Like most American kids that grew up in the 80's I watched the Indy 500 every year and became interested in motorsports thanks to that race, but I didn't really get hooked until I started watching Formula 1 racing in the late 90's. My favorite era were those years with the great Mika Hakkinen/Michael Schumacher battles. (I was a Mika Hakkinen fan) So my fondness for Formula 1 waned once Mika retired and Schumacher started winning everything, even at the expense of his teammate Rubens Barrichello. My interest in F1 has only been lukewarm since.

Then I turned to Champ Car racing here in the US for my motorsports fix. However that was quickly extinguished once Champ Car and Indy Car merged and we were stuck with Tony George and his many foibles. (It was entertaining to watch the Hulman/George drama I'll admit.) My interest has been less than lukewarm with Indy Car lately, even without Tony George at the helm.

Over time however, the excitement I once had for motorsports has slowly gone. Maybe it has to do with my age, I don't know. But I think I will pour my efforts into my Trooper and my interests in the outdoors to add excitement to my life.

Thanks for checking out my blog, I hope you enjoy it. I will still post racing news when I find something interesting or noteworthy.

Sunday, August 30, 2009

Obi-wan wisdom

(crapwagon.com 8-29-09
(regarding who had the worst business model, CART or the IRL)

Hayden Fan
The IRL was really just a political tool by FTG to gain control of CART. I would almost guarantee that if you went to up Tony in 1996-1997 and said, "Here, you control CART." FTG would have killed the IRL. I doubt Tony had planned for the IRL to really work anyway.


Obi-Wan

Yes, probably true, but the more important question is: If FTG had been given control of CART circa 1996-1997, would he have retained its status quo?

It’s only my opinion, but I don’t think so.

Tony George may be an idiot but that doesn’t mean he is without ideas. Spectacularly bad ideas to be sure, but ideas nonetheless.

Before he launched the IRL, George actively tried to reform CART to be more in tune with his NASCAR-like vision for American open-wheel racing. I am convinced that he thought – probably still does – that an oval-centric open-wheel motor sport utilizing outdated (read cheap) technology allied with the magic of the “Indy” name was a sure-fire recipe for success.

It is evident (at least to me) that Tony operated under the belief that NASCAR’s rise to national prominence had been made at the expense of AOW. Specifically, I think he harbored the notion that if IndyCar had beat NASCAR to the punch with regard to its series outline – namely, cheap technologically-backward racecars competing mostly on speedways in stage-managed “spectacles” which featured side-by-side racing with photo finishes and at least one, big multi-car accident every race – that there never would have been a NASCAR as we know it. In other words, George believed that the CART team owners had stolen the sport from the Hulmans and IMS/USAC circa 1979 and NASCAR, in turn, had afterward stolen the thunder from a misguided CART; which strayed increasingly far away from his concept of an oval-centric ideal.

So, I think if he had succeeded in buying CART in November 1991 and merging it with USAC into “Indy Car Inc,” that he would have immediately moved to change the sport into something resembling his later Indy Racing League.

In light of this probability, I think George’s infamous “25/8 Rule” was an attempt to do more than establish the IRL; namely, I think it was designed to give Tony control of the money-making speedway portion of the sport.

A lot of critics, mostly the Gomer brain trust, endlessly chastised CART’s team owners for not seeing the handwriting on the wall in 1995 and giving into Tony’s 25/8 demands. Had they done so, in their view, the owners would have removed the reasons for the existence of George’s IRL and killed the league before it had a chance to establish itself. This assumption is completely illogical, IMO. If CART’s team owners had acceded to Tony’s demands and participated in his WDW race (at a newly constructed speedway owned and operated by George) and/or the one at Phoenix as a condition of competing in the 1996 Indy 500, their participation would have been the functional equivalent of putting all three races on CART’s schedule. This would have immediately put George in control of three events on a combined schedule of nineteen races. In actuality, though, 25/8 would have also forced the Loudon, NH and Las Vegas, NV speedway events on CART’s calendar as well; handing Tony control of five oval races on CART’s 1996 schedule.

However, those are not the only changes that giving in to George would have brought about. CART’s own Homestead race (on March 3rd) would have been in direct conflict with Tony’s WDW event (on January 27th). Two races in South Florida a week apart would have oversaturated the local motorsports market and, given the mandatory 25/8 attendance requirement at WDW, probably would have caused abandonment of the Homestead race.

