TG on unification and centennial era

[NickFalzone]

He also briefly mentions 2013 date, but no implication that it's a make or break time. I also like the idea of a continued winter series with international racing:

http://www.indycar.com/news/?story_id=12907

[Rex Monaco]

"Or you could see something like ALMS has done in licensing our specifications, our name and brand for a European schedule."

Given F1's departure from many historic European tracks, a Euro Indycar series might not be a bad idea.

In fact, I was thinking the other day that a Euro, Asian and American series with Indy at the center of all 3 could work.

[Rex Monaco]

Given F1's departure from many historic European tracks, a Euro Indycar series might not be a bad idea.

And Indycool, you don't even have to ask me what I think. It was already posted here.

[Chamoo]

"Or you could see something like ALMS has done in licensing our specifications, our name and brand for a European schedule."

Given F1's departure from many historic European tracks, a Euro Indycar series might not be a bad idea.

In fact, I was thinking the other day that a Euro, Asian and American series with Indy at the center of all 3 could work.

Agreed, however I don't want to see 20 races seasons outside of America. I believe there should be only smaller 10 to 12 race seasons for anything based outside N.A.

[Rex Monaco]

Agreed, however I don't want to see 20 races seasons outside of America. I believe there should be only smaller 10 to 12 race seasons for anything based outside N.A.

Since it would be it's own series, it should have as many races as it's fans and sponsors would be willing to suppport.

[Chamoo]

Since it would be it's own series, it should have as many races as it's fans and sponsors would be willing to suppport.

Perhaps, but it wouldn't nessicarily be it's own series. I think it would be a sub-division of the IRL and would most likely be run by the IRL. I think that any series outside of the main IRL American series should be run as the main series, and I believe that keeping the opposing series under 10 or 12 races would keep the spot light on the IRL here in NA.

This is all a ways in the future anyways, and I doubt it will even come to fruition.

[Mark in Oshawa]

Indy Cars in Europe? Racing on tracks F1 wont visit? Ummmmm unless you get some name drivers that people would pay to see who are just sitting around not driving in some other series and a ton of sponsors...then I don't really see it happening.

Face the reality, there are a lot of race drivers out there who are good and might put on a good show, but we may not have heard of them and people tend to want to buy the sizzle and get steak in the deal. They don't just buy the steak. Champ Car never seemed to grasp that 2 or 3 names and 17 guys named Moe or Claude or Rene wasn't going to sell in North America.

I know Europe is a slightly different and more educated market but I still stand by the fact you need some name drivers to lend legitmacy to your series. Maybe by 2013 this conversation will be about the idea of making this series go to Europe but right now...it is hide in the bunker and hang on time...

[Rex Monaco]

And how do drivers make their names? By driving.

Or do you want only grandsons and great-grandsons (or grand daughters and great-granddaughters) to populate this series?

It's a total package. There needs to be diversity of manufacturers to get those fans that care about Honda or VW or Porsche to support their team. These fans will then find a factory driver to support. (You can't discount the fact that NASCAR is populated with Chevy, Ford or Dodge fans and/or Toyota haters).

There also needs to be diverse tracks, so that the drivers are challanged weekly and the series makes stops in major metro areas in North America.

This is what will create a healthy series that will eventually draw drivers to the series. And eventually it could become the retirement series for ex-F1 'names' (or the stepping stone for future F1 shoes). And a Euro series would help draw those names that might otherwise retire to DTM or something else, instead of come to the US for the IRL.

There is 12 years of immense damage to overcome, but staying inside that box as some want to do will not do a thing to overcome that damage. While speaking of greater things to come in the future, will help raise the spirits so we can get through the deep valley that we find ourselves in today.

For me, this gives me hope that TG might be heading somewhere beyond the perception of just wanting to control of AOWR.

I think he wants to be the next Bill France or Bernie Eccelstone. And that takes a much larger vision than he has shown us so far.

