Thursday, May 5, 2011

Pimpski leading the new revolt

(by Obi wan crapwagon.com 5-4-11)

From the moment the Idiot Grandson was appointed the Speedway president in January 1990 by his grandmother and mother, the Hulman-Georges tried to use their ownership of the Indianapolis Motor Speedway and its once-iconic Indy 500 to leverage ownership of the entire sport. Well, with that (and perhaps $700 million of the family fortune) they succeeded in a hostile takeover of the sport in February 2008 but virtually destroyed it in the process.

Also destroyed was the economic basis for the success of their centerpiece race. For most of its history the 500’s main claim to fame (and the participation of the sport’s best teams/drivers) was that it offered the richest prize purse in all of motorsports. That ended in 2001 when the Daytona 500, NASCAR’s centerpiece race, posted a total purse of more than $11 million in comparison to Indy’s $9.6 million. From there the gap between the two race purses widened until by 2007 the Daytona purse was richer by nearly $8 million! Last year Daytona still paid out $5 million more than the total take at Indianapolis.

More significant (IMO) than the total rewards available in the two premier races was the changes in the requirements to attempt to win a piece of them. In Championship racing it used to be that the sport’s sanctioning body (AAA, USAC, CART) published the broad technical outline for it along with a rule book by which to interpret its specific application. The sanctioning body managed the sport, inventors innovated within its bounds, and individual promoters/track owners (like IMS) posted a prize purse to try to attract the best and most popular drivers/teams to their particular race. At IMS this model continued until 1981 when for all intents and purposes the Hulman puppet organization USAC lost the first war in AOWR to the team owners of CART. From that point until 1997 when the Idiot Grandson replaced his grandfather’s creation with one of his own (i.e. the IRL), the Indy 500 was the only National Championship-caliber race sanctioned by USAC.

However, the reality of the situation at the Indy 500 was such that while USAC theoretically controlled the technical specifications for the race and its own one-race “Gold Crown Championship,” the Speedway needed the team owners of CART in order to stage a successful race. Between 1979 and 1981 the Speedway and USAC refused to allow the 500 to be counted as a “points paying” race toward the CART national championship. After they were sued and lost their case in federal court in 1979 for attempting to ban certain CART team owners from the May classic, IMS and USAC changed the 1980 Indy 500 to an “invitational” race in an effort to control the teams that could enter it (and have a chance at its rich prize purse). The folly of this tactic was revealed at the June 1981 USAC Championship race at Pocono when the majority of the CART teams boycotted the race and USAC had to flesh out its field with converted dirt track cars; causing the race to be deemed a failure. The message being sent by CART was clear: if you attempt to technically control the National Championship and divide CART’s ranks by picking and choosing entrants to the rich Indy 500, we can do the same thing to the 500 that we did to Pocono. The Speedway management wisely allowed the CART sponsor PPG Industries to broker a deal whereby the 500 would remain under USAC (i.e. Hulman) sanction but would become a race counted as part of the CART championship in terms of points. This compromise essentially limited the extent of IMS/USAC control over the sport’s technical specifications.

I am of the belief that the CART boycott of Pocono was the one of Tony George’s nightmares; the “threat” to the IMS and its attempted control of the sport that he often alluded to during his tenure as head of IMS and the IRL. The next time that IMS refused to allow its race to be counted toward the CART championship was 1996 when it counted instead toward Tony George’s revival of the USAC National Championship, the Indy Racing League. As with the earlier organization, the purpose of the IRL was to establish its dominance over the sport’s technical outline and rule book; which was accomplished in part with the issuance of a significantly different IRL formula and rule book in 1997. Previous to this, George had already reinstituted the exclusive invitational status of the 500 with 1996’s “25-8 Rule.”

My point is that by seizing control of his sport’s technical specifications and rulebook, Tony George significantly altered the economy of the Indy 500. Specifically, the number of choices that a would-be participant could make in equipment was greatly limited and the range of his/her financial options narrowed. Very quickly, George’s 1997 “production-based” engine formula gave way to purpose-built racing engines and in 2003 CART’s brand of leased racing powerplants was back; and every step of the way the cost of Indycar racing was increasing. Between 2003 and 2006, CART’s economic model was somewhat in place in the IRL in that a would-be 500 entrant had the possibility of manufacturer subsidies/sponsorship to help defray the cost of competing in the big race.

