Tuesday, September 1, 2009

Obi-wan wisdom - Read Between the Lines

Team Owners Get Some Answers
(by Bruce Martin versus.com 8-30-09)

JOLIET, Ill. – Team owners had a chance to quiz IndyCar Series officials on Saturday afternoon at a regularly scheduled owners meeting on a variety of topics, including next season’s race at Brazil and the latest on new equipment expected to be implemented in 2012.

“It was a good general update,” said Terry Angstadt, president, commercial division of the IndyCar Series. “We talked about the schedule – some of the tweaks we made to that, some of the things we still have to do to that. We talked about how we ended up at the schedule that we have and what our goals are for future schedules. We talked about sponsorship updates – some of the official categories we are filling in and our progress for a title sponsor. We talked about TV, which was a separate subject and an update on engine/chassis package and when we plan on announcing the rules for 2012.”

Angstadt spoke to the team owners along with IndyCar Series president, competition division, Brian Barnhart and outgoing president of broadcasting Charlie Morgan, who is leaving the series to work for Emmis Communications in Indianapolis.

Here is a capsule summary of the topics:


* Raising the value of the series:

“That is through big investments by key partners,” Angstadt said. “Just like every other sports property raises their value it is a combination of efforts through team sponsors, our sponsors and our direct investment.”


RBTL:
Same-o, same-o. Yes, the value of a sports property is arguably raised through big investments by key partners including team sponsors and league sponsors. However, the past year has seen virtually no investment (big or otherwise) in the league by its “key partners” and new team sponsorship is close to non-existent. The $4 million broadcast rights fee that the league received from Versus might be considered an investment by a key partner in the league but it went straight into the pockets of the Hulman-George family in order to offset the expense of the TEAM program (which is a reallocation of existing prize monies masquerading as team subsidies). Moreover, the $4 million Versus payment only serves to partially compensate for the more-than-$4 million reduction in broadcast rights fees received from ABC/ESPN (for zero net gain). Hence, any increase in the value of the series must come, by Angstadt’s definition, from “our direct investment.” Here, no increases have been announced; in fact, Angstadt’s later comment that the TEAM program is being restricted to cover only 22 to 24 cars probably amounts to a decrease in the family’s direct investment in the league.

* The current television package that includes 12 races on VERSUS and five on ABC:

“Interestingly, it is dead-on the number forecasted by VERSUS before the season ever started so that shows you they tend to know their business,” Angstadt said. “We had a meeting in Chicago on Thursday and they have good plans to grow the ratings. They have grown every property they have ever been affiliated with and they continue to grow as an entity and we have all the confidence they will deliver on that.”


RBTL:
The idea of the league working to give Versus a better entertainment product to sell is out of the realm of possibility. The league’s owners (i.e. the Hulman-Georges] have no plans for increased investment in their motorsports property, so all forward steps are being left to their new media partner. Before this, the league waited for a dozen years for The House of Mouse to grow their business, without success. Message to Versus: You are on your own (and we expect the world from you).

* Late-starting times, such as Saturday night’s 9:10 p.m. local start at Chicagoland Speedway:

“Our television partner at VERSUS wanted the start for this one because of a lead-in program they have that draws very good numbers for them,” Angstadt said. “It’s a very good lead-in for us and the last time they had that drew a 1.2 rating. It is what it is – you have to cooperate and you don’t win 100 percent of your battles. If there is a time-slot issue we have to work together. It is a late start but I hope it doesn’t have a negative impact on the on-site crowd.”


RBTL:
The big lead-in was cage fighting. Bottom line: when cage fighting gets better ratings than your races, you’ve got to take a back seat to the brawlers. Moreover, when the league is totally dependent on its new media partner to somehow increase its popularity, it has no say in the matter. Hoping (aka wishing) that a late start wouldn’t have a negative impact on the on-site “crowd,” when he knew better, highlights that false hopes are all the initiative(s) the league leaders have left to them. As Angstadt said: “It is what it is.”

* Status of the season-opening race in Brazil.

“Tony Cotman (IndyCar Series director of competition) leaves Monday night and I leave Tuesday night,” Angstadt said. “We’ll be back down there this week and have lots of good letters and communication back and forth. All of the business fundamentals are out in the open for a race in Salvador and don’t think there are issues there. We hoped to get it signed while we are there and we will be there most of the week.”


RBTL:
The league has everything riding on a fairy-tale outcome for the Brazilian race negotiations. When it was first reported, the Brazilian promoters were supposedly offering the league ten times its usual sanction fee – itself a fairy tale – plus the equivalent of a year’s TEAM subsidy for every team. Angstadt has so much riding on this that he will later comment that the hoped-for profits from the Brazilian race will enable the league to redeploy itself in failed markets (specifically Phoenix).