[Mark in Oshawa]

Rex....new names come up in a series that has old names to amuse us while we learn about the new guys. When you start from scratch, you have to get some cred from the public by having a few guys with some charisma and some star power that they recognize.

As for overcoming the damage of the last 12 to 13 years, going to Europe is part of the issue some of the fans had with CART/CCWS. This is a unique series so becoming an F1 light or competition for the A1GP isn't going to really be an option. They need to be INDY and therefore spend some time showing the Europeans what ovals are about and then going to old road race circuits and showing they are not just about turning left. A slow steady growth when the economics improve of a few races in Europe is how you start over there.

This might be one case where Tony's careful and plodding style may help.

[Chamoo]

This might be one case where Tony's careful and plodding style may help.

It's also one case where he might not have the brains to pull it off.

[Mark in Oshawa]

Chamoo...I am tempted to agree with you BUT he has managed to get to where he is somehow. If he makes Europe work, all power to him. CART/CCWS I think botched a marvelous opportunity.

[Chamoo]

Chamoo...I am tempted to agree with you BUT he has managed to get to where he is somehow. If he makes Europe work, all power to him. CART/CCWS I think botched a marvelous opportunity.

I don't believe CCWS botched a marvelous opportunity. Perhaps way back when, CART did, but I don't believe I should comment on that as I was too young. I think CCWS actually succeeded by going to Europe, however, I just don't believe it was given a chance to prosper as CC shut down before it had the chance to make more of what it had started.

[indycool]

Okay, Rex, I won't. I just disagree that something like that is a remotely imminent idea for the moment.

[Rex Monaco]

I just disagree that something like that is a remotely imminent idea for the moment.

Seeing as how TG was speaking about sometime after 2013, there is no argument from me that this idea would be remotely imminent at the moment.

For me, I'm very happy to see TG appearing to be thinking outside the box on possible ways that he could grow the series in the future.

[Mark in Oshawa]

I don't believe CCWS botched a marvelous opportunity. Perhaps way back when, CART did, but I don't believe I should comment on that as I was too young. I think CCWS actually succeeded by going to Europe, however, I just don't believe it was given a chance to prosper as CC shut down before it had the chance to make more of what it had started.

I'll say this. CART went over 2 or 3 times, once to Brands on the short circuit and two times to Lausiztring (three? I am not 100% sure). Both races drew alright but there was never really any effort to stay there and establish a footprint. What CCWS did was just flaying around in the death throes and did their image back here more harm than good.

[indycool]

All about money, Chamoo. Lausitz went into a form lof bankruptcy after the CART race and Forsthe had stuffed a bunch of money into Brand's Hatch and it still lost badly. It costs a ton for everyone involved to go overseas.

[Chamoo]

All about money, Chamoo. Lausitz went into a form lof bankruptcy after the CART race and Forsthe had stuffed a bunch of money into Brand's Hatch and it still lost badly. It costs a ton for everyone involved to go overseas.

I still believe the CCWS events were successful over the pond.

[indycool]

Not by financial standards for everyone involved.

[SarahFan]

Not by financial standards for everyone involved.


exactly....yet there goes TG talking about pursueing the same things that didn't work for CC....

isn't there some saying about the true meaning of lunacy is repeating the same actions and expecting different results

[Chamoo]

Not by financial standards for everyone involved.

Of course not. No event is expected to be profitable in the first, or even second year. If it is, it's gravy. Had they been given the chance to survive, then the first year one-time costs would had been given a chance to spread out over a few years, and the events would had become more reputable.

I guess we'll never know what would had come of the CC overseas races. However, I do believe they were the right thing to do for the CCWS business plan. I would love to see the IRL do something like that in a few years to help diversify the schedule even more and grow the fan base, but right now it isn't a viable option due to the economy and their product in the States is just fine. With Unification occuring, everything is still in a fragile state (ie. car counts, people getting accustomed to the IRL etc...) and it doesn't make sense to try going overseas.

