IndyCar: See the Future!

I go back and forth on the "innovation" question as it pertains to IndyCar racing. Yes, innovation was a great selling point for racing for nearly a century. However, as the author of this story in Slate writes, innovation in those days had everything to do with top-end speed.

That is not the case today.

Again, I point you in the direction of the column in Slate in which Edison2 is discussed.

Former racers Ron Mathis, Kevin Doran, and Brad Jaeger (Indy Lights) are managers for this very ambitious company located in Lynchburg, Virginia.

The Edison2 also provides a nice tie-in with IndyCar because it runs on E85 Ethanol. According to the company, the 750-pound Edison2 has demonstrated that it can get 101 mpg. That won't help APEX Brasil and UNICA sell ethanol, but it might just give IndyCar racing something interesting to promote.

Might we some day see the 5-gallon Indianapolis 500?

Roggespierre

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.

Roggespierre

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?

Roggespierre

Two IRL Advisory Board Reps Revealed

This might be old news to some, but at least half of it is good news in my opinion.

The Republic has learned that the IRL Chassis Advisory Board - we shall avoid calling it the Looney Board - has at least two members signed, sealed and delivered.

The first is Eddie Gossage, President of Bruton Smith's Texas Motor Speedway. This makes perfect sense, not just because I suggested that either Smith or his emissary should be offered the race promoter's seat on the board, but also because TMS pays by far the steepest sanction fee of any race track or temporary circuit in the IndyCar Series.

That Gossage accepted IRL President Randy Bernard's offer is seen as nothing but good news in these quarters. Gossage sells tickets and corporate sponsorships more ably than any race promoter in North America. The IRL event at Texas continues to draw more race fans than any other IndyCar event, including those that enjoy millions in public subsidies.

You can like his tactics or not, but you must admit that Gossage is good at his job. Let's hope that those who want to turn IndyCar into the kind of series that has failed repeatedly in the U.S. marketplace will be willing to listen to someone who forgets more about marketing every day than they'll ever know.


The second appointment is more curious. I am a fan of Gentleman Gil de Ferran. He was an outstanding technical racing driver and a magnanimous Indianapolis 500 Champion.

The oddity is not that de Ferran was selected for a leadership role. He is a business-minded, intelligent man whose cool temperament will be appreciated by other members of the Advisory Board.

No, the strange thing is that de Ferran, the newly named president and managing partner of Luczo Dragon Racing, was chosen to represent the car owners. Because he is a "partner" in his racing team, we can assume that de Ferran is in fact a car owner. But we're left to wonder why his contemporaries selected one of the IRL's least experienced owners to represent them.

To that end, I have a theory, as you might have imagined.

Several IRL car owners are aligned with the various would-be chassis suppliers. Gil likely has no such conflict of interest. Perhaps even more important, he was not perceived to have had a conflict. In cases such as these, appearances are often at least as important as facts.

As a fan, I appreciate that de Ferran does not carry the baggage that some of his more seasoned IndyCar team owners must carry around. Is that sufficient to make up for inexperience?

My guess is that, given de Ferran's understated, cosmopolitan demeanor, yes, it probably is.

Best of luck to both men. The future of a once-great sport depends on them.

Roggespierre

IRL Advisory Board: Who and Why

Let's assess the composition of the advisory committee that will recommend a new IndyCar chassis to IRL CEO Randy Bernard.

Thanks to this article in the Indianapolis Star, we know that the board will include the following.

1. Retired Air Force General William Looney (Chairman)
2. An undetermined league representative to be chosen by Bernard
3. An IRL team owner to be selected by his peers
4. A marketer/promoter to be picked by Bernard
5. A race engineer

The list has the makings of a good start for the following reasons.

• Looney's job is to ensure that all factions are heard.
• Team owners are rightly included because new equipment will require significant capital investment on their part.
• We shall assume that "marketer/promoter" means "race promoter", one who assumes the financial risk associated with operating an IndyCar event. Certainly this is a constituency that must be given ample consideration.
• Engineering consultation is essential because the car must be safe, fast and functionally efficient. We should also hope that this particular engineer is adept at cost analysis.

