IndyCar?

Having absorbed $9.2 million in financial losses in exchange for the privilege of hosting two IndyCar races at an airport, promoter Northlands apparently wants out and the City of Edmonton is seeking to cap its future losses.

Such is the glory of temporary circuits! Congratulations, Baltimore!

Props to Honest Edmonton

That said, I do want to give credit to the City of Edmonton for its candor and transparency. I doubt that any government takes great pleasure in disclosing that it will have incurred losses of more than $10 million in public funds over three years so that it could host an IndyCar race.

If Long Beach, St. Pete, Sao Paolo, Birmingham, Toronto and Baltimore were more like Edmonton, then we would have a much better grasp of the gap that exists between the cost of IndyCar racing and demand for the product in the marketplace. Yes, city streets and Barber's permanent road course are likely more cost-effective than airports. However, in each case virtually all of the costs are variable, meaning that they must be incurred every time an event is staged.

What in fact is the difference? We'll probably never know.

Credit also goes out to Pressdog for being the first to point IndyCar fans toward this article from the Edmonton Sun.

The article strongly suggests that Northlands, the public-private partnership that promotes special events in Edmonton, wants out. Given the losses, who can blame it?

The author further suggests that the City of Edmonton is willing to continue to subsidize the event at a price point of $1 million per year. The City would like to see an "independent" promoter take over the event.

What does this mean?

It means that the Edmonton Indy will survive beyond 2010 only if a promoter agrees to accept all associated financial risk beyond $1 million per year. It also means that Northlands, the existing promoter, does not believe that it can break even despite the offer of a $1 million annual government subsidy.

That Northlands does not want to continue to promote the event speaks volumes. This is particularly disturbing when one considers that Honda will transfer to the Edmonton promoter some of the economic rent that it collects by over-charging IndyCar teams for old, spec engines. The article refers to this transfer as event "sponsorship".

This does not seem to bode well for the future of the Edmonton Indy unless a greater fool can be found.

I ask that you please keep the Edmonton equation in mind when you are tempted to blame International Speedway Corporation - a for-profit, publicly traded firm that receives no direct government subsidies, when it inevitably drops additional IndyCar races.


IndyCar: Versus and National Identity

Those who have read this blog in the past know that I have no tolerance for those who blame Versus for IndyCar's cable television ratings woes.

The argument is simple. If you have a product that people want to see, then viewers will find you. Recall that it was not that long ago that a large portion of the NASCAR Cup schedule aired on The Nashville Network. The success that NASCAR enjoyed on second-tier cable demonstrated to national broadcast networks that Cup was a national sports entertainment product that was worth pursuing.

Conversely, IndyCar's poor ratings on Versus are well documented. Apologists have done what they have always done - blamed the telecaster.

A Product in Demand

Well, it seems that people indeed can find Versus if the product is something that they want to watch. I thank frequent commenter Andy Bernstein for bringing this article at Sports Media Watch to my attention.

Wednesday's Game 3 of the Stanley Cup Finals drew a 2.0 rating and 3.6 million viewers on Versus. The game between the Chicago Blackhawks and the Philadelphia Flyers was the highest rated Stanley Cup game on cable since 2002.

Some might argue that the ratings increase is due to the fact that two very popular teams happen to be playing in the Stanley Cup Finals. In my view, that argument is correct. It also supports my point concerning American drivers.

Versus is available only in the United States. Therefore, it benefits from having two popular American hockey teams playing on the sport's grandest stage. What do you think the Versus rating might have been if the Finals had included, say, the Montreal Canadiens and the Edmonton Oilers?

Facts are not always Fair

The market is telling IndyCar that the nationality of the participants matters. It provided a strong suggestion to that end in 2009, when the Indianapolis 500 had a record low eleven Americans in the field and earned its lowest rating in history on ABC. The market spoke very clearly again in 2010, when the Indianapolis 500 had nine Americans in the field, another new record low, and garnered its lowest rating in history for the second consecutive year.

The local market in Indianapolis spoke clearly on Memorial Day, when the rating for the 500 Victory Celebration dropped approximately 33% year over year. There is only one reason to watch the Victory Celebration - to listen to the drivers talk. One-third of the 2009 Victory Celebration audience determined that it was no longer interested in hearing IndyCar drivers talk.