Perhaps in a few years they could do one race to each of the engine manufacturers home countries, depending who comes of course. I don't believe it would be fair to run Motegi but leave out, say Audi?

[SarahFan]

Perhaps in a few years they could do one race to each of the engine manufacturers home countries, depending who comes of course. I don't believe it would be fair to run Motegi but leave out, say Audi?

Motegi is owned by Honda and all the costs including frieght etc are covered by Honda.....

it's not like the IRL foots the bill in an effort to support Honda..... more like the IRL accepts the invitation to appease it's sole engine supplier...


if Audi came on board and spent the millions for the IRL to race at lauzits I'm sure the IRL would be there this Labor Day



* question.... does anyone know if Honda pays the travel and lodging expenses of the teams for the week in motegi?

[indycool]

Permanent race tracks in North America can be profitable in the first year. Street races can't. Overseas races have travel involved that someone must pay for added to the picture, like street races have construction costs each year.

[Chamoo]

Permanent race tracks in North America can be profitable in the first year. Street races can't. Overseas races have travel involved that someone must pay for added to the picture, like street races have construction costs each year.

They can be profitable the first year, however, they aren't expected to be. Someone expects to lose money the first year of any event due to marketing and promotion, new employee hiring, and any first year hick ups.

[indycool]

Untrue of permanent race tracks, which already have staffs and facilities in place to have races.

[Chamoo]

Untrue of permanent race tracks, which already have staffs and facilities in place to have races.

I respectfully disagree.

[pits4me]

Some of these permanent tracks are also narrow, have outdated facilities, logistics issues, etc. IC has never been a supporter of temporary street circuits, even when they are run successfully.

The problem we have is the current IRL platform isn't well suited for non-oval competition. The Panoz DP01 gave us a teaser of what nimbleness could be.

[indycool]

Chamoo, disagree all you want, but to have a temporary race, add a couple million bucks that a permanent facility does not have, repeat it every year, and have only three days to recoup and prosper, when a permanent facility has 365-day use of the facility for other races, tests, events, etc.

[garyshell]

Chamoo, disagree all you want, but to have a temporary race, add a couple million bucks that a permanent facility does not have, repeat it every year, and have only three days to recoup and prosper, when a permanent facility has 365-day use of the facility for other races, tests, events, etc.

I don't think Chamoo was disagreeing that a temporary circuit could not be profitable its first year. I think the disagreement was with the point that a permanent one would be. There is no question that the permanent facility would be in the black sooner. The point in question was would EITHER of them do so the first year. I tend to think not, if the permanent facility does a proper job of marketing and promotion, they would not really break even the first year, given they would also have other costs associated with the event. Staff, security, food, clean up etc. are needed per race and represent a significant cost even for a permanent course.

Gary

[Chamoo]

I don't think Chamoo was disagreeing that a temporary circuit could not be profitable its first year. I think the disagreement was with the point that a permanent one would be. There is no question that the permanent facility would be in the black sooner. The point in question was would EITHER of them do so the first year. I tend to think not, if the permanent facility does a proper job of marketing and promotion, they would not really break even the first year, given they would also have other costs associated with the event. Staff, security, food, clean up etc. are needed per race and represent a significant cost even for a permanent course.

Gary

Thank you Gary.

A new race is the same as any new enterprise taken on by any group or company. In most instances, if first year losses are not planned, then it usually shows a lack of leadership for the project, and ignorance. Most companies don't expect projects to be profitable in the first or second years. They are willing to take a hit the first couple of years to make a profit the subsequent years.

Even with a permanant circuit where the start up costs for an ICS race is not as high, there still remains a period of time where a fan base must be developed and kinks in staff have to be fixed up. Unforseen marketing costs and research costs also attribute to the first year start up.

I am not saying that every races has to lose money in their first year, but, the majority of the promoters stepping up the run races, whether they be ovals, permanent courses, or temporary circuits, and setting up their first year budget to be in the red, and most times they are usually correct, or they end up even further in the red then they previously thought. This does not just apply to the old CCWS, it applies to all major motorsports including the IRL, Nascar and F1.