What's Missing?

In my opinion, the committee still lacks the comprehensive expertise that will be required to fulfill the formidable business objectives that the IRL needs to achieve with its new car project.

First, why are the broadcast partners not represented? Increasing television ratings is by far the fastest way to increase revenue to the league and its promoters, teams and vendors. The new car should be ideally suited to accommodate slick production in High Definition. To not include a representative of either Versus or ESPN/ABC would seem to be a rather significant oversight.

Second, a marketing consultant should be added to the committee. The league should be able to find plenty of them at Indiana University's nationally ranked Kelley School of Business. Happily, that particular institution just so happens to specialize in sports media and marketing!

At Kelley, the IRL will find plenty of highly qualified, experienced marketing experts who might offer analysis such as that which is found here, here, here, here and here. One need not be a pseudonymous blogger to know this stuff.

Third, I believe that including the right kind of "marketer/promoter" is crucial. I would not include one who benefits from financial backstops provided by municipal and state governments. That would mean, for example, that the Edmonton and Barber promoters are out.

My pick would be Bruton Smith, or at least an emissary of Bruton Smith. Speedway Motorsports has been a loyal customer of the IRL for more than a decade. It promotes events at multiple locations, including ovals and a road course. More important, it is a for-profit corporation that does not benefit from direct government subsidies. In other words, Bruton and his firm require a genuinely profitable product, one that attracts lots of fans and corporate advertising dollars. His inclusion in this process is essential.

Finally, I am curious to learn who the "league representative" shall be. I can only hope that it is someone who can anticipate being held accountable for successfully marketing the end product.

Roggespierre

IndyCar: The Task at Hand

It is impossible to overstate the importance of the advisory board that will select a new IndyCar chassis and/or concept to IRL Chief Executive Randy Bernard. A primer that outlines the group's mission was provided this week by Curt Cavin of the Indianapolis Star.

I suggest that you read Cavin's article carefully before you continue reading the analysis here.

The following quote from Bernard's chosen board leader, Retired Air Force General William Looney, is cause for some measure of concern.

"(Bernard) wants to make decisions in an open process with criteria that
comes up with the right answer for everybody, not just one particular interest
group."

I commend Bernard for providing an open process. However, the devil, as they say, is in the details. That is where market success and market failure are determined.

It seems that Looney is describing a political process. In my view, that would be a mistake. Selecting a new chassis is a marketing activity. Ultimately, the "right answer for everybody" is the most cost effective solution that enables IndyCar to attract the greatest possible number of paying spectators and television viewers, as well as corporate dollars that tend to be driven by fan participation.

Therefore, the process of selecting a new chassis should not be about balancing and appeasing established constituencies, but rather it must be about growing the sport in a highly competitive marketplace. That requires establishing and delivering a defined set of core benefits to IndyCar's end users - fans.

I shall have more to say about this matter in the near future.

Roggespierre

Bernard Selects a Real Leader

New IndyCar czar Randy Bernard obviously sought and found an experienced leader to head the advisory panel that will recommend the next generation of specs for the IZOD IndyCar Series.

According to the Indianapolis Star, the job will go to Retired Air Force General William R. Looney III. This is a man who has achieved much. I am therefore encouraged by his appointment. Congratulations, Mr. Bernard!

I trust that the general will effectively keep factional interests at bay throughout the selection process. That is, after all, much of the battle.

General Looney - here's hoping that you deem significant cost reduction and control to be Jobs 1A and 1B. Drivers are for driving, not financing!

The Citizens solute you and wish you well.

Roggespierre

Barnhart Serious about 3-wheeled IndyCar?

Few seemed to notice when Roger Penske said that IRL Operations Division President Brian Barnhart was considering adopting a three-wheeled machine as the new IndyCar spec for 2012. I have since heard from more than one credible source that Barnhart is in fact serious about the idea.