Incidentally, a street spectacle in Baltimore will not solve this problem. In my view, each event that attracts international road racers only compounds the problem.

Argue with my opinions all you like; I welcome differing points of view. However, I do ask that you offer facts that support your conclusions.

In my view, the facts all tend to make the same statement - clearly, concisely, and loudly.


Thursday, June 3, 2010

IndyCar Engines on Second Thought

Comments from some of you have led me to rethink my initial position on the IndyCar engine spec announcement for 2012.

I confess that I know very little about the technology that makes Indy cars go. Frankly, technology for its own sake does not interest me. What does interest me - and what I believe is far more important than the spec itself - is technology's impact on three crucial marketing questions.
  1. Does it enhance on-track competition?
  2. Will it significantly reduce the cost of entry to correspond with the product's market value?
  3. Does it increase the probability of adding American drivers who might be more easily sold to U.S. motorsports consumers?
Speedgeek addressed the first point quite persuasively, in my opinion.
Personally, I could see IndyCar allowing 4-cylinder engines and/or engines that come in under 2.4 liters extra boost pressure, a larger air restrictor or extra fuel flow. They kind of left that door open in the announcement... To my mind, this relatively open spec for small displacement turbo engines has been the way to go all along for the 2012 car, and to me it sounds like they're picking the route that will spark the most interest from manufacturers and fans alike.
Citizen John addressed my second and third questions. As usual, he brought relevant facts to the discussion.
Provided they are interested in participating, Mazda is one of few marques who could answer the call for 2012 with an existing product. Their 2.0L MZR-R sports car engine, now in its fourth year of service, already uses alternative fuels... without the restrictor, reaching the stated ceiling of 700 hp would not be an issue.
And my favorite part.
While the 2010 version of an MZR-R lease agreement is still being debated, it could be similar to what MAZDASPEED offered in 2008 and 2009: a three-year lease for one engine, including all electronics and ancillaries, for $60,000 the first year, $50,000 the second and $40,000 the third. With two or three engine rebuilds added in the $35K apiece range, you still walk out the door around the $150K range each year.
The prospect warms my heart.

Therefore, I shall reserve judgment as the circumstances evolve. If Speedgeek and Citizen John are correct, then it could well be that IndyCar is effectively utilizing the 2012 spec to address its ample marketing challenges.

We can hope.


Wednesday, June 2, 2010

Honda wins IndyCar Engine Sweepstakes

Wow, that ICONIC committee sure did make quick work of determining the new engine formula for the IndyCar Series.

Make no mistake, today's announcement is a big nod in Honda's direction.

Honda was the only manufacturer that preferred a 6-cylinder motor for the new 2012 spec.

The stipulation that other manufacturers are allowed to compete with smaller engines is meaningless. Honda's monopoly is secure for the foreseeable future.

That Mr. Honda himself, Gentleman Gil de Ferran, was selected to speak for ICONIC only enhances the impression that the fix was in.

This does not bode well for Delta Wing, the only chassis proposal that did not assume that the engine choice would be the Honda V6.

So, when do we get the Dallara announcement?


Benefits of Pricing IndyCar to its Market Value

The primary mission of The Indy Idea is to discuss how IndyCar might become a viable competitor in the motorsports entertainment marketplace. At present, it is not.

IndyCar is not economically competitive because it is grossly overpriced. I initially provided quantitative evidence in support of this argument here. I further revised my analysis here and here. I further explained the ramifications of IndyCar's non-competitive market position in the second half of this post.

The relevant microeconomic assumption is that demand exists for virtually any product at some price; however, demand does not necessarily exist at any price. For example, McDonald's sells millions of Big Macs each year at a price point of approximately $2.99 apiece. How many Big Macs do you think McDonald's would sell if the price were no less than $11.96 apiece?

That is effectively the value proposition that IndyCar and its teams offer to sponsors.

If you are interested to know why sponsors such as Target and 7-Eleven are willing to take that deal, you will find answers here. Unfortunately, firms of that particular type are too few in number to sufficiently finance the IndyCar Series.

Incidentally, this is a marketing exercise. Think of it as having to do with the 2nd "P" of marketing - Price.

IndyCar "As If"

Let us assume that IndyCar might somehow price its product to correspond to its market value. That would necessarily mean that operating a competitive IndyCar team for the entire season must cost no more than $1 million.

