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Sports Business

IndyCar ponders overseas expansion to counter troubles at home

August 28, 2013

IndyCar Series officials are seriously considering an off-season overseas mini-series of sorts at the same time one of the series’ most popular drivers—Tony Kanaan—complains about lack of sponsorship dollars, his declining pay and inability to secure a ride for next year.

So I’m left wondering how to square this.

Hulman & Co. CEO Mark Miles and his right-hand man, Derrick Walker, are trumpeting the idea of an off-season circuit in strategic global markets to boost the image of the series and the financial fortunes of its teams. Walker has no firm commitments with tracks, promoters or sponsors, but IndyCar officials said a “winter championship” could be launched as soon as early 2015.

Walker says the plan is a chance to showcase IndyCar’s brand of open-wheel racing to overseas markets, while very carefully stating that it is not an attempt to challenge Formula One.

Some sports marketers think the overseas portion of the schedule would be popular with sponsors looking to do business in far-flung locales, and that markets in Asia, Latin America and the Middle East would be willing to consider hosting a race.

Here’s the thing. Most, if not all, IndyCar teams will need some subsidy to make it happen. IndyCar officials are likely to seek that subsidy from race promoters. While that set-up isn’t atypical of international races, it’s not the healthiest position to be in, either.

IndyCar officials have indicated they’ll avoid F1 markets, presumably to steer clear of the ire of F1 czar Bernie Ecclestone. A war with F1 is something we can all agree that IndyCar cannot afford.

So, what countries and promoters would IndyCar find if it steers around F1? You might imagine that if F1 is not in a market, there’s a good reason.

Yes, some countries would like to host an F1 race but can’t afford it. And those same locales might lap up the cheaper IndyCar sanctioning fee. But it’s a risky proposition for a number of reasons. Randy Bernard learned that the hard way with his China fiasco of 2012, when a race in Qingdao was cancelled at the 11th hour.

A basic tenant of business is that when looking at a return on investment, you have to look at the amount (actual or potential) invested to determine the (actual or potential) return.

While strengthening IndyCar’s reach and audience—internationally or otherwise—is a worthy cause, it comes with a cost. You wouldn’t know that listening to Walker talk about how these overseas events will add to the teams’ and series’ bottom line.

“Right now we've got a lot of down time and there’s only so much testing you can do,” Walker told Racer.com. “Our teams need income and an international component could help provide some additional income that helps strengthen their financial position.”

The cost of this endeavor is about more than mere money—though that’s a big part of it. Miles and Walker have to be careful that they don’t divert time and energy from priorities. If a top priority is to go global, I suppose they could be on the right path with this initiative.

Beyond giving the teams—and their staffs—something to busy themselves with during the off-season, I’m not sure what the end game is.

It’s been no secret that IndyCar team owners often lay off a chunk of staff when the season is over. With Miles suggesting he will compress the North American (spring and summer) portion of the season, primarily to avoid butting heads with the NFL, there’s more concern about that than ever.

But that concern isn’t born of the series’ two most important constituencies—sponsors and fans. It is born out of a concern for IndyCar teams and their employees, a constituency the series has too often prioritized too highly.

 So it’s no surprise that some team owners support the proposal. But this can’t be merely a jobs creation issue for the series and its teams. Their central mission cannot be about creating jobs for people who love racing.

At some point, series officials have to be about growing the series—and more importantly making money, something they haven’t managed to do since the open-wheel series’ started in 1996.

As Miles and Walker deliberate over an overseas expansion, they have plenty to worry about on the home front. On Sunday, only 391,000 people watched the IndyCar race in Sonoma on television. It was a good race, full of intrigue on and off the track. Too bad not many people saw it.

Meanwhile, Tony Kanaan, the reigning Indianapolis 500 champion Tony Kanaan says no one will give him a job racing IndyCars in 2014 unless he brings a big-time sponsor with him.

“Right now I have not got one offer on the table that doesn’t require me bringing money,” Kanaan recently told Racer.com. “I’ve talked to Michael [Andretti], Bryan [Herta], Chip [Ganassi], Sam [Schmidt] and others and they all need money. And at this point in my career, I think that's a pretty sad situation.”

Kanaan even said he’s willing to take a pay cut to get a ride. But still no takers. So that begs the question: If no team is willing to sign the reigning Indianapolis 500 champion at a discount, where’s the money coming from to race internationally during winter?

More importantly, those invested in this sport must ask themselves how a handful of races in places like Qatar and along Asia’s Pacific Rim will strengthen television ratings, live attendance, merchandise sales and overall fan avidity in places like Indianapolis, Pocono and Sonoma.

And how will resources in the series’ front office be divided to focus on launching and growing an international mini-circuit and the North American schedule?  

Miles and Walker may have this all worked out. They may have a blueprint that connects the dots across the Atlantic to bolster this series once and for all. And sooner rather than later, we won’t ever have to hear about the plight of guys like Kanaan again.

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