Barnhart told Dave Lewandowski of IndyCar.com that one of two specs under consideration, "...is so radically different it will entail significantly more in terms of R&D, cost and time. It's kind of out there."

Apparently, three-wheeled racers are not a new idea. Who knew they race ovals (clockwise) in England? That might go a long way toward reinvigorating short track racing, but it hardly seems appropriate for the World's Greatest Race Course.




Something like a modified Volkswagen GX3 (photo at right) might be appropriately artful. Landing the resurgent German automaker would certainly be a feather in the caps of Barnhart and Terry Angstadt. Manufacturers do seem to be considering adding 3-wheelers to their product lines.




Frankly, I would prefer a 3-wheeler to this uninspired puffball that was served up by Honda.


So Crazy that it just might...

When I first heard that Barnhart was thinking about a 3-wheeler, I was appalled. But I must admit that the more I think about it, the more I warm to the idea. For the sake of argument, let's assume the following.

1. Safety is comparable to that of the present cars
   
2. Teams will be responsible for manufacturing a significant portion of the car
3. The supply chain will be allowed to evolve from below rather than being dictated from above
4. Manufacturers will not be granted concessions that add inefficiencies to the supply chain
   
5. The 3-wheeler will cost less because fewer parts (and tires) must be replaced
6. It will pose a greater challenge to IndyCar drivers
7. A small team can run the entire season for $2.5 million or less
   

In my view, these objectives are fundamental and essential. If they are satisfied, then my concerns diminish considerably. We know that IndyCar teams do not generate $2.5 million in promotional value per season. But the present, uninteresting spec is central to the equation.

IndyCar Shock Therapy

A 3-wheeler would, at the very least, provide some shock therapy. Does it border on gimmickry? Probably, but even that might not be such a bad thing. The wow factor would likely increase television tune-in viewership for a period of time. Recall that each additional television viewer generates $0.09 of additional promotional inventory that each team can sell to sponsors. If IndyCar were to have its economics under control, then it might be able to convert the short-term bump into long-term vitality.

A 3-wheeler might also solve an additional problem. It is no secret that a large majority of racing drivers in the United States cut their teeth in series that feature front engine, tube frame cars that race primarily on oval tracks. Alternatively, racers from most other countries graduate from go-karts to lower level single-seaters that race almost exclusively on road courses.

I know of no country where drivers work their way through the ranks driving 3-wheeled cars on circuits of any type. Might this be the middle ground that IndyCar so desperately needs? Might it appeal to not only those who clamor for technology, but also those who want to tear off the wings? Is it possible that racing nirvana is within reach?

Approving of a 3-wheeled IndyCar is something that I normally would have expected to do on the same day that I purchase my first Bette Midler album. But these are not normal times for IndyCar racing. I am beginning to sense the wind beneath my wings.

Roggespierre

John Menard: IndyCar Power Broker

**NOTICE: Please see the comments below this article for alternatives to Dallara chassis monopoly. - Roggespierre**

Forbes estimates that John Menard possesses a personal fortune that is equal to that of Rupert Murdoch. Operating in an age that rewards financial engineering and economic rent-seeking more than fundamental value creation, Menard has built his business the old fashioned way. I respect him for it.

It is therefore ironic that the future of the Indy Racing League might depend on the home improvement magnate agreeing to become its financier. Tony George has indicated that Menard is interested in building and selling IndyCar engines. I do not claim to have inside knowledge, but I do suspect that the IRL would like to have Menard assume a different and, one could argue, more important role.

Series Sponsorship: Not a good Fit

Rumors have circulated that Menards stores might become the new title sponsor of the IndyCar Series. Curt Cavin of the Indianapolis Star reported this week that there has been nothing in the way of confirmation.

Examination of Menards' retail locations leads me to question why John Menard would have any interest in title sponsorship. Menard has nothing to gain from advertising at Long Beach, Sonoma, St. Petersburg, Texas, and Birmingham, let alone Toronto, Edmonton, Japan and Brazil. That is why I believe that the league has something altogether different in mind.