How real is this? Assuming midnight comes and the race doesn’t turn into a pumpkin, the Brazilian event(s) as imagined by Angstadt et al would be so profitable that almost any team in the league should immediately consider entering only the South American race and the Indy 500 because they would be the only two IRL events with a pay out. Really. Why risk the wear and tear of a full season in the wrecking league when the Brazilian race would cover a team’s entire expenses at Indy? Additionally, such a plan would greatly increase a team’s chances in the 500 and a shot at its multi-million dollar purse because the team would be participating with brand-new equipment (or as near to it as the league can come). Plus, there are savings beyond wear and tear to be had. For instance, Honda-Ilmor has an “Indy only” engine lease available that is about a third cheaper than their full-season lease.

Would the league allow this to happen? Of course not. Should this pipe dream prove to have some substance, look for the IRL to impound all the money and replace their TEAM payments with the South Americans' cash. The Hulman-Georges are nothing if not greedy and this plum would be too tempting to pass up.

Before that happens, though, the Brazilians have to contract a big case of the stupids. There were originally three cities supposedly vying for this event: Rio de Janeiro, Campinas – a city about an hour from Sao Paulo – and Tony Kanaan’s hometown of Ribeirao Preto, a city about two hours north of Sao Paulo. Now, all but Kanose’s homies have decided to take a wait-and-see attitude; so Tony has to convince his former neighbors – he now lives in Florida – to take a financial bath in support of his employer.

No doubt George and Angstadt were counting on the league’s fuel supplier, APEX-Brasil, to dig deep to come up with the necessary reals to showcase its adopted motor sport. However, the global economic downturn has decimated the alternate fuels industry in the U.S. and severely impacted worldwide consumption; which likely means the APEX-Brasil pockets are no longer as full as before. Not to mention the fact that the Brazilian drivers in the IRL aren’t exactly household names back home. I think all this would add up to some serious back-peddling on the part of the Brazilians; IF the race comes off, look for it to provide less than the pot of gold envisioned by the desperate Gomers.

* Getting financial relief for the team owners from engine and chassis manufacturers:

“We talked a lot about that and we did point out there was relief this year from Dallara, Honda and Xtrac (gearbox supplier) and we said we anticipate for some of that relief to get better next year,” Angstadt said. “We do have that commitment from Honda. Our goal for 2012 is to have a more competitive package. If you compare our costs from a number of years ago to where we think we’ll end up in 2012 it is tremendous progress.”


RBTL:
Well, there you have it. If “progress” in 2012 is going to be measured in terms of comparative costs – which Angstadt implies will be much lower – it precludes the deployment of new equipment. This is underscored by the fact that the hoped-for 2012 savings are coming from Honda, Dallara, and Xtrac; which means that they are the anticipated suppliers three years from now. Are any of these manufacturers going to tool up for brand-new, clean-sheet components and charge less for them? Not in this world.

* A title sponsor:

“I’ve made this comment before that we are 90 percent sure we will have one and that’s where we are at right now but that is a very schizophrenic subject,” Angstadt said. “It appears that things are stabilizing with the economy. We are very close to having one and there is another sponsor right behind that if that doesn’t work out. Hopefully we’ll have one for 2010.”


RBTL:
Here’s Angastadt doing his Lucy and the football improv for the Gomers. He’s 90% sure that he used to be 90% sure but now he’s 90% not so sure.

* CEO Jeff Belskus handing the Indy Racing League in a more businesslike manner:

“I feel very good; Jeff is a very smart guy and knows the business well,” Angstadt said. “He has a lot of institutional knowledge within IMS (Indianapolis Motor Speedway) and the IRL. I like everything I see. I think we work very well together. He is very engaged in our company.”


RBTL:
That’s awfully nice (and condescending) of Terry to say that about his boss and a guy who had a hand in founding the IRL (long before Angst came stumbling along). He better hope they work very well together. First, I see Barnhart biting the dust and not long after, Terry A.

* New management at the Milwaukee Mile:

“We’ve had a couple of good conversations and I read that they have been making tremendous progress on their negotiations with NASCAR and we remain neutral to that,” Angstadt said. “We’ll see where that goes. It’s not their obligation to settle up on the debt owed to us by the previous promoter but it is part of what needs to be discussed for us to go back there in the future.”