The same is true of CART’s inaugural Rio de Janiero race, which was held the same day as Tony’s Phoenix race. With the logistical problems and reverse seasons in the Southern Hemisphere, George’s Phoenix race also would have played havoc with CART’s Queensland, Australia race (held on March 31); possibly causing its cancellation as well.

Of course, if the team owners had given in to 25/8 rule, it would have been because of their desire to take part in the Indy 500; so the 1996 U.S. 500 at MIS would have also been moribund.

Then, too, George’s event at Loudon was held on the same day as CART’s Elkhart Lake, WI race, so some adjustment would have been required there.

Finally, Tony’s LVMS event (the second race of his “1997 season,” held on 15 September 1996) would have become CART’s de facto season ender (and thereby a more profitable race).

Consequently, if CART’s team owners had given into George’s 25/8 Rule in 1996 they would have essentially given Tony the power to schedule new CART races whenever and wherever he wanted ever afterward (always under threat of being locked out of the Indy 500).

As noted, in all probability acquiescing to George would have immediately resulted in the cancellation of CART’s Homestead, Rio de Janiero and U.S. 500 events; so instead of growing the sport’s calendar, it would have likely contracted it with an increasingly prominent role for Tony’s oval racing events. This is entirely in keeping with what George and his Gomer followers wanted: foreign events and road/street races being dropped in favor of speedway events in the U.S. and a skewing of CART’s emphasis on diversity in favor of oval races. Moreover, where series speedway specifications were concerned, the Indy 500 would naturally have set the rules, so Tony would have had an effective backdoor approach to moving the IndyCar outline in the direction of a NASCAR-like sport and as he dictated more or more speedway events as a requirement for Indy participation, this emphasis would have eventually taken over the sport.

The real payoff, from Tony’s point of view, is that if his 25/8 Rule worked in cowing the CART team owners, George would have had ownership/control of most of IndyCar’s oval races (which he clearly believed would be the most profitable). Additionally, Tony and Jack Long had a plan already in motion to build a string of “temporary” speedways all across the country; so George would have been more or less guaranteed a place for them on the CART schedule as soon as they were completed (which would have helped finance their construction in the first place).

Had events transpired as Tony anticipated, he wouldn’t have needed the IRL for more than a very few years. Both CART and IRL events – which no doubt would have been eventually merged – would have had the benefit of participation by the “cars and stars” of CART, ensuring their popularity. Instead of standing in line and bidding to hold a CART race, George could have paid himself a sanction fee (for all the IRL events forced on the CART calendar) and he would have had a leg up over any promoter or team owner in placing his events on the series schedule (which would be a huge advantage in negotiating for use of facilities which were not yet his own).

As already noted, the icing on the cake was that the Indy 500 and Tony’s other oval races could have then been used to transform the IndyCar Series specifications by forcing adoption of George’s cheap (e.g. stock-block engines and ‘spec’ price-capped chassis), retro-technology formula for the entire sport.

For those who think that the Idiot Grandson is, well, an idiot and incapable of thinking up such a intricate plot, it should be pointed out that cunning and greed can often masquerade as complex thought; to dream this up all Tony would have had to do is “follow the money” and scheme to get more of it. For instance, it is far easier to observe how a Roger Penske made money off of his IMS and then simply ape him, than it is to actually think like Penske.

In fact, I think it took far more intelligence to think of a way to successfully get around the 25/8 Rule (and all it entailed) than it did to dream it up (and essentially try to tax the sport). All George had to do was plop his Brickyard down on a prosperous caravan route, obstruct it and demand a pay off -- any two-bit crook has the "smarts" to do that; but a CART mover-and-shaker like Penske had to figure out a way to capitalize his threatened holdings (see CART's IPO) and pull the wool over the France's eyes long enough to sell out to them at a premium. The latter course of action took a touch of genius to accomplish.

JM2c

(follow up)

Well, it may be a small point but I think the Indy Racing League was more than a tool for gaining control of CART. Tony George wanted to reorder the sport to more closely fit his and his Hoosier followers’ vision of it. That’s why I said the important question about Tony’s attempts to take over CART was what he would have done with it after he gained control of it; namely, would he leave it pretty much “as is” or would he have set about trying to create something resembling the IRL? As I said, I think the answer is the latter.