Menard as Financier

The IRL plans to introduce a new equipment package in 2012. Although some prefer to focus on technical characteristics, I believe that economics must be the primary consideration. Technical capabilities simply do not matter if the teams can not afford to operate.

Let's use chassis suppliers as our example. Firms such as Dallara, Lola and Dome are not going to begin development of a new IndyCar spec unless they receive a good chunk of cash upfront. Unfortunately, most IndyCar teams are not capable of providing the necessary capital outlay all at once. Therefore, a financial intermediary is required.

In the past, the Indianapolis Motor Speedway occupied that role. It co-signed on behalf of teams that sought loans from National City Bank so that cash payments for new equipment could be distributed over time. However, now that the IMS has exited the business of underwriting the IRL, a new intermediary must be found. I believe that the IRL would very much like to have John Menard accept that role.

Menard is one of few who has sufficient liquidity available to bear the cost of developing a new chassis. Underwriting the project would, of course, require that Menard accept the financial risk associated with non-payment. Each IndyCar team that fails to make good on its promise to pay for new equipment would cause Menard to incur a cash loss. This risk must be offset.

Therefore, Menard would also become the exclusive distributor of the new chassis. In effect, he would act as automaker and car dealer, financing the cost of development, purchasing the new cars from Dallara or whomever, and then selling them to IndyCar teams. Like any car dealer, Menard should be expected to add a retail mark-up. He is entitled to this because he accepted the risk of non-payment.

The Arbiter's Advantage

If John Menard were to accept the roles of underwriter and distributor, then he would also acquire tremendous bargaining power to influence IRL management. He who spends the money has the power; in this case, there is no new chassis unless Menard spends a lot.

John Menard happens to be a fan of IndyCar racing, a fact that warms the soul. I hope that Menard accepts the dual roles of underwriter and distributor. Equally important, I hope that he leverages his bargaining power to force IRL management to build an IndyCar Series that might succeed economically.

What are the conditions that Menard would do well to require?

1. An oval-based U.S. racing series that occasionally ventures into road and street racing because:
2. Ovals will attract U.S. drivers and, therefore, U.S. fans, which will allow for:
3. Increased sponsor participation in IndyCar, which will ensure that:
4. Teams have sufficient capital to make good on their promissory notes with Menard.

In addition, I suggest that the chassis retail for less than $200,000. Each additional dollar will only increase the risk of non-payment and delinquency. If $200k does not seem like enough, well, then that's too bad. NASCAR (sans-culottes!) Cup chassis cost less. Teams in that series have earned the right to spend more. IndyCar teams have not.

Hope for Dopes

John Menard has many tools at his disposal (sorry). He could save IndyCar racing from itself. The job will require not only lots of cash, but also ample resolve to engage in tough love. The IRL needs somebody like Menard much more than Menard needs the IRL.

Menard has earned a reputation for beating up his suppliers pretty badly at times. That is, after all, how low cost positioning is established and maintained in the retail industry. Let's hope he's ready to beat up some more.

He might be the last, best hope for IndyCar racing.

Roggespierre

Is this the new Indy Car? If so, then Why?

Could this be the next Indy car? Sources have informed the Committee of Public Safety that the model pictured above is getting serious consideration. The IRL is expected to announce new technical specs for the 2012 IndyCar Season.

What would this car allow the series to accomplish? How would it improve the strategic positioning of IndyCar? We must drill down to get the answers. That's why we're here.

Identifying the Job

We adopt a test first published by Harvard Business School Professor Clayton Christensen. The author of The Innovator's Dilemma and other worthy titles suggests that, when considering product development as a function of marketing, the correct question to ask is this.

• What are the jobs that the customers are trying to get done?

Three Dimensions of Marketing & Product Development

Christensen argues that each "job" people want to do has three dimensions: social, functional and emotional. IndyCar racing has traditionally focused on the functional aspect, staging motorsports events to entertain fans.

