Dario does his part at New Hampshire

That Dario Franchitti is an outstanding IndyCar driver is obvious. He is a two-time Indianapolis 500 winner and the defending series champion. His accomplishments speak for themselves.

Therefore, it would seem to follow that Franchitti should be a huge racing star in the United States. However, attendance and television ratings appear to indicate that he is not.

Like most IndyCar drivers, Franchitti is not from the United States. He must therefore work that much harder to establish himself as a competitive product in the U.S. motorsports marketplace.

In that regard, Franchitti has had a very good summer. He seems to have made appearances just about everywhere since May, when he won his second Indy 500.

Franchitti's latest promotional effort was Sunday at New Hampshire Motor Speedway, where he drove three laps in his Target Ganassi Indy car to promote the series' return to NHMS in 2011. Witnessing a fast race car on the New Hampshire oval no doubt shocked many of the NASCAR Cup partisans.

Personally, I look forward to seeing IndyCar's return to NHMS. I am rooting for Jerry Gappens and Randy Bernard to pull off a highly successful event.

They will need lots of help from IndyCar's "stars". Dario Franchitti appears to be working hard to become exactly that.

Let's hope that Dario becomes the most widely known Scot in the United States since Adam Smith.

Kudos to you, Dario. Don't stop now. Come down here and mingle with the Citizens. Get to a county fair or two this summer. Try the pork tenderloin.

You've only just begun!

Roggespierre

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.

Roggespierre

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.

Roggespierre

Marlboro Tix Nix: Another Drag on IndyCar

Perhaps we now know why Richmond is not on the 2010 IndyCar schedule.

According to Curt Cavin of the Indianapolis Star, Phillip Morris USA will not continue its free ticket voucher program at IndyCar races in 2010.

No wonder Terry Angstadt has become so fond of promoters that are subsidized by governments.

It is difficult to imagine that IndyCar will return to Kansas Speedway after 2010 unless more than 50,000 Middle Americans suddenly determine that what they really want to watch at the Kansas oval is an international road racing series. The Kansas IndyCar race was supported not only by the Marlboro ticket program, but also by NASCAR fans who were forced to buy bundled tickets.

Now, both subsidies are gone.

Phillip Morris USA will continue to sponsor Team Penske - for 2010, at least. But perhaps we now are better able to understand why Tim Cindric has become so keen to bring star NASCAR drivers to Indy next year in order to increase television ratings.

Roggespierre

Milwaukee Mile: IndyCar can Wait

According to Dave Kallman of the Milwaukee Journal Sentinel, a new promoter will assume control of the Milwaukee Mile this Friday if it pays NASCAR's 2010 sanctioning fees by Thursday. It seems that the Indy Racing League is being treated as an ancillary concern.

This makes perfect sense.

Forget for a moment that NASCAR Grand National drew an estimated 45,000 spectators this year while the IRL increased its audience to 28,000 paying customers. The old Mile promoter owed money to both series. Unlike the dominant market leader, IndyCar decided to forget about returning to Milwaukee until at least 2011.

The key here is television revenue and commitments. NASCAR has quite a few of both. IndyCar has very little of either because the product is not designed to attract U.S. television viewers.

Therefore, NASCAR is willing to take a chance on the new Mile promoter because it needs to fill its Grand National television schedule. If the promoter fails to pay, then NASCAR still collects a (smaller) profit because it earns significant television revenue.

The economics of IndyCar racing are very different. Most of its revenue is derived from sanction fees that are paid by promoters. The IRL can not afford to get stiffed again in Milwaukee. If the state and municipal governments in Wisconsin were more like those in Alabama, then The Mile would be on the 2010 IndyCar schedule.

Unfortunately, the Dairy State is not willing to subsidize IndyCar racing. The politicians in Alabama are more amenable. Therefore, Terry Angstadt is taking his failed product to Barber Motorsports Park, which offers less seating capacity but more profligate government agencies.

The Wisconsin State Fair Board demands that the Milwaukee Mile operate in the competitive marketplace. That is bad news for the IndyCar Series, a market failure that requires taxpayer handouts to sustain its unwanted product.

Roggespierre

IndyCar: Mike King is no Market Analyst

Mike King is a nice guy and a competent announcer for the IMS Radio Network. He is also a pliant company man. Citizens can therefore assume that his public statements provide a reliable approximation of whatever it is that the IndyCar bosses are thinking.

