Media & Marketing and Sports Business

IRL traveling bumpy road: Despite successes, sponsors are walking, teams are folding and top drivers lack rides

February 6, 2006

The Feb. 4-7 auction of locally based Panther Racing hangs over the open-wheel series like a dark cloud at a time when IRL officials have been crowing about its 2005 successes.

Television ratings soared 53 percent from 2004 to 2005, attendance increased 9 percent, merchandise sales were up 75 percent, and Web traffic on the series' site rose 162 percent. According to Joyce Julius and Associates, an independent Ann Arbor, Mich.-based media research firm, sponsors got 57 percent more exposures during 2005 IRL telecasts than in 2004.

"We're gaining momentum," said John Griffin, IRL vice president of public relations. "But we have to build more value for fans and sponsors. That's where our focus is."

On the heels of a week when IRL officials hired famed rock 'n' roller Gene Simmons to help sharpen the series' public image and announced retired NASCAR star Rusty Wallace will be the lead announcer on its national TV broadcasts, series honchos were still pondering why car count is declining, teams are folding, and sponsors are abandoning the open-wheel circuit.

The loss of Panther is especially concerning. Formed in 1997, Pan- ther is one of the most successful teams in IRL history, with 15 race victories and two championships. The team's drivers have included Sam Hornish Jr., Dan Wheldon, Tomas Scheckter and Buddy Lazier.

Panther's owners include former Indianapolis Colts quarterback Jim Harbaugh, local car dealer Gary Pedigo and Doug Boles, who was an aide to former Mayor Steve Goldsmith.

"Panther lost Pennzoil, their primary sponsor, and that does happen in motorsports," said Zak Brown, president of Just Marketing, a locally owned motorsports marketing firm. "But when a series loses one of its stronger teams, that's pretty serious."

It's far from the IRL's only concern. MoNunn Racing liquidated after its owner Morris Nunn retired. Nunn's ability to make more selling the team piecemeal than as a package shows few prospective owners are on the horizon, motorsports experts said.

Sam Schmidt Motorsports, the 2004 Menard's Infiniti Pro Series champions, also recently chose to sell at auction after encountering financial difficulties.

Hemelgarn Racing, Cheever Racing and Dreyer & Reinbold Racing also have encountered financial difficulties.

Red Bull, Pennzoil and Menard's are among sponsors that departed after the 2005 season. Engine manufacturers Chevrolet and Toyota also walked, leaving Honda as the series' sole engine supplier. While Honda has promised to bring lease costs of engines down, the series and its teams will sorely miss the millions of dollars in advertising the engine makers pumped into the IRL.

The economics of racing in the IRL is such that seven of the series' top 20 drivers in 2005 are without rides less than two months before the season opener at lic stumbles over the sport."

Cost containment

IRL officials are working hard to bring costs down, Griffin said.

Honda reduced its annual engine lease price from $1.7 million to $1.1 million.

"We feel pretty good about getting that down to just below $1 million for next year," Griffin said, adding that series officials are also working to bring the cost of chassis, tires and other race goods down for 2007.

Honda is also offering engines for about $250,000 for the month of May to help the IRL achieve a full field of 33 at the Indianapolis 500. That's about half of what it's been in past years.

The IRL has been trying to lower teams' costs since it formed in 1996, including brokering deals to get discounts on tires, fuel and other essentials for full-time teams since 2003. The IRL has also kept virtually the same engine and chassis formula the last four years, making it easier for teams to get cheap, used equipment.

"Bringing costs down is fine, but more than anything the IRL needs to increase exposure for their teams and sponsors," said Dennis McAlpine, a motorsports analyst based in Scarsdale, N.Y. "Increasing exposure has to be the No. 1 priority."

Sponsors are not deterred from paying $10 million to $15 million for a primary sponsorship in NASCAR, McAlpine said, because the exposure is so great.

Though TV ratings were up last year-a phenomenon most attribute to newcomer Danica Patrick-most IRL races still struggled to attract 1 million households nationally, or attain a 1.0 rating as measured by New York-based Nielsen Media Research. Most NASCAR events draw 6 million to 8 million households. The Indianapolis 500, the IRL's lone stalwart, still draws 5 million to 8 million TV households.

"Showing a one-year increase is fine, but we can't be happy with that," Griffin said. "The ABC ratings need to be 2.0 consistently."

With the hiring of Simmons and partner Richard Abramson, IRL officials hope to kick-start the series' popularity, especially with younger fans. Simmons seems like an odd choice, but Brown thinks he could be a strong addition.

"I've met Gene Simmons on several occasions and he's a fantastic businessman," Brown said. "If people can get beyond his image as a guy with his face painted, sticking out his tongue on stage, I think you'll see he's a very good and innovative marketer."

Simmons, 56, is credited with turning Kiss into a $1 billion licensing enterprise, putting the band's name on everything from credit cards to Kiss-opoly board games.

Simmons' partner has an equally unique background. Abramson is most famous for managing Pee-Wee Herman's career.

Simmons is pulling no punches. During his first meeting with IRL officials, he told them their "logo sucked."

"I didn't know what it was, and it just didn't connect with me," he told Forbes magazine. "And they were all over the place. You have to simplify the message. You go to Burger King and you know you can have it your way. That's all you need to know."

Simmons will also work on driver marketing, a major thrust the past two years for the IRL. Simmons, sports marketers said, has his work cut out for him.

"I know a former IRL champion from a few years ago that doesn't have a PR person," Poole said. "How can that happen? It's ridiculous."

Former NASCAR champion Wallace, who retired from racing in 2005, could be a bridge to a new audience for the IRL. Wallace will be the lead announcer for ABC/ESPN, covering the 2006 IRL season.

"We think Rusty Wallace is going to be the John Madden of motorsports," IRL's Griffin said.

Wallace's exposure to the IRL has been limited, industry experts said, and winning him over could be a big coup for the series.

"Rusty Wallace is an American racing icon who gets an awful lot of exposure from the mass media," Brown said. "If Rusty shows a strong interest in Indy car racing, he could be a very powerful ambassador for the sport."
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