Setting aside exactly how we might accomplish this objective, let us examine the potential benefits so that we might accurately judge whether or not the resulting pain would be worth it.

The following list is by no means comprehensive. The benefits are merely top of mind effects that would be the logical economic results of pricing IndyCar racing to match its market value.

  • Teams attract sponsors because sponsorship is correctly priced

  • IndyCar attracts sponsors at the series level because sponsorship is correctly priced

  • TEAM subsidy payments can be cut because teams have fewer costs and more sponsors

  • Some savings from reduced TEAM subsidies can be used to promote IndyCar

  • Team and series sponsors can increase activation and promotion budgets because the cost of entry is reduced

  • IndyCar can reduce its required sanction fee because it no longer must subsidize teams

  • Profits to race promoters increase because the sanction fee is reduced

  • Race promoters can reinvest some of those profits to increase promotion of IndyCar events

  • Demand for IndyCar races increases among race promoters and tracks because IndyCar events are profitable

  • IndyCar selects new events according to strategy rather than necessity because it has a broad selection of available venues

  • Team owners can hire drivers based on talent and marketability because correctly priced sponsorship is available

  • The ladder system begins to work because the top rung is available to drivers who demonstrate that they are talented and marketable

  • Ride buyers continue to exist; the only difference is that there are more of them because rides are cheaper to buy

  • Field sizes therefore increase

  • Drivers who fail to qualify are not excluded for the remainder of the season because their sponsorship packages are correctly priced for a full season; financial risk to sponsors is reduced

  • On-track competition is enhanced because the entry list grows

Pie in the Sky or Something to Try?

Those effects seem pretty desirable to me.

That said, we must consider how IndyCar might devise a product that allows teams to sell primary sponsorship at its true market value. The cost of entry would need to be no more than 25% of the current price.

It can be done, albeit painfully.

Therefore, I ask for your help. I am looking for ideas both big and small that will drastically cut operating costs.

I am not looking for reasons why it can not or should not be done. Don't tell me why I should pay $11.96 for a Big Mac. I don't care how much you like Big Macs. You'll never convince me that I should pay more than $2.99 for it.


Tuesday, June 1, 2010

2010 Indy 500 gets Record Low Overnight TV Rating

This should not be a surprise to anyone.

Digital Sports Daily is reporting that the 2010 Indianapolis 500 earned the worst national overnight rating in the event's history. The source is new to me, but I believe the number to be credible.

NOTE: SportsBusiness Daily has now confirmed the 4.0 overnight number.

Thus, a racing product that is not designed to attract a large American television audience has again failed to attract a large American television audience.

DSD claims that an ABC source indicated that the overnight composite number is a 4.0. That is down 4.76% from the record low of 4.2 that was set last year.

That number is also less than the NASCAR Cup average on Fox (4.9) this year.

The overnight rating reflects viewership in the nation's largest, "metered" television markets. We should anticipate a downward revision when the smaller markets check in and the final rating is released.

Apparently, the IZOD IndyCar iteration of a U.S. based international road racing series is heading toward the same fate that greeted the previous permutations: CanAm, CART, and ChampCar. Mergification has generated worse television ratings than The Split.

Promotion of the event and its drivers was up this year. IZOD did a fine job holding up its end of the bargain. Promotion is not the principal marketing problem that imperils the IndyCar Series.

No, the core difficulty is that most Americans who are willing to watch racing on TV are not willing to watch an international road racing series on TV, not even when it races at the world's most celebrated oval. Promoting these drivers and these cars will not generate the desired results.

Randy Bernard, your suppliers of racing teams are gradually devaluing the one marketable asset that remains in your purview. How to stop the negative feedback loop? Here's one idea.

The Revolution is eating its children. The guillotine blade draws nearer with each "successful" government-subsidized event and every new Piloti-shod financier.

Additional Ratings Info (5:06 p.m.)

Sports Media Watch is reporting that the top market for the 500 was - surprise, surprise - Indianapolis. So, where else does IndyCar racing have some fans?
  • Dayton, OH - 9.3
  • Louisville, KY - 8.4
  • Fort Myers/Naples, FL - 8.4
  • Orlando, FL - 7.2

Notice that those nascent urban racing markets that IndyCar appears to be pursuing are not at the top of the list.


