Is Back In The Black Noteworthy?

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Despite the fact that there could be some serious spin in the article, the Sports Business Journal reporting that the Motorsports Division of Hulman & Company finished 2014 in the black for the first time in years – has to be interpreted as good news. I believe the actual quote says that “The IndyCar Series and Indianapolis Motor Speedway are on track to be profitable for the first time in more than five years.”

I interpret that to mean that the Indianapolis Motor Speedway had an even better year than usual, with the Grand Prix weekend added in; and that IndyCar didn’t lose as much as it usually does. Therefore, the two entities combined probably showed a slight profit. I seriously doubt that the series was profitable.

Still, good news is good news. The Motorsports Division of Hulman & Company had been bleeding red ink for years. Attendance had previously been down for the Indianapolis 500 in the latter part of the last decade. It was significantly down for the Brickyard 400 in recent years, and Formula One had been a financial burden in the last decade.

Some feel that there is way too much emphasis placed on the Indianapolis 500 compared to the other events on the IndyCar schedule. That’s a debate for another day, but if you are an IndyCar fan, you want every single event at the Indianapolis Motor Speedway to be a financial success. Be it the Indianapolis 500, the Brickyard 400, the Moto GP or even the Vintage race – anything that brings profitability to IMS, is cash to sustain the Verizon IndyCar Series.

Mark Miles is facing his third season at the helm of the series, when the 2015 season kicks off at a site yet to be determined. It is now his baby. 2014 was dubbed a “transition” season. So far, the jury is still out as far as I’m concerned. To date, his biggest move is to bring Verizon on board as the title sponsor of the series. He also was able to unload the Indy Lights Series, which was struggling under the IndyCar banner.

Miles has alienated fans, however. His insistence on continuing to end the season before Labor Day, which I was originally for – has irked fans who resent the fact that the calendar says it is still summer, but the season has now been over for a couple of weeks. Regardless of how much fans and tracks are miffed, Miles has made it clear that this is the way to go. Mark Miles may very well be proven right, but an olive branch of some sort to the fans may not be a bad idea. The 2015 schedule, in general, doesn’t appear to be coming together as fans had hoped, either.

Another source of fan concern is what appears to be a lack of promotion that fans feel is needed to grow the series. With his team of Jay Frye and CJ O’Donnell on board, there may be a lot of things working in the background – but we fans aren’t seeing anything tangible. The bunker mentality that was prevalent in the Tony George era, seems to have returned. Fans don’t know what’s going on, so they get concerned. Transparency does not seem to be a virtue of the Mark Miles era.

But while we’re bashing Mark Miles, let’s remember one thing. He was charged to stop the bleeding, first and foremost. Tony George had an open checkbook to support his pet project – the Indy Racing League, now known as the Verizon IndyCar Series. His sisters grew weary of seeing their family fortune continually dwindle, while he bolstered the series and upgraded IMS into a world-class facility.

Randy Bernard was brought in. He had a long-term vision to grow the series by getting new fans through excessive promotion. That took a hefty investment on the front-end. After a sea of red ink from the Tony George era, the board wasn’t too keen on giving Bernard the same open checkbook that George enjoyed. After some shady maneuvering by some cowardly owners, Bernard was kicked to the curb and Miles was brought in.

His vision was totally different. Miles was focused on the here and now. He saw a hemorrhaging balance sheet and slashed budgets, eliminated positions and cut costs wherever he could. Two years later, he can claim to be in the black. But at what cost?

The ledger looks healthier than it has in years, the TV ratings are showing some improvement and attendance was up for events at Indianapolis. But Fontana took a predictable beating in the ratings and attendance, while attendance at Pocono took a nosedive, Milwaukee was disappointing and several others were mostly flat.

One of the biggest concerns from fans has been the high sanctioning fees that IndyCar is charging tracks. So many tracks that fans covet have said that they cannot make money on an IndyCar race under the current structure.

I don’t claim to be a business analyst, but those who are much more in the know than I am insists that the business model that IndyCar is using needs to be blown up and completely redesigned. The theory is to charge tracks a lower fee, thereby making ticket prices lower. Attendance would rise, with more people to buy merchandise, food and beer. It looks great on TV to have full stands and that leads to more people taking interest.

But if you read the article, Miles says he actually wants to raise sanctioning fees. Isn’t there a simple business practice known as supply and demand? While we hard-core fans all love the product, we are currently in the vast minority. There is not a huge demand for IndyCar in the public’s mind. How will higher sanctioning fees improve that?