RBTL:
Angstadt better not be “neutral” in private about Milwaukee’s progress in their negotiations with NASCAR, because the stock car series is the only thing between the venerable racetrack and the wrecking ball and the only hope the IRL has for getting paid and/or scheduling an event in the only remaining independent speedway. Problem is, Milwaukee is talking to NASCAR about their trucks and they are an endangered species.

* Texas Motor Speedway taking over the week after the Indianapolis 500 date:

“We’ve had a very good re-engagement with Eddie Gossage and SMI (Speedway Motorsports, Inc) and Texas Motor Speedway so we feel good about where that is,” Angstadt said. “We feel good about where that is and frankly it’s hard to hang onto a date at Milwaukee after what we have gone through. We’d love to be back there but it doesn’t have to be the week after Indy (at Milwaukee).”


RBTL:
Loving this. So, Angstadt et al have “re-engaged” with Eddie G and the Smiths? When was the divorce? Let me guess: it came when Tony G & Co gave away Texas’ traditional date – the best attended IRL event outside of Indianapolis – to play footsie with the Frances at their Watkins Glen ghost town. Eddie is probably still wondering what the attraction was? In Texas you leave the dance with the girl you brung, not waltz off with some wall flower and later come groveling back. Expect for Eddie G and Bruton to look for some serious payback; maybe when the league is dissolved and Belskus wants their contract to go away.

* Any chance to reconsider New Hampshire Motor Speedway in the future?

“No,” Angstadt said. “Would you like me to expand on that? I really do feel that a good part of the conversation is when there are two Cup dates at a venue without a long racing season we struggle. SMI doesn’t agree with that and we completely respect their opinion on that but we are not going to agree on every business issue between the two companies. That is a tough market to go into with that challenge. “I don’t let the comments they made impact our relationship, though.”


RBTL:
Think about this. If Bruton Smith and the NHIS brass are willing to pay top dollar (or pay at all) to host an IRL race they think will be profitable, what possible gripe could Angstadt et al have? I mean, the Brazilian ethanol producers start throwing reals at the league and they can have a race in the Amazon jungle for all the league cares; but not American speedway owners who are in the biz? It doesn’t make sense. And, as Judge Judy says, if it doesn’t make sense, it isn’t true. Which means the probably reality, especially given past SMI practice, is that NHIS wants a track rental (like Atlanta and LVMS) or a free race. In either event, Terry A doesn’t have the authority to schedule another race that costs the Hulman-George family more money; especially one where the league is going to come off looking bad.

* Car count staying constant despite a poor economy:

“We’re very encouraged and that is not to be confused with not having a long way to go,” Angstadt said. “We are thrilled with the growth in sponsorship in the most challenging economic times in our lifetimes. If we secure the title sponsor like I think we will and when we get Brazil secured that goes a long way to stabilizing the League side. And we are helping teams secure sponsorship and that is always a top priority.”


RBTL:
Excuse me? “Growth in sponsorship in the most challenging economic times in our lifetimes?” When did that happen? Are we perhaps talking about the measly few sponsors the IRL has rustled up in the past five years before we knew we were experiencing the most challenging economic times in our lifetimes but now realize we were in trouble way back then? If so, the same state of unconsciousness applies to the sponsors as well. Who were the new sponsors to the league after the news media was proclaiming the financial times were dire? Or, are we maybe counting our Brazilian and title-sponsor chickens before they hatch?

Anyway, how long have we been hearing about the league helping teams secure sponsorship being a “top priority;” only to have Tony grab them off for IMS with the rationale that it was the league rainmakers doing all the heavy lifting?

* How many cars can the TEAMS program maintain before it becomes a financial issue?

“That’s a 22- to 24-car number,” Angstadt said. “We would need to make decisions beyond that on some kind of criteria on how you get one of those spots because that is a huge commitment from the League. If we have 28 cars not all of them are going to be able to share in this program.”


RBTL:
Okay, there’s the limit put on the H-G family’s “support:” 22 cars. Next year. After that, all bet’s are off. Remember here that the TEAM program was put in place in lieu of guaranteed prize purses for races; basically, the league collected all the purses and then meted them out along socialist lines. One overlooked implication of the TEAM program is that speedway owners and/or promoters weren’t required to put up any prize money. Otherwise, they’d never have allowed the league to siphon it off. There is a firm belief among the oval cartel that a race’s prize purse is integral to it’s success. Therefore, the league’s race purses were a hidden form of subsidy.

* Danica Patrick staying in the IndyCar Series:

“We think it is very important,” Angstadt said. “We have worked hard and closely with IMG to give them confidence in our series and her role in the future of our series. We are looking pretty good and we feel good about it all coming together. I really respect the magnitude of this decision for her and we have respected that from Day One. That is why we are respecting that as best we can with IMG. It is sales, marketing, PR, venue selection, where she feels most competitive at so it is really across the board. IMG challenges us and we respond accordingly. Those are good conversations to have.”