Mainstream Media: Where are Indy's Americans?

These pages were supposed to serve as a warning to IndyCar Management.

American drivers are a necessity if IndyCar racing is to experience legitimate growth in its home market.

American competitors are essential if the crowd at the 2014 Indy 500 is to include more people than attended the United States Grand Prix.

American racers are also necessary - if not sufficient - to increase national television ratings, which are now worse than they were at any time during the split.

This story is now beginning to dominate IndyCar coverage in the mainstream media. Randy Bernard and his charges will not be able to control it. It's an easy and convenient story to write because it requires zero knowledge that can't be attained with a brief perusal of the entry list. It also happens to be true.

Fox News has enjoyed taking pot shots at IndyCar over the past few years. This makes sense because Fox has a lot of money invested in NASCAR.

Here's the latest from the "We Report, You Decide" network.

Impressions Outside IndyCar (where they matter most)

Alas, Rupert Murdoch's minions are not alone.

The USA Today version of the same story can be found here. Among other things, the writer suggests that the Indianapolis 500 has become the French Open. That's a good line.

These stories mirror the one that was penned for Sports Illustrated last week by Tim Tuttle, an established motorsports writer who has tended to be kind to IndyCar and the IMS.

The same point is echoed in this story from the Quad City Times.

Something called The Daily Caller weighs in with this offering.

I become physically ill when I read stories like these not because they are wrong, but rather because they have it mostly right.

Once again, good luck to you, Randy Bernard. Tony George never was able to move the mainstream media needle away from the Story of The Split. The story that you must either solve or change is that of The Dwindling American Relevance of the Indianapolis 500.

You are not envied here, Mr. Bernard.

That said, I will suggest that having IndyCar drivers spend considerable time extolling the virtues of Brazilian Sugar Cane Ethanol is probably not going to help very much.

Further development of the "ladder system" is also a waste of time so long as the cost of fielding an IndyCar entry exceeds the value that a team can offer to potential sponsors. Want proof?
  • J.R. Hildebrand
  • Jonathan Summerton
  • Robbie Pecorari

Another Solution that Solves Nothing

Chip Ganassi Racing's Mike Hull is a bright guy who often suggests possible solutions. This is ultimately a good thing for which he should be commended. However, Hull is not a marketing guy. Perhaps that is why he believes that additional manufacturer participation is a big part of the solution.

This is simply wrong. Manufacturer competition will not bring fans back. The stars of the show are the drivers. They must be changed. The Piloti-shod financiers must be expelled. They must be replaced by drivers that auto racing fans in the United States want to watch. That will require drastic cost reductions.

Manufacturers will finance teams; that's why team owners and managers like them. But manufacturers will do nothing to attract U.S. fans and television viewers. Want proof?
  • Hideki Mutoh
  • Kosuke Matsuura
  • Twin Ring Motegi
These are strings that were attached to manufacturer money.

Want more proof that manufacturers are not The Answer? Notice the trend in IRL network television ratings when Honda and Toyota joined the series in 2003. Manufacturers offer financing. They do not attract fans.

That said, I believe that Hull is right about many things. Among them is his claim that fans want more diversity in the cars and engines. However, manufacturers are not necessary in order to accomplish the task. IndyCar's salad days were dominated by privateers. Innovation was a grassroots phenomenon. It can be again.

Who knows? Today's IndyCar teams and their suppliers might even develop technology that they can sell to manufacturers. Perhaps the league could develop an Intellectual Property Co-Op for that purpose.

There are many possibilities. Let us hope that Randy Bernard, Brian Barnhart, Mike Hull, Eddie Gossage, and the other smart people in power examine them all and choose wisely.


Monday, May 31, 2010

Impressions from the 2010 Indianapolis 500

I awoke from a lengthy slumber this afternoon after driving 1,165.4 miles round-trip so that I could watch my 33rd consecutive Indianapolis 500 Mile Race in person. Once again, it was worth it.

I have long believed that the Indianapolis Motor Speedway is one of the world's premier managers of facilities and large-scale sporting events. This, too, was confirmed with the 94th running of the Memorial Day Classic.