But citizens of Indianapolis know that the city has long been emotionally invested in the Indy 500 - many locals care about racing just one month per year. Apparently, citizens of Edmonton can relate, as well. Events that confirm the communities we live in are "somewhere" can take on momentum and endure hardship that other events can not. That's one reason why Baltimore is a lousy idea. If you have to street race, then we reiterate that Bridgeport, Connecticut, a stinking pile of urban blight in an otherwise privileged area, is the place to do it.

The social dimension has always been difficult for IndyCar racing. Following World War II, the Indianapolis 500 drew a multi-tiered audience that would not occupy the same place at the same time under normal circumstances. The elite could be found in the pits, garage area, hospitality tents, and suites. Families shared the main grandstands with hard-core fans. Partiers took over the infield, creating a subhuman cesspool that provided more entertainment than the race in some years.

Danton argues that the social dimension was critical to NASCAR's economic rise. Feeding on the subculture of the former Confederacy, NASCAR became a blue collar, sociologically based phenomenon that overwhelmed the motorsports marketplace in the United States. But it is not given that NASCAR's homogeneity will always provide a competitive advantage in the marketplace.

When Roggespierre attended his first Indianapolis 500 in 1978, it looked like a NASCAR race. The starting field was composed of 31 drivers born in the United States, naturalized U.S. citizen Mario Andretti and Canadian Cliff Hucul. We do not advocate a return to those days. However, a healthy base of competitive U.S. drivers would be helpful in making the Indianapolis 500 economically competitive.

Danton thinks the car in the photo looks a bit video-gamish. We're guessing that somebody told the IRL that its age demographics suck, and that young people like video games. These are facts. But the solution isn't that simple. Kids who like video games tend to get that particular job done by playing video games and not by watching IndyCar races.

Give the parents a product they want to see, don't blow junior's eardrums to smithereens, and you'll get the kids. Every other child in Middle America owned some article of Jeff Gordon merchandise in the late 1990s. His car looked like a Chevy Lumina. How many kids became fans because they liked the Lumina on the NASCAR video game? Cart, meet horse. Did Jeff Gordon make the kids NASCAR fans or did NASCAR make them Jeff Gordon fans? Now that's a question worth asking.

One way to nudge U.S. drivers toward IndyCar is to focus (not necessarily exclusively) on oval racing, a uniquely American form of the sport. Another is to reduce costs to allow the underlying economics of team participation to make sense. How much would the IRL have to slash expenses? Optimally, the cost of fielding a championship-caliber, one-car effort for the 17-race season should be approximately $1.3 million. That number is probably shocking to the present IndyCar teams, but so what? That's the value of the product they and the IRL offer in the competitive marketplace. The number would increase proportionately with television ratings and ticket sales.

So, the question becomes: would the chassis pictured above allow teams to compete for the IndyCar Championship at a cost of $1.3 million per season? If the answer is no and the projected per-season cost is nowhere near that amount, then why incur the initial capital outlay? The new car might or might not improve on-track competition, a probability that makes performance a less than compelling reason to switch cars. Conversely, the new car absolutely should increase the competition to qualify for the Indianapolis 500 - something that must happen if the Month of May in Indianapolis is to feel important enough (the emotional aspect) to attract fans on more than two days.

Another question: will this car require that teams contribute significantly its manufacture? This is absolutely necessary. IndyCar teams must recapture some of their present expenditures. Currently, virtually all racing-related expenditures flow in one direction: out of the series. Teams are happy to outsource these services so long as the IMS or somebody else subsidizes them. But that, too, must end.

So, will production of the new cars require that IndyCar teams do something more than assemble them? If the answer is no, then why do it? How does this change the consumer-competitor culture of IndyCar Racing? How does it establish new revenue streams that teams can count on when times get tough? How does it resolve the problem of monopolistic vendors? How will it enable the IndyCar Series to remain competitive when Apex Brasil determines that its stretegic objectives have been achieved? How does it differentiate IndyCar from NASCAR, where all cars look the same?