Right now, they are apparently thinking that more road and street racing is a splendid business proposition for the IndyCar Series.

Pete Pistone of CBS Sportsline recently argued that IndyCar should embrace ovals because the racing is fantastic. We agree with Pistone's conclusion, even if it is the product of hopelessly muddled logic.

King responded in Pistone's mailbag this week, suggesting among other things that road and street circuits are preferred because they have attracted greater attendance than ovals this season.

Mike King, Market Analyst: "Ovals, Bad"

King offers arguments that are convincing only on a strictly prima facie level. Attendance at IndyCar oval races at Kansas, Kentucky and Chicagoland was undeniably awful in 2009. But he seems to conclude that these tracks are somehow unable to draw an audience that would match those that attend events at road and temporary circuits.

We know that this is false because Kansas, Kentucky and Chicagoland have attracted large IndyCar crowds in the recent past. We know this not only because it is confirmed by data, but also because we were there.

The problem is that IndyCar racing is no longer a product that is
designed to appeal to fans of oval racing. It is a road racing product. There is no counter-argument: one need only examine the schedule and the roster of drivers. - Roggespierre

Recall, too, that races at Kansas, Kentucky and Chicagoland early this decade drew better TV ratings - the primary profit lever, by far, for any racing series - than the non-Indy events today. Moreover, those ratings were achieved despite the presence of an exquisitely capitalized competitor and captured media that dedicated more effort to destroying the original IRL model than to growing its own business.

Incidentally, many of those guys are now pulling the strings that manipulate the Indy Racing League.

Like we said, King is a pliant company man.

Mike King, Market Analyst: "Road & Temporary Circuits, Good"

King also engages in puffery, suggesting that the crowds at St. Pete, Long Beach, Edmonton and Mid-Ohio were "phenomenal."

Frankly, attendance had better be phenomenal at those events. We reiterate that IndyCar is a road racing product. Therefore, if it fails to attract crowds and television viewers who enjoy road racing, then IndyCar is an even greater market failure than we had previously believed.

The crowds looked just okay from our vantage point. Attendance at Mid-Ohio obviously declined year-over-year despite ample comp ticket distributions by Honda and Firestone. Edmonton, insolvent and requiring subsidies from more than one government entity, drew a crowd that would be considered mediocre at a large oval track. But it looks fine at an airport, where seating capacity can be adjusted for appearance's sake.

The course at St. Pete renders audience estimation nearly impossible, and we suspect that is the idea exactly. We can report that the locals in the Tampa Bay region are not particularly impressed. If not for the rivalry among local municipalities, then the event likely would not survive. It might not survive, anyway.

Warning to the IRL - St. Petersburg, Florida is engaged in a heated mayoral race. Citizens there are not pleased with the direction. This is unfortunate because your event is and has been part of that direction. If there is to be a new mayor, then we suggest that you begin smooching his derriere with some haste or risk losing public assistance. You might also want to contribute to the campaigns of each mayoral candidate, just in case.

Mike King: Taking what they're Giving & Working for a Living

King does make some salient points. For example, he wrote to Pistone that IndyCar events that are paired with ARCA and other stock car series have not been successful. We agree. IndyCar is not a stock car series and is unlikely to draw many stock car fans.

Unfortunately, King's overlords would like to have us believe that Stock Car Fans and Oval Racing Fans are one and the same. This is false.

If such an assumption were correct, then the early IRL would not have been a more successful television product than the present iteration. It would not have earned crowds of approximately 60,000 at Kansas, Kentucky and Chicagoland - each without the benefit of government subsidies.

If NASCAR Fans and Oval Fans were homogenous, then the Indianapolis 500 could not possibly exist. Perhaps that is the intent.

By the way, 60,000 was the estimated attendance at the "phenomenally" successful Edmonton event this year. Is there any reason to believe that St. Pete and Mid-Ohio attracted 60,000 paying customers?

Like we said, King provides a reliable approximation of whatever it is that the IndyCar bosses are thinking.

He will never be a market analyst. But he will keep his job.

Roggespierre

IndyCar Economics: Why they'll Race in an Alley

As the IndyCar Series evacuates to Japan, we invite citizens to consider the following numbers. They are the dreary residue of market rejection, the just sentence for failing to serve consumers. The Committee of Public Safety has every reason to trust the sources that provided this information.

• The standard sanction fee for an IndyCar event is in the range of $1.2 million to $1.5 million. The number is highly variable.
  