Congratulations to Mari Hulman George, the IMS Board of Directors, and IMS CEO Jeff Belskus and his entire team. Whatever you might think of him - and I like him, by the way - Tony George also deserves credit. The facility has never looked better. Yes, he spent a lot of money, but he also did an outstanding job upgrading and maintaining the Speedway.


The race was good but not great. In my opinion, it was more interesting than the 2009 version. The following facts, observations and opinions are listed in no particular order. They represent something of a data dump from my very tired cerebellum.

Your mileage may vary. In fact, I encourage you to submit your impressions in the comments section below.

  • The right driver won. Yes, Dario Franchitti might have benefited from the final yellow, but that is only because he was put in a precarious position by the previous yellow. Dario had the field covered all day long - no small task in contemporary IndyCar racing. Franchitti's win in 2007 might have been a fluke. This one most certainly was not.
  • Davey Hamilton is probably right. Tomas Scheckter is likely an idiot and a knucklehead. However, because I am a fan and not a driver, I love to watch Scheckter drive. The man drives with reckless abandon from the drop of the green flag. He is an old-style charger. His lack of patience has probably cost him more than a few potential victories, but he is worth the price of admission.
  • Speaking of admission prices, I bought a $90 ticket in E Stand (1st turn apex) for $60. I had plenty of wiggle room because the two seats next to me were unoccupied. While I appreciated the unanticipated level of comfort, I think it is safe to say that the series has much work to do with regards to increasing demand for the racing product.
  • The Moment of Silence in honor of those who lost their lives so that we might live free is always one of my favorite parts of the opening ceremonies. Unfortunately, I did not know when it occurred due to inexcusable technical problems. I also missed the first stanza of Taps, another one of my favorites, for the same reason. And I really felt sorry for Jewel, who reportedly had worked very hard in preparation for singing the National Anthem, who had to suffer through a malfunctioning microphone. I can attest that there is no worse feeling. Kudos to her for bravely sticking it out.
  • The transition to the recorded video segment in honor of Memorial Day does not work. It's an unnecessary road block in an otherwise moving ceremony. Please get rid of it. The speeches, songs and invocation have much more impact and should not be interrupted once they begin.
  • Track announcer Dave Calabro unintentionally caused multiple additional moments of silence at Sunday's race. These occurred during driver introductions, when he uttered the names Sebastian Saavedra, Takuma Sato, Mario Romancini, Bertrand Baguette, E.J. Viso, Hideki Mutoh and too many others.
  • Which team has the most fans? From the looks of the apparel at the race, it's clearly Andretti Autosport. Tony Kanaan is a Brazilian who has a very American story, and it shows. He has clearly established a fan base. Danica has fans, albeit fewer than she had when the month began. Still, it is clear that young ladies identify with her. Marco Andretti gear seemed to adorn lots of teenage boys and young men, many of whom undoubtedly would like to party with Marco and his entourage of attractive young women. I also noticed a lot of Ryan Hunter-Reay 37 IZOD gear, which was good to see. John Andretti received one of the loudest ovations in driver introductions. There is value in having LOCAL favorites in competition. This is true not only at Indy but also at every race in the series.
  • IZOD's sponsorship activation efforts were very good. The sponsor is definitely getting its money's worth. Given the product that it offers to fans, the series appears to be getting its money's worth, as well.
  • There are rumors of a possible team owners' revolt if Delta Wing is not selected to be the next generation of Indy car. Some believe that the fix is in for Dallara and that the ICONIC machinations are just for show. In my view, this is the Big Story of the summer in IndyCar.
  • Randy Bernard has made friends and earned respect for his willingness to listen and return phone calls. That might sound like small potatoes, but it should not be underestimated.
  • If Brian Barnhart wants Dallara or another manufacturer and the team owners want Delta Wing, then Randy Bernard is about to be significantly tested for the first time in his tenure. Good luck, Randy.
  • The existential question is making the rounds of the IRL administrative offices, the garage area and the media room. Specifically, people are asking one another, "Why does the IRL exist? What is it? What is its purpose? Is it a sanctioning body? Is it a marketing company? Is it (should it be) an event promoter?" These are good questions to ask. I'm glad that those in power are asking them. I will be interested to hear their answers in the coming months.
Again, I invite you to submit your impressions in the comments section. I will respond as frequently as possible.