Yes, temporary circuits do have more start up costs (though i don't believe they are in the 2 million dollar range), and they will always be less profitable then a well attended oval or road course. But that doesn't mean all ovals or road courses start making profit their first year, which doesn't deter the promoters. If it did, there wouldn't be a whole lot of races on the schedule.

[garyshell]

Chamoo,

I could see where a new temp circuit could easily have 2 million in startup costs, if they purchase the seating and barriers needed. If they choose to rent, it would be less initially but an ongoing expense. Tis the old expense versus capitalization argument.

Gary

[indycool]

Gary, staff, security, food, cleanup, etc., are necessary at a permanent course, too, whether it's the first race or one anywhere down the line. You're right in that my point was that a first-year race at a permanent course is DESIGNED to make money. A permanent facility is in the racing business and everything it does is DESIGNED to make money.

A permanent facility like Conseco Fieldhouse isn't going to book the Harlem Globetrotters for the first time without making money and the Globetrotters aren't coming to Indy for the first time either unless they have the thought of making money.

Chamoo, permanent circuits don't have the costs you're projecting. They know their markets from previous races. The research is done. As part of the negotiations to have a race, they pretty much know which corporations are going to take a suite. Some of them won't even do a deeal without a race sponsor brought to them. Their costs are known before NASCAR, IRL or dancing bears come to town.

A street course has additional cost and additional situations to resolve that sometimes cost money.

[Mark in Oshawa]

Permanent race tracks in North America can be profitable in the first year. Street races can't. Overseas races have travel involved that someone must pay for added to the picture, like street races have construction costs each year.


Ok IC...you just put my BS detector twanging off the peg. A Permanent race track such as a Texas Motor Speedway or Las Vegas Motor Speedway will cost upwards of half a Billion dollars to build with maybe 100000 seats. Yet it can make money in the first year while the sponsors and City of Toronto spend 2.5 million or so a year to construct the Exhibition Place circuit and LOSE money? Splain your math there.

The permanent facilites have tremendous startup costs and I suspect the debt load on anyone but a Bruton Smith or ISC who build a permanent facility is far greater than the annual cost of a street race.

It is the permanent tracks which have been around a long time that can make money on a race because they have been bought and paid for in far less expensive times when the economies of scale and land values were different. IMS is a gold mine because the track was bought and paid for decades ago. If you built a permanent facility nowadays, you are not seeing a profit from that track for years unless you fronted a ton of cash up front to reduce the debt load and I can tell you that isn't happening.

Street racing can be made somewhat doable with the right sponsors and a city who is willing to spend a little to make sure they have that great tourist draw in their city.

As for the constant love of people thinking the CART/CCWS mistake of going to Europe was a good idea, may I remind you that they are GONE because of things like this. It was part of their business plan, because they botched things up so bad in the US they needed a place to put a few dates where the smell hadn't permeated.

Europe isn't doable unless there is a sponsor on that side willing to pay part of the way, and that the IRL is committed to that market long term and willing to maybe lose for a few years to develop Indy Car racing in Europe. The problem is that with only two ovals there, you are on road courses and IRL cars on road courses right now are no better to European fans to watch than the ton of OW series they have already. Remember, these people still get excited by f1 parades with next to no passing. It is a different market with a different mentality. Better the IRL get North American fans back. They at least know what an Indy car is.....

[indycool]

Mark, I agree with the North American focus.

Yes, the permanent tracks have startup debts. Some, like Ontario, have collapsed under them. But the races THEMSELVES make money and the SMIs and ISCs move money around to take care of the debts for all their holdings.

