Thursday, June 10, 2010

Texas IndyCar Price & Market Value

Thanks to multiple contributors who brought the latest IndyCar television ratings data to my attention.

You know who you are.

According to Sports Media Watch, the Firestone 550K on Versus attracted 518,000 viewers. The same race in 2009 drew 467,000 viewers. Any increase is good news for the series. Adding 11% year over year is solid.

These numbers give us an opportunity to value the returns to IndyCar team sponsors that are attributable to participation in the Texas race.


We begin with our quantifiable benchmark, namely the value of sponsoring a full-time championship caliber NASCAR Cup car in 2010. As we have said, published reports and our own revisions indicate that such a team could anticipate generating approximately $18.649 million per year in sponsorship revenue.

We assume that the primary driver of sponsorship value is television ratings. Supply chain derivatives and arbitraging activities that have nothing to do with the value of the racing product are excluded from our analysis. Subsidies that are paid to teams by drivers and the league are also excluded.

The 36 NASCAR Cup events in 2009 combined to attract approximately 236,720,000 TV viewers in the United States.

$18,649,062 / 236,720,000 viewers = $0.078781098838767

Therefore, the sponsors of a typical championship caliber NASCAR Cup team pay a bit less than $0.08 per U.S. television viewer. Therefore, that number (not rounded) is the market price that sponsors can be expected to pay.

Firestone 550K: the Valuation

I remind you that the IndyCar race at Texas attracted 518,000 U.S. television viewers.

Thus, the valuation equation:

518,000 viewers * $0.078781098838767 = $40,808.61

The Texas race was worth $40,809 in advertising value to sponsors such as Penske, and Target.

Return to the Benchmark

So, how did NASCAR Cup compare? Let's take a look.

Sports Media Watch notes that the Gillette Fusion ProGlide 500 at Pocono drew its worst rating since 2007. However, it still managed to draw 5.3 million U.S. television viewers on TNT.

5,300,000 viewers * $0.078781098838767 = $417,540

Therefore, the NASCAR Cup race at Pocono was worth $417,540 in promotional value to sponsors of the top teams.

The Meaning of Market Competition

Notice that the value that accrues to sponsors can be quantified. Econometrics are far more sophisticated than anything that I have noted here, but the point is the same.

This is why I am very concerned about returning to the CART model. Yes, CART event promoters did very well. Temporary circuits tend to be very good for promoters.

However, CART was fortunate that it did not have an established market competitor that was worth nearly 10x its value every time it put a product on the track.

In addition, tobacco companies that provided ample funding to CART and many of its teams and drivers are now gone. Those firms did not care about ratings - they advertised in CART because it was the only way that they could promote their products on television.

Those funding sources are gone forever.

Sponsorship of a top team in the Texas IndyCar race is now worth approximately 9.77% of sponsorship of a top team in the NASCAR Pocono race. Even if IndyCar were to quadruple its rating, its teams would still need to sell sponsorship at a price that is more than 60% cheaper than the price of NASCAR team sponsorship in order to be competitive in the marketplace.


Wednesday, June 9, 2010

Oh, no! Boring Belle Isle might be coming Back!

Detroit's Belle Isle is IndyCar racing's Rasputin. There are many reasons to hate it. Unfortunately, it is virtually impossible to kill it.

According to Paddock Talk, the annual parade through Belle Isle could return to the IndyCar schedule in 2011. Roger Penske would be the promoter once again.

Meanwhile, Indy 500 Champion Dario Franchitti is lobbying to have an IndyCar race through New York's Central Park. That might actually be pretty cool.

Nevertheless, for better or worse, the parade toward a primarily road and street racing series remains unabated.


Monday, June 7, 2010

NASCAR fans... just like IndyCar fans

According to Sports Media Watch, NASCAR just concluded its worst-rated season on FOX... again.

Read the entire story here.

Please note the comments section following the SMW story.

What are NASCAR fans doing? They're blaming the television partner!

Granted, IndyCar would love to have NASCAR's problems right about now. Let's hope that Randy Bernard and ICONIC figure out a way to take advantage when NASCAR Cup sponsorship valuations are adjusted downward.

I have discussed that very proposition here.


Sunday, June 6, 2010

MLS likes IndyCar Cable TV Partner

IndyCar insiders have blamed Versus for the series' poor cable television ratings. However, another niche sport in the United States apparently believes that Versus might just provide the key that will unlock future growth.

According to Broadcasting & Cable, Major League Soccer has initiated preliminary discussions that might lead to a deal with Versus. MLS is apparently impressed with the way that Versus has promoted and increased ratings for the National Hockey League. The package that is the subject of current negotiations airs presently on Fox Soccer Channel.

Major League Soccer is one of few properties that draws fewer U.S. cable viewers than IndyCar. According to Sports Media Watch, the MLS on ESPN2 drew an average of 290,000 viewers per game in 2009. This year's season-opener on ESPN2 drew 285,000 viewers, down 14% from last season.

Some sports that are very popular globally simply do not attract a large audience in the United States.

For proof, we need look no farther than the ManU/Chelsea Premier League match that attracted a whopping 526,000 viewers on ESPN2, a new Premier League record in the United States. That number is in the same ballpark with IndyCar races on Versus.

Culture Matters

In the United States, soccer is a game that is played primarily by suburban school children. In many other nations, the game is both a deep-rooted passion and a very serious business.

Similarly, road and street racing in the United States tends to be great fun for a small niche that likes that sort of thing - the exception being NASCAR Cup at Watkins Glen and Sonoma, the two most popular road races in the United States. Globally, that particular brand of racing is widely considered to be the ultimate test of man and machine.

No racing series can change an entire national culture. Apparently, neither can a professional soccer league. The difference is that racing costs much, much more than soccer. That is why it requires a much larger audience.

MLS might be profitable with an audience of approximately 300,000 U.S. TV viewers. IndyCar enjoys no such luxury.