UPDATE: Experts say loss of race hurts both F1, Speedway

July 12, 2007

Motorsports experts are divided over who is the biggest loser after the announcement that Formula One will not return in 2008 to Indianapolis Motor Speedway.

"The Speedway loses one of the world's marquee global motorsports events and F1 loses out on one of the world's largest markets for its teams and corporate partners," said Tim Frost, president of Frost Motorsports,
a Chicago-based consulting firm that advises motorsports properties on business practices.

Although IMS recently signed a deal to host a MotoGP race-the motorcycle racing equivalent of F1-it won't come close to replacing the marketing bounce the facility and the city got from Formula One, said Derek Daly, a locally based motorsports analyst and broadcaster who raced in F1 from 1979 to 1982.

Daly said the city should have stepped in to offer F1 boss Bernie Ecclestone an incentive package that would have kept the race in Indianapolis.

"This is too big an event at the global level for the city to let go," Daly said. "Formula One is the [most] watched sport around the world. If we let this slip away, I think the city sends the message they're more interested in domestic exposure than international exposure."

The U.S. Grand Prix-which has called Indianapolis home the last eight years-attracts thousands of the highest ranking global corporate executives to Indianapolis annually, Daly said.

"That kind of exposure is difficult to replicate," he said.

The famed Brickyard first hosted the USGP in 2000 after IMS President Tony George sank a reported $75 million into building the 2.6-mile road course and other infrastructure for the race.

In its inaugural year, the race drew more than 200,000 spectators, and by all accounts was profitable for the Speedway despite F1 officials keeping all the broadcast revenue.

Attendance began to decline in 2002, and the relationship between F1 and IMS officials began to sour when all but six cars pulled out of the 2005 race after the first lap due to difficulty with tires.

Attendance for the 2007 race was an estimated 100,000, and Frost said the Speedway likely lost money on the event.

"With only ticket, concession, parking and other ancillary revenue streams to rely on, they were in trouble from a financial standpoint," Frost said. "The margins definitely constricted."

This year, the IMS-F1 relationship became more strained when Ecclestone criticized Speedway officials for not marketing the event throughout the region.

Cities in Asia and Europe were offering to pay a sanctioning fee nearly triple what IMS forked over-a reported $10 million to $15 million, Frost said, causing Ecclestone to reconsider his options.

While the race is definitely gone for next year, IMS spokesman Ron Green said Speedway and F1 officials are leaving the door open for future events.

George is set to meet with reporters to discuss the situation later today.

One thing is sure, Frost said.

"If this race goes away, they have a big fixed asset in that track just sitting there," Frost said. "They'll have to rethink their strategy."

The city's hospitality industry is certain to suffer.

Philippe Thevenet, sales and marketing director of the Conrad Indianapolis hotel, held out hope IMS and F1 would reconcile.

"It's a fantastic opportunity for all the hotels and tourism in Indianapolis," Thevenet said. "We would love to see it back, and we would hope there would be an agreement that would come out fairly soon."

He would not comment further until an official statement is issued by the parties.

Indianapolis Convention & Visitors Association spokesman Bob Schultz said the divorce is disappointing.

The event ranked only behind the 500 Mile Race and the Allstate 400 NASCAR races for tourism revenue brought into the region, he said.

However, Schultz added, the $100 million annual loss will be offset by the MotoGP motorcycle race that will begin at IMS in fall 2008.

"It demonstrates the remarkable value in having the Indianapolis Motor Speedway," he said.

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