[Mark in Oshawa]

IC...but you then must agree it takes a LARGE corporation such as ISC or SMI then to do all of this. Which then begs the question: Can any race make money in the first year? In the first 10 years? If not for the fact all of these tracks were built and run over decades and come from a time when the startup costs were not so great, then you have to conclude no race really makes money if you have to pay for the venue in any way shape or form. Racing is a lossleader for a real estate play or racing is an advertising venue for Corporate North America. That is fine.....and you seem to be on my side on this so we can now drop the fiction that Street racing is somehow evil while if it occurs on a permanent facility it is profitable and good. Races are either raced on venues that draw fans and make a good splash if not profit for the organizers on some level or they suck and go away.

Races such as Long Beach, Toronto or Edmonton may not make money in the conventional sense, but if I spent 500 million building a 1.5 trioval and hosted one IRL and two NASCAR dates a year, I still may not be making any money 15 years from now either. The facilities profit and value comes out of the land value and equity, not out of ticket revenue.

[indycool]

That's what I posted earlier -- 365 days vs. 3 days.

[garyshell]

Mark, I agree with the North American focus.

Yes, the permanent tracks have startup debts. Some, like Ontario, have collapsed under them. But the races THEMSELVES make money and the SMIs and ISCs move money around to take care of the debts for all their holdings.


I think you just failed accounting 101. You can't divorce the apportionment of debt amortization or service from the rest of the expenses incurred by an event. Only if such debt service were $0 would your argument hold water. The IRS would not take to kindly to such moving around of money.

Bottom line is the IRS doesn't care if an event makes money, they care if the company does.

Gary

[indycool]

Gary, the "companies" are SMI and ISC and The Hulman Co., not the events and not the tracks individually in those cases. THOSE are what the IRS cares about.

[SarahFan]

so just to summarize....

Street races have increased costs annually related to construction and tear-down, permits fees etc that can't be spread across 365 days a year...

and permanant facilities have HUGE building costs that need to be amortized over time (events)



so the Steward of AOWR said.... 'what the hell lets combine the costs and run a race in the LVMS parking lot'....

yet more proof TG is completly out of touch with economic realities of racing

[indycool]

Oh.

[garyshell]

Gary, the "companies" are SMI and ISC and The Hulman Co., not the events and not the tracks individually in those cases. THOSE are what the IRS cares about.


I have no idea what the corporate structure is for these companies. However I would not be surprised if individual tracks were separate entities in their relationship with the IRS and the companies you mentioned were holding companies. That shell game, is often played by the tax lawyers, especially when local taxing authorities are involved. This is especially true when tax "set asides" or abatements are involved.

Gary

[garyshell]

Mark, you may be confusing whether the race makes money or the track makes money. The race is one weekend and could be promoted by a party other than the track owner - as in leasing it for the weekend. The track itself makes money all year with other pro races, renting for SCCA or NASA club weekends and to car clubs (BMW, Porsche, etc.) track days as well as test and training days. So the start up costs are amortized over many events in one year as well as the debt service being spread over many years.

But in the final accounting, you can be sure that if the owner of the track has a heavy debt service number, the amount being charged to the event promoter for use of the track will reflect that. The track owner will need to recoup that debt service amount by charging a higher price to the event promoter than a similar track with older infrastructure, and thereby lower debt service, might charge for use of their track.

Gary

[indycool]

They probably are subsidiary companies and the tracks probably pay state taxes individually, but the holding company probably does the IRS. Sometimes you can get an idea of which tracks earn more or less than others from annual or quarterly reports because SMI and ISC are both public, but seldom hard numbers. In any case, the profits from Las Vegas go straight to Charlotte just like a company-owned 7-11 in Orlando sends its profits straight to Dallas. Multistate companies move money around all the time.

Most promoters promote their own major events and take their profits from those. Track rentals, testing, etc., are just another source of income that a street race doesn't have.

[garyshell]

That's what I posted earlier -- 365 days vs. 3 days.


If only the equation were that simple. It is more like:

Amortization of (500 million for building a facility + interest on a 30 year loan) + one years operating costs / number of days when patrons are coming throught the front gate. (Yeilds a hightly variable number dependent on the age of the infrastucture, debt load etc.)

versus

2 million setup costs + 3 days operating costs / 3 days.