RBTL:
Brother, it sounds like Angstadt is about to offer Danican’t an ownership position in the league, doesn't it? How about the part about giving IMG [i.e. Danican’t] a say in venue selection (“where she feels most competitive”)!!! I wonder if she gets to pre-approve Brazil’s street circuit? [“Sorry, boys, the Princess of Pout doesn’t like the hairpin around the fountain in the plaza, so the race is off.”] In any case, it’s unbelievable (if I hadn’t just read it). What other driver in the history of the National Championship was allowed input into venue selection?

It makes me wonder what Penske and Ganassi think about this. If push came to shove, which defection(s) do you think would more likely sound the league's death knell: Danican't or the ex-CART duo? My money is on the Pimp and F@t@$$i.

Anyway, when thinking about this Gomer article of faith -- quick, cue the Joan d'Arc improv -- pathetic and desperate also come to mind as apt descriptions. Obviously, here is a motor sport held hostage to a woman. Boss Gomer and the little Gomers believe their fate and that of their sport rests in Danican’t “iron” grip. Hey, I’ve got an idea. If Danican’t is the sport’s end all, be all, why not sell it to her (meaning Motorola)? $21 million (Danican’t current sponsorship deal) is way more than the IRL is worth, so there’s a profit and everybody goes home happy. Then Danican’t becomes a Danican and wins every race (under orders from the boss) and the whole exhibition should be a huge success (if one believes the Gomers).

* Other drivers sharing in the attention that Patrick gets:

“We have our three points leaders going to Miami on Tuesday because they have earned it,” Angstadt said. “We have had stability in our name drivers and it is up to PR to shed the light on those that deserve it. Ryan Briscoe is a really fair guy and a phenomenal race car driver. He is really unbelievable.”


RBTL:
After the question about Danican’t and its response, this one was inevitable. Who’s Angstadt think he’s kidding? No one but Danican’t matters to Angstadt. Can you blame him? He thinks he is a marketing guy and without Danican’t he would be like a Madison Avenue hustler trying to sell Frosted Flakes without Tony the Tiger. The IRL and its mascot are now inseparable; and there isn’t room for another.

At least Terry A is being honest when he (perhaps unwittingly) says on the one hand that the league’s top three points leaders (notice no names) have earned their positions and then on the other hand says it is up to Public Relations to get them noticed; i.e. forgetaboutit. That’s a near to impossible task when the IRL’s PR folk spend about 75% of every league broadcast pushing Danican’t in everyone’s face. Maybe he means that the points leaders’ PR guys ought to have lunch with Danican’t’s PR guys (meaning the league) and convince them to shed “light on those that deserve it.” Don't hold your breath waiting for it, though; "don't call us, we'll call you, big guy."

I love how Angstadt describes Ryan Briscoe as “a really fair guy and a phenomenal race car driver” but stops just short of saying it doesn’t matter. Maybe with a sex-change operation, things might have been different.

* Getting Phoenix back on the schedule at some point:

“That has been one of the bigger challenges for us,” Angstadt said. “We might have even used Phoenix as an example that if we can secure other markets that pay us a good value for our series then we can afford to go to another market or two that is good for the business, although not financially. We offered Phoenix a compelling package to go there but it was not embraced by the promoter. We cannot go there for free, although free is an exaggeration.”


RBTL:
How this for double talk? What he’s saying is that if the suckers in Brazil pay way too much for their race (i.e. “good value for our series”), there will be an unwarranted surplus which could then be used to rent the Phoenix track from ISC. Why would the league want to do this? Because he thinks Phoenix would be “good for the business, although not financially(!)” When have you ever heard of something being good for business, but not financially? Between the lines what Terry A is saying is that (in his view) a return to a ‘prime’ market like Phoenix will give him some credibility in selling other suckers on sponsoring the IRL. Despite the fact that the league would undoubtedly pay ISC for the privilege of appearing at PIR, that part could be kept confidential and the mere fact of a return to a failed market can be touted as a “turning point” in league fortunes and as a sign of growth. Thus, the Phoenix event itself wouldn’t be profitable but the false image it created might enable Angstadt to sell the league to others, which would hopefully be profitable in the long run; hence, Phoenix would be “good for business, but not financially [by itself]”

He's right about one thing, though, a free race at PIR is an exaggeration; the Frances would want a non-refundable deposit up front.

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