Citizens can probably tell that we are not optimistic about the new IndyCar spec. We would like to see the league 1) mandate a tub or driver compartment for driver safety, 2) publish a schedule of design constraints, and 3) let the teams and their smart engineers figure out the rest. We would like to see aero tunnels banned. We would like to see sphincter-wrenching qualifying runs at Indy again. We would like to see cars that are a little bit scary, the way race cars should be!

IRL Management: what are the jobs that your customers (ticket buyers and tv viewers, race promoters, league sponsors, broadcast partners) are trying to get done? Figure it out and help them do it!

Roggespierre

Michigan Warms to IndyCar

We can't imagine many citizens saw this coming. Bob Duff of the Windsor Star reports that Michigan International Speedway President Roger Curtis might be warming-up to IndyCar racing.

In recent years, Curtis has not pretended to have interest in bringing Indy cars back to MIS.

Will the IRL return to MIS some day soon? Well, we can hope. Curtis said he would consider a "proposal that makes sense." We doubt that the standard $1.2 million to $1.5 million IndyCar sanction fee would make much sense at Michigan International these days, given the IndyCar series' present value proposition. Roger Curtis is in the business of selling tickets and merchandise to consumers, few of whom have indicated interest in IndyCar's present roster of drivers.

Unless Terry Angstadt can dig up another corporate underwriter to cover the losses and guarantee that MIS covers its hurdle rate, then MIS and IndyCar will remain separated.

How many times must the Indy Racing League be thwarted by its overpriced racing product before it takes appropriate action? Isn't that what management is supposed to do? IRL Management, please quit talking about technology you can't afford. Hire engineers to design a safe and economically efficient driver compartment, distribute a schedule of design constraints, and tell the teams to begin building their new cars. Granted, most of the teams don't know how to manufacture cars, but they'll either figure it out or call their buddies in NASCAR for guidance.

Nevertheless, thank you, Roger Curtis. It's fun to recall our sport's proud history at Michigan International, and it's even more fun to imagine that it might return some day with a product that people want to see.

Roggespierre

IndyCar Price and Market Value

Budget estimates for running a championship caliber, one-car IndyCar team for the 2009 season range from $7 million to $8 million. But the Republic wonders, what should it cost? The question draws opinions from team owners, sponsors, fans and IRL officials. But opinions don't really matter. The only valuation that counts is the one dictated by the free market. And, believe it or not, the market provides some surprisingly consistent estimates.

In finance, the relative value of assets - firms, securities, real estate - is derived from the market prices of similar assets. Because NASCAR (sans-culottes!) Cup and IndyCar operate in the same industry, have similar sources (not values) of revenues and costs, and rely on nearly identical supply chains, we shall use data from Cup to benchmark the market value of a top IndyCar team.

Previously, Roggespierre wrote wistfully of the day when corporations might choose to sponsor IndyCar racing for its own sake. Adjusting the cost of participation to its market value is something that must occur if that day is to come.

WARNING: This requires some very simple math.

According to Jayski.com, the first 21 races of the 2009 NASCAR Cup season attracted a total of 148.17 million U.S. television viewers. Comparatively, the Indianapolis Business Journal and others report that the first twelve races of the 2009 IndyCar Series attracted 10.37 million U.S. TV viewers. Note that our comparison does not include qualifying, special programs, and other events because the ratios would not change materially.

For both series, we divide total viewership by the number of races thus far in 2009 and get the numbers below.

• Average NASCAR Cup event = 7.055 million viewers



• Average IndyCar event = 0.864 million viewers

Next, we divide the viewership total for the average Cup race by the viewership total for the average IndyCar race. We learn that the value of the average NASCAR Cup event is 8.16 times greater than the value of the average IndyCar event. This is a key data point for advertisers that purchase on a strict cost-per-thousand basis. Another way of demonstrating the difference in market value is to say that the average IndyCar race is worth 12.25 percent of the average NASCAR Cup race.

As Danton often jokes when washing down stewed tortoise with a rancid Burgundy while lunching at the Jacobins, just you wait. It can get worse.

