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, GoDaddy.com 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.