• The IRL incurs costs associated with racing operations in the amount of $500,000 per event.
• The IRL distributes approximately $1 million per event to teams via IndyCar TEAM.

Therefore, the best case scenario is one in which the IRL breaks even. An Indy Lights race requires additional prize money in the amount of $360,000. The IRL does not charge the promoter because, as little market value as the IndyCar Series possesses, the Lights series offers none whatsoever.

Thus, the IRL business plan calls for an operating loss at each IndyCar event unless a supply chain can be arbitraged or a government subsidy can be secured.

Cash Flow-a-Go-Go

Of course an event sponsor can alleviate the financial burden considerably. Unfortunately, the IRL and its teams frequently sponsor their own races.

• Honda is title "sponsor" at St. Petersburg, Toronto and Mid-Ohio
• Honda's IndyCar participation is subsidized by teams that overpay for spec engines
• Teams are subsidized by the Indianapolis Motor Speedway through IndyCar TEAM
  

Therefore, Honda receives title sponsorship for three events without incurring a net cash outflow. Why would any firm offer cash to sponsor an IndyCar race when, for all intents and purposes, Honda gets three of them for free?

Manufactured Partnership

Perhaps the teams and the IRL don't mind sponsoring their own races. Do they care that they are funding Honda's Formula Dream "sponsorship" that allows Hideki Mutoh to participate? Does Hideki Mutoh add any reciprocal economic value to the IndyCar product?

Honda might be writing the checks that pay for the series to travel to Motegi next week, but that does not mean that it is paying the freight. Does Motegi add reciprocal value to the League?

But wait! Didn't Terry Angstadt just say that Honda has agreed to reduce the price of its engine lease program next year? Was that not a significant and benevolent act of partnership?

No, it wasn't. Declining marginal cost per unit due to economies of scale is the natural result of mass producing homogeneous products, such as spec engines and parts. Honda's production costs next year will be less than they were this year. Remember, too, that the lease is really a user fee. Ilmor does much of the the rebuild work. How many new engines is Honda required to add to its existing stock in 2010? None? A few?

Honda's costs will decrease in each year that further development is not necessary. Might that be why Honda Performance Development has become enthusiastic about the IRL remaining a single manufacturer series? Of course it is.

More Deep Capture: Honda Edition

The Committee of Public Safety has been told that Honda now thinks of the IRL as a customer rather than a partner. Does that mean that Honda is cash flow-positive on its all-inclusive IndyCar project? It sure sounds that way.

If that is the case, then why is Honda still credited as a league sponsor? Why is its name on every Indy car if in fact it is extracting and not contributing revenue? Why do the team owners wear Honda shirts on race day? Did the IRL and its teams pay for those, too?

Did you notice all of those Honda commercials during race telecasts this year? Neither did we. Let's hope that nobody at the IRL earned a commission for this deal.

Is anyone asking these questions at the IRL? In the House of France, Lesa France Kennedy, proud owner of an economics degree from Duke University, is meticulously analyzing cash flows. Who is her counterpart at the IRL? Is it the salesman or the racing operations guys?

Happy Labor Day Weekend from the Committee of Public Safety

Roggespierre

IndyCar Baltimore Attendance Increased to 150,000

Baltimore was one hot and humid city today. Hopefully, somebody will pour water on the crazy notion that the consumers in the former home of the Colts are nuts for IndyCar Racing. Apparently, the "feasibility study" found that 150,000 would converge on Charm City if only IndyCar racing, mass market phenomenon that it is, would come to town.

This area has much in common with the rest of the country. It is therefore probable that Greater Baltimore does not care about the present IndyCar product. The best hope for this event is that the locals think Al Unser, Jr. will actually drive in it. Little Al is recognized here. Danica, thanks to a strong activation effort by AirTran - big at BWI airport - is also well known.

Two stars - one retired and the other just as likely to be racing over in Dover in NASCAR next season. All other drivers combined? They're nobody here.

Maybe they think they'll get an "international audience" from DC. Think again, sirs. We live among them. They do not give a damn. The Brazilians at the embassy and the consulate know less than Americans about the Brazilian IndyCar drivers. The emigres here are diplomats and intellectuals. Do you really think they talk about IndyCar racing at the World Bank?

Indy Racing League - you have no market position. You have no fans. You must choose a market segment, serve it and serve it well, and let the others go. Try to get everybody and get nobody. Do you really want to see that at the Indy 500? That's where we're heading!