And indeed it does, as we have not yet accounted for the fact that NASCAR Cup runs twice as many races as the Indy cars. This factor must be included because we are seeking the market value of running a one-car IndyCar team for an entire season.

NASCAR Cup: 7.055 million viewers * 34 events = 225.760 million viewers
IndyCar: 0.864 million viewers * 17 events = 14.688 million viewers*

*IndyCar is positively skewed by a favorable deviation due to the Indy 500. If we were to calculate the averages at season's end, then the IndyCar numbers would likely be worse.

We are now ready to calculate our relative valuation rate. We divide projected IndyCar season viewership by projected NASCAR Cup season viewership.

14.688 million IndyCar viewers / 225.760 million NASCAR Cup viewers = .06506

The market, as a function of U.S. television viewership, values a championship caliber, full-season IndyCar team at approximately 6.51% of the total value of a similar NASCAR Cup team. We rounded up.

Budgets for top NASCAR Cup teams are estimated to be between $18 million and $20 million per season. Having determined relative market value at 6.51%, we know that the correctly priced operating budget for a top IndyCar team for the season is approximately $1,302,000.

That is how much a championship-caliber IndyCar team should cost given its market value. In the present cost structure, $1.302 million is enough to cover the season engine lease and three front wing assemblies. You still need a chassis, tires, gearbox, crew, driver, race shop, travel & lodging, hauler and someone to drive it, components and replacement parts.

Available data regarding title sponsorship for the series suggest that our relative valuation is very much in the ballpark. NASCAR Cup's deal with Sprint Nextel is estimated to be worth $700 million over ten years, or approximately $70 million per season. Using our 6.51% relative valuation rate, we estimate that the market price for title sponsorship of the IndyCar Series is $4.557 million per season. Using this figure, we can say with some confidence that John Menard's offer of less than $4 million per year for title sponsorship is a bit low. Conversely, Terry Angstadt's asking price of $8 million to $9 million per year is too high.

Perhaps this explains why title sponsorship is so elusive. The IRL has no doubt turned down its share of low-ball offers. But the market value of the IndyCar product is considerably less than the asking price.

We might also better understand why so many corporations prefer to sponsor NASCAR Cup teams for three or four races rather than back an IndyCar team for the entire season. Given the cost per thousand calculations, a standard metric in the advertising industry, part-time sponsorship of a Cup car remains a significantly better value.

Finally, we can deduce some hints about the "technology vs. cost" argument that is beginning to perk and boil again as anticipation builds the for new IndyCar technical specifications. The Penske and Ganassi teams have every incentive to prevent market value from entering the equation that determines new specs. Teams that have sponsorship to support annual budgets of $7 million to $8 million per car gain nothing if teams with $1 million budgets are able to compete with them for sponsors and race wins.

Citizens are advised to keep this in mind the next time Target Ganassi Racing Managing Director Mike Hull proclaims that the future of IndyCar racing is best secured with high-tech race cars. Although it is true that Hull and his employer are well served by expensive technology - which, by the way, is not the same thing as innovation - it does not necessarily follow that all IndyCar stakeholders stand to gain from a high-tech approach.

Indexing the cost of entry to market value will not solve all of IndyCar racing's challenges. But it will address many of the bigger ones. The Republic hopes that IRL management has the necessary courage and discipline to make it happen.

Roggespierre

IndyCar & F1: Technology & Innovation

The Autoextremist is lambasting the FIA again, and with good reason. The worldwide motorsports governing body, based in the Republic, seems intent on killing Formula 1.

What does this have to do with IndyCar racing? Everything.

When Mike Hull and others talk about "technology" in IndyCar, they typically mean "aerodynamics". Unfortunately, this particular permutation of automotive technology is becoming increasingly irrelevant. And don't get us started on "innovation". Needless to say, if mass-produced computer software is available for it, then it is by definition not an innovation.

It is not IndyCar's job to preserve the employment of aerodynamicists. Rather, IndyCar exists to attract an audience. Conservation is on the minds of many, and the IRL should do whatever it can to capitalize. You want innovation and technology in IndyCar racing? Let's start by reducing the size of the fuel tanks to 10 gallons. That would lend significant competitive advantage to any manufacturer that increases fuel economy at a rate that is greater than that of the resulting decline in speed.