In my very limited wisdom, I think Mark Miles should take one of his eyes off of the bottom-line and look into the future. There is a big difference in keeping the series in the black and growing the series. It takes promotion and some keen minds that can read the latest market trends. What was popular in 1990, has no bearing on today. Personally, I don’t care for a lot of today’s trends, but I don’t want to see my passion wither on the vine either, just for the sake of tradition.

Maybe the crack marketing team of Frye and O’Donnell are working on a long-term plan and are on the verge of launching something really big. The problem is, the bunker mentality doesn’t even give fans a glimpse. Therefore, we get frustrated.

But give Mr. Miles his due. He has restored financial order to the Motorsports Division of Hulman & Company. The board is now happy and the Hulman-George family is now happy. Maybe now, it’s time to make the fans happy.

George Phillips

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18 Responses to “Is Back In The Black Noteworthy?”

  1. Bent Wickerbill Says:

    With the current state of affairs, I am still amazed (yet thankful) that these folks were able to convince a company of Verizons stature to open their checkbook. IMHO the series is in a freefall, between high sanctioning fees, a shrinking number tracks/dates (and some psychotic compulsion to end the series by labor day) available and a high priced (essentially non racing) management group who takes its advice from a high priced non racing consulting firm. This is a prescription for disaster. I recall years back when I worked for a fortune 500 aerospace company, the new (non aerospace background) CEO stating that one need not be an aerospace man to manage an aerospace company and promptly placed many of his non aerospace buddies on the board. Well after a few years of blundering and bumbling through several very foolish acquistions and business decisions, he finally realized that he was going to actually have to put some of our corporate officers with actual aerospace backgrounds on the board and he was going to actually have to listen to them if he did not want to wind up an even larger failure than he had been to date.. Nuff said…

  2. miles did not alienate me by ending the season on Labor Day. the season will be plenty long enough once they start a bit sooner.

  3. It takes sustained profitability over the long term for a business to succeed, so the next stanza in Mile’s back-in-black song is to keep it going. IndyCar is like the whale (IMS) and the guppies (everything else) right now. The strategy seems to be to make the whale bigger to help sustain the guppies. I sincerely hope it works out for them. It seems more likely that there is revenue and fans to be gained outside Indiana, but I have not run the numbers. It’s very possible that the IMS focus is the best way to go based on available data/research. I’m more than content to let Mr. Miles stress over all of this. I’ll just focus on things within my control, like decisions over what entrainment to consume. I live eight hours from Indy, so I hope everyone enjoys everything there without me. I noticed zero change/improvement in my annual attendance at the Iowa Speedway race, in fact I felt like I didn’t get $65 worth of value from the one-race show there this year. Next year I’ll walk up and buy the cheapest available seat. But, hey, every consumer gets to decide these things for him or herself.

    • Phil Kaiser Says:

      A former newspaper writer should know it’s “Miles’s” NOT Mile’s! His name is MILES and the possessive of that is Miles’ OR Miles’s, c’mon ‘Dog!

      • Phil Kaiser Says:

        And I’m really getting sick of P’dog’s constant drum beat that Indianapolis gets too much attention. IT’S THE BIGGEST SINGLE DAY SPORTING EVENT IN THE WHOLE DAMNED WORLD, do you not get that? Do you not get that it’s ALWAYS been that way in Indy Car, for nearly 100 years! Enough with the whining about the biggest single day sporting event in all the world already! Sorry IOWA doesn’t have anything like that except CORN!

        Done with my rant, thank you….

  4. Another thing worth noting from the article is that part of the way they were in the black was by laying people off, so its not like Indycar suddenly made a ton of money. Increasing sanctioning fees is insane. There is no justifying that decision unless you literally only want to see racing at street courses, Barber, Mid Ohio, and Indy. My only hope is that it was taken out of context; in that case Miles like is talking about sanctioning fees as it relates to international races. Still not great, but a little better than just increasing sanctioning fees across the board.

    As for the growth vs. money thing, that’s basically what I’ve been saying for awhile. I loved Randy Bernard even when I didn’t like every single thing he did. Randy wanted to grow the fanbase, but does Miles? Some of his decisions call that into question. From ending the season at 1am to starting the season in Dubai, these aren’t moves to grow the fanbase. Well, unless you’re trying to grow it in Asia and the Middle East.

    Another example of why I dislike Miles is everything is rule by committee. Even race control. I like a more hands off race control, but race control by committee is a terrible idea, and I hate the way they drove off Barfield, who in my opinion did a great job.

    To sum up, personally Indycar 2014 was one of my 2 least favorite seasons of Indycar (2009 being the others) so that sums up how I feel about Miles as well as anything.

