After the checkered flag dropped on this year’s Indianapolis 500, the green flag fell on negotiations for a new television contract between the Indy Racing League and ABC/ESPN.
The current deal doesn’t expire until the end of next season, but the contract calls for the parties to discuss an extension starting this month.
Sources close to both sides said ABC/ESPN pays the IRL about $10 million annually, but getting that kind of guaranteed cash beyond 2009 could be difficult.
Still, network officials have made their interest in the series clear.
“We hope to continue the relationship well beyond next year,” said George McNeilly, ESPN senior communications director.
While ABC/ESPN is likely to ask for a discounted or restructured revenue-sharing deal, IRL officials are likely to ask the network for increased promotions, including on-air and Web advertising, and possibly pre-race, post-race and other special IRL shows.
The differing demands could lead the IRL to shop its deal to other networks. Motorsports sources said NBC and Turner Broadcasting have interest in the openwheel series. NBC, sources said, would like to wrestle the Indianapolis 500 away from ABC, which has aired the race 44 consecutive years.
One thing is certain. Lots of people are watching the IRL’s TV ratings in what has become a critical year for the series. While the buzz around the series is growing, that hasn’t yet led to significant ratings gains, and some in the broadcast industry are growing impatient.
ABC/ESPN officials said they have seen no bump in advertising during race broadcasts this year despite the IRL’s unification with rival Champ Car, Danica Patrick’s recent victory, and Helio Castroneves’ exposure on the “Dancing with the Stars” TV show.
The IRL’s ratings have been mostly static since entering the deal with ABC/ESPN in 2004. In 2006, the average viewer rating for 14 races, including the 500, was 0.97, according to New York-based Nielsen Media Co. Last year, the average was 0.94 for 17 races. A 1.0 rating equals about 1 million households nationwide.
Ratings for the Indianapolis 500 have hovered around 5 the last five years. It was 4.5 this year, and 4.3 last year when rain delayed the race. The series’ TV ratings, which so far this year are down a bit, don’t give the series much leverage in its extension negotiations.
“I don’t think it’s any secret that the [IRL] is a money-losing deal for ABC and ESPN,” said Jeffrey Cokin, a former NBC executive who now heads his own broadcast consulting firm, Connecticutbased Cokin Communications. “You can bet they’ll be trying to negotiate that price down.”
But some of the IRL’s strongest races haven’t been run yet this season-including ones in Iowa, Watkins Glen and Mid-Ohio, where the series can make an impression on network brass. Recent open-wheel developments have given the series a higher profile in the national media, and there is hope that will eventually translate into a stronger fan following, Cokin said.
“[IRL officials] will be trying to play up the series’ recent gains, and they have some points to make,” he said.
The IRL intends to make clear what it expects from a broadcast partner going forward.
“In broad strokes, we want the best, widest distribution across as many platforms as possible,” said Charlie Morgan, IMS Productions president. “Digital distribution will be an important part of this next contract.”
IRL officials have long called on its broadcast partners to pump up the volume on its open-wheel race promotions, but broadcast experts question which should come first, ratings or promotions.
“I don’t think ESPN has put a lot of marketing muscle behind the series because they’re constrained by the ratings,” Cokin said. “They have serious investments in the NFL and NASCAR. With a limited amount of promotional spots to fill, they have to support those investments where they think they can get a return.”
ESPN officials said they have made an aggressive bid to build momentum for the league, including airing all the races for the first time in high definition.
Many sports marketers still wonder if the IRL is gaining speed fast enough in the wake of its unification with Champ Car to make a difference for this round of negotiations.
“There are more solid teams this year on the track and the series is signing some good sponsorship deals with the likes of Coke and DirecTV,” said Tim Frost, president of Frost Motorsports, a Chicago-based motorsports business consultancy. “For the first time in a few years, they’re drawing significant attention from the national media.”
All of that, Frost said, should equate to higher television ratings and more revenue from advertisers flocking to the IRL broadcasts.
Maybe next year
Zak Brown, whose Indianapolis-based Just Marketing International was hired last year to find the series sponsors, said it will take time for momentum to build into a critical mass.
“I think you’ll see these new sponsors become prominent in marketing the series, and that includes making substantial TV ad buys during races-next year,” Brown said.
Brown and his company could deliver the series its biggest weapon by year’s end. JMI was hired by the series last year to hunt for a series title sponsor, and Brown said he is confident he can deliver one that will pay $10 million annually to affix its corporate name to the league moniker.
“I think the Indy Racing League will have a title sponsor in 2009 that will be involved in this series in a big-time way,” Brown said.
It’s uncertain whether the title sponsor announcement will come soon enough to affect the next TV contract. While it is clear that negotiations start this month, neither side would comment on how long those negotiations will last.
“These sponsorship deals take some time to come together, and a bit more time to show their full impact,” Brown said.
Just Marketing is credited with bringing some of the biggest marketers to NASCAR and Formula One, including DuPont, Hilton Hotels, Subway restaurants and Crown Royal. Brown also represents ESPN in its motorsports sponsorship deals, so he’s likely to have the network’s ear.
Brown projects that the IRL title sponsor will spend at least $10 million in promotion and advertising beyond what it pays to the league for its deal. A big chunk of that, he said, will go toward advertising during the series’ race broadcasts.
Cash up front?
Cokin isn’t convinced that the promise of a title sponsor alone is enough to gain the IRL another rights-fee deal from ABC/ESPN. Of the major North American sports properties, only the National Football League and NASCAR have deals where all their money comes from guarantees from the network.
Cokin thinks a more likely scenario is a revenue-sharing agreement, where ABC/ESPN guarantees a smaller sum, and the network and series work together to sell the ads during the races and other IRL programming. The revenue from the ad sales would first cover production costs, then be split between the two sides.
Already, the IRL provides a $10 million mobile production truck and 50 to 75 employees to help with the TV broadcasts. Adding sales and marketing people to the mix would be a small leap, but IRL officials will have no interest in cutting the cash that comes from the network.
“If the [IRL] is confident that their series will grow, this could be a good deal for them,” Cokin said. “Once the series gets stronger, the series could mandate that its sponsors make TV ad buys. Of course, if the ratings go up, that mandate wouldn’t be hard to enforce. If ratings go up enough, advertisers usually come calling.”