One of the most obvious things about the IRL is its name; meaning its inclusion of the ‘Indy’ label. George was obsessed (IMO) with the idea that the sport needed the ‘Indy’ moniker attached to it in order to succeed (to the same extent as NASCAR). When he tried to force the sale of CART (to him) in November 1991, he proposed that both CART and USAC be dissolved and reformed under the ‘Indy Car Inc’ corporate banner (and brand). When the team owners declined to sell him CART, George went ahead in February 1992 to incorporate ‘Indy Car Inc,’ anyway; supposedly as an “advisory” committee to the Indianapolis Motor Speedway. CART’s team owners immediately suspected an attempt by George to grab off their ‘IndyCar’ brand, so they made preparations to go to court and win the trademark outright (rather than pay IMS a fee for its use). CART’s owners had invested more than a dozen years of sweat equity by that point in establishing the IndyCar brand – where, importantly, little recognition had existed before – and consequently they had a good chance (IMO) of winning the trademark outright; especially as Tony made no secret of the fact that he wanted to apply their brand name to a new, rival open-wheel motor sport. Someone obviously alerted George to that probability, because he suddenly proposed a compromise on the “IndyCar” brand issue: he asked that IMSC be allowed to register the IndyCar mark unopposed and, in return, he agreed to lease the name to CART for perpetuity (supposedly). CART’s team owners, unfortunately, accepted Tony’s offer.

This compromise came back to haunt the CART organization in 1996 when the scheduling of the U.S. 500 opposite the Indy 500 on the same day gave George’s legal team the opportunity to claim that CART had broken the terms of their IndyCar licensing agreement. Here, the situation was the reverse of the one which occurred in 1992: CART was attempting to establish a new, rival event to the venerable Indy 500 and obliquely apply the IndyCar brand to it. I think the inherent strength of CART’s claim to the trademark was demonstrated by the fact that the parties agreed to a settlement whereby neither group would be allowed to use the trademark for six years.

George, of course, was pleased with the agreement:

"As we embark on the second season of the Indy Racing League, it will be clear to sponsors, fans and the general public that 'Indy' cars are the cars that participate in the Indianapolis 500," George said.

CART had established the ‘IndyCar’ name as a global brand in motor sports. By the time that George was allowed to use the trademark as his own, it had been reduced in recognition and importance such that (as George said) it was “clear to sponsors, fans and the general public that ‘Indy’ cars are the cars that participate in the Indianapolis 500…,” only. In other words, the trademark had ceased to be a widely-recognized, international brand name and now mostly applied to an annual race held in Indiana.

Of course, one doesn’t need hindsight to know that loss of its brand name immediately crippled CART; a blow from which the sport never really recovered or compensated for. The sanctioning body lamely reverted to its ‘CART’ moniker and the series was at sea (in terms of recognition) for a year before it adopted the ‘Championship’ trademark in December 1997. I believe this was made possible only by George’s earlier ouster of the United States Auto Club as the sanctioning body for the Indy Racing League. I think there is little doubt that USAC laid claim to the ‘Championship’ name after the AAA abandoned it in 1955. If USAC had still been sanctioning the ‘big cars’ of the Indy 500 at the end of 1997, I think CART would have had difficulty laying claim to the trademark; but by then USAC was officially out of the sanctioning business for America’s top-tier open-wheel motor sports.

Anyway, back on topic, I think the IRL was important to Tony George for a lot of reasons (and uses). As discussed above, I think it was important to him as a vehicle to establish his ownership of the ‘IndyCar’ trademark. If he had succeeded in acquiring CART at any time, he would undoubtedly have changed its name to an ‘Indy’ something and the IRL facilitated this.

Also, without ownership of CART, the IRL structure allowed George to negotiate for his own races. For example, let’s say that Tony had succeeded in forcing CART’s team owners to participate in one or more of the IRL’s 1996 races. This would have resulted in the “stars and cars” of the well-established IndyCar World Series running in support of Tony’s new races; which would have greatly increased their chances of success. However, the track owners and/or promoters of those races would have paid their sanction fee to Tony George; not CART. Consequently, as long as ownership of CART remained outside of Tony’s grasp, his ownership of the IRL allowed him to mint new races and his ownership of IMS and the Indy 500 allowed their use as a means of forcing CART to support the new races.