That's innovation. That's technology. That's not good news for the aerodynamicists who have dominated the developmental portion of racing for three decades.

We admit that this idea requires considerable development. More important, this is the type of idea that ought to be discussed frequently on West 16th Street.

Roggespierre

IndyCar Teams: Build Something!

Revolution can be so disappointing.

Early IRL stalwarts, think back with Roggespierre to those hopeful days of early 1997, when the new cars and engines were going to transform Indy car racing into an egalitarian enterprise. The new, production-based engines from Nissan and the automaker formerly known as General Motors would be available, at one low, low price, to everyone. Once more, teams could work on their own engines! The oppressive reign of leases, sealed blocks and manufacturer badges would be banished forever.

Suckers, we were.

The dirty little secret was that the teams did not want to work on engines. John Menard and Ed Rachanski, good revolutionaries, both, were exceptions. A.J. Foyt, apparently of his own free will, chose to lease his motors from Katech Engine Development. The remaining Aurora teams contracted with Roush, Comptech, Rocketsports, Speedway and Brayton, in addition to Menard and NAC. Herb "Herbie Horsepower" Porter and Rick Long resurrected the Infiniti before turning it over to Tom Walkinshaw.

The early Indy Racing League was revolutionary in the existential sense, but it failed to rid Gasoline Alley of an entrenched culture of consumerism that began in the 1980s and that continues to this day.

F1 teams build things. NASCAR teams (sans-culottes!) build things. Ford-Freaking-Focus Midget teams build things. IndyCar teams order things and have them delivered with some assembly required. The royals shall be served.

The result is a massive outflow of cash from IndyCar teams to Dallara, HPD and Ilmor. Guess who's left without any money? It's the guy who "hired" the aristocrat in Pilotis to drive his car, that's who.

NASCAR teams (sans-culottes!) keep tens of millions in their pockets every year by making things and selling them to each other. They figured out the benefits of kereitsu even before those treasonous counterrevolutionaries from Toyota showed up.

I'll give IndyCar teams this much. Ever since George Bignotti turned Robin Herd's lame-ass March F1 chassis into a mass-produced U.S. open wheel behemoth, IndyCar teams have demonstrated a keen appreciation for the Division of Labor.

Roggespierre hears that Americans are fed up with outsourcing. But it looks like the only ones that are doing anything about it live south of the Mason-Dixon Line (sans-culottes!)

Meanwhile, the IndyCar guys can't even sell their old stuff like they used to because they keep it and buy update kits every year. And yet they wonder why getting to 33 at Indy is tough? Nincompoops!

So, please, Mr. Barnhart, take heed of this advice. Imagine an IndyCar tub that has all of the neat-o safety additions that you guys have worked so hard on over the past few years. Bid it out, get a good price, and have the low bidder start taking orders. Then let the teams do the rest.

IndyCar is hurting because the underlying economics make no sense. No fundamental problem will be solved by push-to-pass, option tires, or any other Cotman gimmick. And please tell me you aren't serious about that three-wheeled Indy car I've been hearing about.

All due respect, Mr. Barnhart, you don't serve the teams. They are your suppliers - they provide an essential portion of your product. But they don't pay you, so they're not your customers. The kind of help they need from you is tough love. They must stop hitting on grid girls, roll up their sleeves and get their hands dirty. Let them build stuff and sell it.

Advertising and B2B supply chain opportunities aren't getting better any time soon, and those are the businesses your teams are in. Do them a favor and make them build, not buy. The results might be, gasp, interesting, perhaps so much so that fans will want to buy tickets and watch the fine coverage on Versus.

The old order must be crushed and Gasoline Alley society subjected to the will of the People. Fail in this endeavor, sir, and the knitters might put you, too, on the next ox cart to Revolutionary Square.

And you really don't want that.

Roggespierre