Gary

[indycool]

That statement is strictly for eligibility for use of the facility to bring in dollars. A track that has a major 3-4 race schedule has profitability over a street races X 3-4.

You ARE right that some tracks couldn't make it. American Raceways, which owned Michigan and Texas World, went too far too fast and Penske bought Michigan off the courthouse steps in Lenawee County, Mich. Curtis Turner did the same at Charlotte originally. Ontario was a good example but it was poorly financed to start with and they couldn't even pay the interest. Pikes Peak was another that they put too much money into and didn't get a Cup date and went belly-up for a song to ISC, which just bought it so no one else could.

Like any other business, tracks aren't a lock. We had a boom of track building in the late '60s/early '70s and another one in the '90s. Those that last, last. And I don't think you're talking about $500 million to build one. Kansas and Chicagoland were nowhere near that.

[indycool]

Good points, Starter. The oval tracks tend to bank on a Cup race to pay the bills, though. And the ones which don't have one struggle.

[Mark in Oshawa]

IC...this has been my point. Oval tracks don't make money just off of Indycar...they usually need NASCAR first and foremost since they are the 400lb gorilla of motorsports.

You can say what you want about street races, but the costs year to year are reasonably predictable for setup and land rental, and if the promotor knows his stuff and gets enough sponsorship, he can make it work. You show me an oval built in the last 10 years that can cut it without a Cup date? Maybe Iowa...and it was done for a very tight budget and is modest in its goals but you certainly are not seeing anything like a Kansas or Chicagoland trying to get by on their Indycar dates alone. Heck...to get tickets for the NASCAR events you had to buy IRL events tickets as part fo the package.

I also would love to see what Kansas and Chicagoland cost to build. You say south of 500 million? I would guess it isn't that far under. Not when you consider a football stadium often is 700 million plus and has often less seats than some of these new speedways. Also, the tracks take up more land, require more enviromental assessments, face more legal hurdles and require other infrastructure your average football stadium would never consider.

You Show me a top flight oval in the 1 to 2 mile range with 80000 seats and there is NO way they can build that for less than 400 to 500 million dollars. Not and call it a first class facility. THat is a huge nut to crack compared to some city putting a million or two in the coffer every year to help support a street race....

[indycool]

Bruton Smith and SMI bought Vegas for $250 million and it was discussed behind closed doors that ISC "deked" him into paying that much.

[Mark in Oshawa]

IC.....it may have cost more to build the place and Bruton was complaining because he saw more of the red ink on the books than he would have liked. That said...to BUILD a track aint cheap.

This is no different than stadia. Skydome in Toronto (now called Rogers Centre) cost 600 million to build with cost overruns and other BS. It was sold to Rogers Media 5 years ago for less than 80 million. Now part of that was because Rogers owned the Blue Jays and the football rights to the stadium so the building was worth not much without those two properties but it doesn't mitigate the fact that the cost of a resale on one of these properties often involves writing off a large sum of cash....

[indycool]

No, it ain't cheap. But Pike's Peak cost $80 million, they were just trying to get their money back out of it and no takers until ISC came up with its deal, whatever it was.

[Mark in Oshawa]

The only reason ISC and SMI are not complaining more about the costs of the write downs is that their established tracks are carrying the companies. I honestly don't know how Bruton Smith does what he does in buying up tracks for the money it must cost and then turn around and put things in the black. I think where he has the money is coming from his established operations and some very creative accounting to borrow against future earnings. The money must be there but in the case of Bruton, you have to know that the money he is making from his more established tracks are hiding red ink and reinvestment costs at places like New Hampshire.

No one really is told the whole story. Like most professional sports, creative accounting can make any sports operation make money to one investor and lose money to the IRS and the accounting can all be legal either way....

[indycool]

True, Mark. Accounting and taxes are bigger business than I can understand.