Indianapolis Motor Speedway and Motorsports and Sports Business

Luring MotoGP may ease hit to Speedway if F1 departs

July 9, 2007

Bringing MotoGP--the world's highest level of motorcycle racing--to the Indianapolis Motor Speedway could easily draw more than 150,000 spectators and net an eight-figure windfall for track owner Tony George.

Motorsports experts say it's a prospect lucrative enough to give George some much-needed leverage as he and Formula One boss Bernie Ecclestone decide if the U.S. Grand Prix will return next year. George promised a decision on the future of F1 at Indy by July 12. Speedway officials at press time said the decision is still 50-50.

If Ecclestone and his series don't return, the motorcycle race would be more than a consolation prize.

The sanctioning fee for a MotoGP race is about one-tenth what Formula One charges, adding to the chances a motorcycle race would be profitable immediately.

"If Bernie takes his F1 race away, [Speedway officials] don't have the road track sitting empty," said Dennis McAlpine, a New York financial analyst specializing in motorsports. "That's a considerable fixed asset, and you want to make sure you're getting some return on it."

And if the Grand Prix returns?

Then IMS gets to keep the international exposure that comes with the USGP and has the motorcycle race to help subsidize it if it continues to fall short financially, McAlpine added.

Speedway officials aren't handicapping the chances that the popular European motorcycle racing series will make a stop here.

IMS spokesman Fred Nation said only that Speedway officials are still in negotiations with MotoGP officials and a race could be held as early as the second half of 2008.

Road course conundrum

Motorsports experts say the two-wheeled racers are just what the Speedway needs to complete George's vision for the facility his family has owned more than 60 years.

In 1994, George strayed from the track's one-race schedule when he ushered in NASCAR's Brickyard 400. Motorsports experts agree the race nets the Speedway a strong eight-figure sum every summer, nearly as much as the flagship Indianapolis 500. But George's diversification strategy hit a bump in the road with the U.S. Grand Prix.

In 1999 and 2000, he stunned racing aficionados by sinking a reported $65 million to $75 million into a 2.6-mile road course and other infrastructure needed for the F1 race.

Recouping that investment has been a challenge. The inaugural race in 2000 drew 200,000-plus and made a low- to mid-seven-figure profit, sports business experts said. But attendance has declined over the years, with an estimated crowd of just more than 100,000 attending this year.

Attendance is vital to its success. The Speedway pays Ecclestone a sanctioning fee of $10 million to $15 million to stage the race, but doesn't get to share in any television or other mass media revenue. George is left to recoup his expenses through ticket, parking and concession sales.

"I think you'd have to conclude that the Speedway lost money this year," said Tim Frost, president of Chicago-based Frost Motorsports, a consulting firm specializing in motorsports business operations. "With the attendance trend there, the margins have definitely constricted."

With the F1 race unable to support the Speedway's upfront investment, George is looking elsewhere for the return.

Solution on two wheels

The MotoGP motorcycle race fits nicely into the Speedway's portfolio in a number of ways, Frost said.

With a sanctioning fee of $1 million to $2 million, the business model for the race looks workable--and lucrative, Frost said.

In addition to ticket, concession and parking revenue, MotoGP officials have shown more willingness than Ecclestone to share other revenue streams, including TV, radio and Internet race coverage.

The average attendance for a MotoGP race last year was well over 150,000, according to Madrid, Spain-based Dorna Sports, the company that owns the series. But most of the 18 races are held outside the United States.

The last two years, attendance at the MotoGP race at Laguna Seca Speedway in Monterey, Calif., has reportedly been around 75,000. With two days of practice and qualifications included, it draws in excess of 100,000.

Race organizers at Laguna Seca have a three-year contract that stipulates there will be no other U.S. MotoGP race. Though Laguna Seca officials agreed to host a MotoGP race through 2009, the exclusivity part of the contract expires after this year, opening the door for a race in Indianapolis.

If IMS officials can draw 150,000 spectators willing to pay a ticket price similar to that of the sold-out race at Laguna Seca--about $60--ticket revenue alone would be $9 million.

Those who follow the sport think there's little doubt the thrill of motorcycles traveling 200 miles an hour at the Speedway will draw a huge crowd.

"A MotoGP race at the Indianapolis Motor Speedway would be so intriguing that I think it would far surpass any other motorcycle race in the U.S.," said Don Becklin, president of Motorcycle USA, a California-based magazine focusing on street machine testing and the motorcycle racing industry.

"The prospect of the world's best racers on the world's most technologically advanced motorcycles at a facility with that kind of history ... that's the kind of drama that is going to draw not only race fans, but motorcycle industry people from across the country."

But there are still barriers to motorcycle racing at the Brickyard.

"There are serious concerns about walls on the outside of turns," said Becklin, who toured the facility with Speedway officials in February. "Motorcycle races can't have that. It could be catastrophic if a driver hit the wall. If they go down, they must have room to slide."

Track modifications could cost several million dollars. And Ecclestone would have to sign off on any course modifications if he and George agree on a 2008 Grand Prix.

Sources close to the IMS said the motorcycle race would be run the opposite direction the F1 race is run, which would eliminate some perilous turns for cyclists.

Revenue around every turn

"There would be expenses to hosting this race, both capital expenditures and operational, but there are several potential healthy revenue streams," Frost said.

In addition to fan-driven revenue, MotoGP has a healthy corporate following. Laguna Seca was even able to sign a reported multiyear, multimillion-dollar title sponsor--Red Bull--for its event.

MotoGP is known for rabid fans and deep-pocketed sponsors, said Rob Doyle, who has covered the circuit for Business Week magazine.

"It is the premier class of motorcycle racing, the equivalent of Formula One on two wheels," Doyle said. "MotoGP is all about incredible speed, power and technology."

The series draws such sponsors as BMW, Dunlop, FedEx, Fiat, Gillette, Honda, Kawasaki, Konica Minolta, Suzuki, Tissot and Yamaha.

Additionally, there are five American MotoGP drivers, including defending champion Nicky Hayden, of Kentucky.

"With the types of sponsors involved, Indianapolis' central location, which should help draw from a wide area, I think [a MotoGP race] would be a big success," Frost said.

While George has adopted a diversification policy, don't expect the IMS boss to fill the calendar with many more races.

"If Tony can retain the F1 race and bring in the MotoGP race, he will have the highest level of race in every major racing category," said Zak Brown, president of Just Marketing, a locally based motorsports marketing firm with a strong presence in NASCAR and Formula One.

"He will have boosted the Speedway's brand image without jeopardizing its integrity by bringing in lesser races. I don't think there's much more he could want."

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