That all changed in 2006 when the IRL became a Dallara-Honda “spec” series. Except for a couple of legacy teams (from CART) there were no more “factory teams” or manufacturer subsidies. Now, anyone hoping to get a piece of the stagnant I500 prize purse had few options; the only equipment choice was a Dallara-Honda and the only available subsidies were from the series itself and contingent on a team participating for the whole IRL series of races (generally for a loss). The absolute cheapest one could expect to operate a one-car shoestring operation was an estimated $5 million (with no real chance of winning) and the top teams were spending $7-10 million or more per car. If one wanted to do an Indy “one-off,” everything (especially engine and tire leases) was more expensive because they were not subsidized. The people who brought this stifling, failed economy into being weren’t the “evil” team owners of CART but rather Tony George and his family and their obsession with owning (in preference to just controlling) the sport.

A good example of the radically changed economy of the 500 can be seen in the person of the Indy 500’s Top Single Race Driver Payoff leader: 2009 I500 race winner Helio Castroneves. For his win, HCN took home a record $3,048,005 record purse (which he had to split with his team). In order to get it, however, it cost Team Penske no less than $12 million (and probably more) to field his car for the season (which was required to get its TEAM subsidy). What kind of a “business” requires an expenditure of $12 million to get back revenues of $3 million? The answer is a losing business. If it were not for Team Penske’s sponsors, it would be operating at a significant loss. Moreover, Team Penske is one of only three teams in the entire IICS with meaningful sponsorship. This is in no small measure a result of Tony George’s control of his motor sport.

Under his tenure the IRL/ICS and most particularly his once-premier race went into free-fall with regard to their popularity and consequently they offer less and less incentive for sponsorship every passing year. Additionally, in a desperate attempt to stem the red ink hemorrhaging from their family bank accounts, the Hulman-Georges have been diverting to themselves every major sponsor who shows an interest in their boutique motor sport. It was a minor miracle that Team Penske managed to horn in on the family’s IZOD sponsorship; but Roger is the only person who could accomplish it.

Now, the H-G’s have taken the final step in the total destruction of Indycar’s economy (IMO). They have undertaken to specify and cause to be manufactured all-new, expensive equipment for the 2012 season without consultation with their team owners; but fully expect them to pay for it. Additionally, they have announced a further reduction in their TEAM subsidy program for the team owners. On the face of it, the sponsorship they have been able to secure from IZOD has been squandered. There’s no telling what they’ve done with their part of it (i.e. “Tony Tax”) but the portion spent by PVH on “activation” and marketing of the sport has obviously been wasted. Race attendance and television ratings are at all-time lows; discouraging any would-be new sponsors and surely giving PVH second thoughts.

This year, for the first time in memory, Roger Penske was not able to sell primary sponsorship for his IICS team. He had to use his extensive b-t-b contacts to arrange different multiple “associate” sponsorships for each of his cars. His is the only team in the IICS paddock who will not accept ride buyers and that is because he is the only team owner who managed to secure adequate sponsorship. So, if Penske is the IICS’s “best-case scenario,” what does this say to his objection to buying new aero kits (when his is the flagship team for GM!). It says the ROI potential for the 2012 IICS is no longer viable and its economy is close to the point of collapse.

In his last published interview in May 2010 before returning to the family fold, Tony George was asked: Was It Worth It?

"HC: Given all that you know now -- all that you have been through -- was it all worth it to form the Indy Racing League? And why?

TG: That is a very broad, open question and the only thing I can do is reiterate what I said earlier, but perhaps say it another way.

There is great value in the Indy Racing League; it exists to support the institutions of the Indianapolis Motor Speedway and the Indianapolis 500 Mile race; and I am proud of its contributions to the sport.

[What he said earlier was:]

TG: Much has been speculated, wildly inaccurate, about how much was spent to build the IRL. I am proud that we have spent a lot less than it would have taken to buy a professional sports team in the NFL, MLB, NBA or even the NHL – and we own the whole league."


In those comments you have the Hulman-Georges’ complete rationale for destroying our sport:

One, they wanted to own the entire sport so they paid perhaps half the cost of buying the New York Yankees to found a motor sport that earns far less that the Indianapolis Indians, the city’s AAA club;

And, two, their motor sport “exists [only] to support the institutions of the Indianapolis Motor Speedway and the Indianapolis 500 Mile race," and has largely succeeded in doing irreparable harm to both.

JMO

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