The situation is not unlike the one whereby the larger IndyCar teams, like Team Penske, suppressed the amount of sponsorship dollars going to rival teams by undercutting the price of associate sponsorship. If CART’s team owners had elected to stay independent of George but agreed to participate in two or more of his races (as dictated by the 25/8 Rule), the IRL could have undercut the sanction fees going to CART. The Loudon, NH race was a perfect example. Tony George convinced the Bahre family to switch sanctioning bodies for their open-wheel speedway race in 1996. If the CART teams had continued to participate in the race, Tony George would have benefited from their support and the Bahres would have paid Tony a sanction fee; not CART. If so, this would have put Tony in a position to provide NHIS with its traditional open-wheel race (including CART’s stars and cars) at a much lower cost; say half the cost of a CART sanction fee. In actuality, I think this was the tactic that George used in convincing the Bahres to switch sanctioning bodies (from CART to IRL) and the gamble that the family took (meaning the possibility that Tony could deliver them an IndyCar race with CART team support at a much lower cost). Which begs the question: how long could CART have survived with FTG being in a position to siphon off most of its sanction fees?

Hence, barring ownership of CART, George needed the IRL operating as a sanctioning body in order to perpetrate this tactic. Ah, you say, but that just proves the point that George would probably have dropped the IRL as soon as he gained control of CART. Here, though, it is important to differentiate between control and ownership because these dictated most of Tony’s actions. As was seen time and again during the 13-year war in American open-wheel racing, George refused to share ownership of the sport. It was not enough for him to control the sanctioning bodies – he was offered that option several times -- he had to own them lock, stock and lug nut. Hence, he needed the IRL to act as tool to undermine and eventually destroy CART.

George’s real weapon, however, was always his checkbook. First, he tried to buy CART outright. When this failed he put in place an alternate sanctioning body (IRL) with the expectation that he could force the CART teams to participate in its races. As outlined above, if the CART teams had given in to Tony’s demands to support his races, George would have quickly expanded the number of his races and quickly bled CART dry of its vital sanction fees and bankrupted the company. As it turned out, Tony had to lay siege to CART and it cost him and his family something on the order of $600 million to complete the task. By the time that George breached the city walls (so to speak), however, all the prominent team owners had burrowed out of the besieged organization and made good their escape; leaving Tony with an empty shell to conquer.

Back on point, another important function of the IRL was the elimination of USAC and its sanctioning of the Indy 500. Tony is nothing if not a cheapskate and he is loath to pay fees to anyone; much preferring to collect them. So, by presenting the IRL as a racing league or series, he gained USAC’s support and sponsorship of the IRL in ACCUS. After the requisite year trail period had passed with the FIA’s representative body in the U.S., Tony was free to have the IRL replace USAC as his sanctioning body; and he quickly moved to do so.

Finally (at least until I think of more), establishment of the IRL allowed Tony to dictate his changes to the sport – aimed primarily at “improving” the sport’s oval racing component – without having to compromise with anyone. If he had succeeded in buying CART at almost any time before its bankruptcy, he would have been forced to deal with the road-racing segment of the sport. There were road- and street-racing events on CART’s calendar at all times, backed by iron-clad contracts, and Champcars were optimized for road racing, not necessarily speedway racing. Likely the teams would not have had the resources to make a wholesale change of equipment and Tony has demonstrated an unwillingness to spend money when he isn’t forced into it. Consequently, he probably wouldn’t have been willing to buy new equipment for many of the teams and his reluctance to spend would, in turn, have led to a need to compromise. We know this because that is basically the path he chose within the IRL. For nearly a decade Tony stubbornly clung to his outdated, technologically-backward specifications for the IRL, until he was forced to add road course events. This, in turn, necessitated a conversion of the IRL’s speedway-focused equipment into something that could function on a road course. The teams, naturally, didn’t have the money to make the conversion; so George had to pay for the changes. However, he likely wouldn’t have done so anytime up to the moment when he determined that he had no choice.

In sum, the IRL was more than a tool used to defeat CART. It was the very embodiment of Tony George’s philosophy and his vision for the sport. It was the only place where Tony’s dictates were law and nobody countered his fantasies with logic and/or a discouraging word. Without the IRL there would have been no ‘split’ and the AOWR landscape would be very different today.

IMHO

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