  5. The 1st step to respect is giving a reliable product. As pressdog mentioned, will it keep going? I believe it will, and here is why, I saw more advertising locally for the Grand Prix of Indianapolis this year, it was on local TV, it was on the radio, it was on billboards. I believe this is why INDY 500 attendance saw a gain. I cannot say what other tracks did in promoting their races. but rolling up your sleeves and going to work is part of it. I truly believe effort is required from each track. What plans are in the works? I am sure we will find out at some time. Earlier season starts make the season long enough, with and end at Labor Day. As we have seen this week, maybe the start of a decline with the NFL is beginning, and just maybe, we are starting to see a rise from the ashes of INDYCAR.

  6. Short term gain = long term pain. Nothing they are suggesting looks positive to me. Very few indy fans would care about the international races. This is just more of becoming F1 Lite. And they cannot be cheap to operate. And if they are international, it likely means all street courses, of which there are already too many.

    I would expect further steep price increases in 2015 at the tracks for tickets and concessions because that is what the consulting firm recommended. Lets see how that goes over.

    I had not heard about the increasing of sanctioning fees. How insane is that? Someone needs to discuss with current Indycar management the theory of elasticity of demand. As prices rise, demand drops. While there is some “inelasticity” to demand for the Indy500 itself, its not a necessity and will suffer at some point. Prices should actually be reduced at some of the other events to build up tradition and loyalty, of which this is very little as the league itself has shown little loyalty to these tracks, with adding and dropping from the schedule and moving races to different dates every year.

    My prognosis is that this is a temporary period of being “in the black” led by higher prices, letting people go, and letting the physical plant at Indianapolis deteriorate further rather than investing money in its upkeep.

    One way to save money is not to promote your races. I think we have even seen that one. Perhaps now is a time to bring to their attention another economic term. Opportunity cost.

  7. Phil Kaiser Says:

    George, it’s still the Indy Racing League with the IndyCar series under it’s banner….

  8. It has been said here and elsewhere that Randy Bernard should have been given more time. Well, sure. I liked Randy also. But the reality is that now Mark Miles is the guy so let’s see what time will bring under the command of Mark and his team. Jumping from one team to the next every few years like IndyCar does with tracks is not sustainable.

    I was very disappointed, however, to read that he intends to raise sanctioning fees. I am just astounded by that. The current sanctioning fee has been the main obstacle to regaining tracks such as Road America.

    My final remark for today is this: It irks me no end to read once again that someone who was not at the race thinks attendence at Milwaukee was disappointing. I was at the race per usual. The crowd was good and gets a bit better each year because the Andretti group does a wonderful job of promotion. All race tracks and all racing series these days are strugging with attendence issues. IMHO 25,000 may be the new normal. Keep in mind as you sit on your couch watching the race on TV that crowds of 40,000 at Milwaukee and elsewhere were when there were little or no races on TV and before the internet. Milwaukee would have had an even better attendence this year if the race had not started so late. Why did it start so late? For TV reasons. Track promoters these days not only have to compete with other forms of entertainment or recreation, but with live TV. So, lets say Pressdog decided to get out of his basement (as if) to come to the Milwaukee race. Is he likely to do that for a race that starts late in the afternoon on a sunday. Probably not. And with Nascar moving to NBCs, you can expect IndyCar races to continue to begin late in the afternoon. Some racing writers and commentators think that following Nascar will improve IndyCar TV ratings even more. Perhaps. And those new viewers watching on TV will likely comment: “Gee, the crowd at Milwaukee looks disappointing.”

  9. billytheskink Says:

    Miles should WANT to raise sanctioning fees. There’s nothing wrong with that as a want, a goal. But that is what it should remain until Indycar can generate the gate receipts and television revenue to justify it.

    Raising sanctioning fees at this time would handcuff the series’ ability to attract and retain promoters even more than mandating that the season end by Labor Day. On that topic, that is the most serious problem with the Labor Day cut-off date, the problems it creates for promoters. There is no more speculation, the evidence is in on the damage it has done to Houston (critical) and Fontana, a pair of TITLE-SPONSORED events.

  10. DZ-groundedeffects Says:

    My essential Indycar thoughts that pertain to events/venues and ultimate health/survival of the series:

    1. Perception of value and scarcity will drive event market pricing.
    2. Low prices with excess supply indicate low demand.
    3. Increase demand by increasing perceived value.
    4. Only when demand exceeds supply, should prices be raised.
    5. Empty seats on TV support the perception of low value.

    Indycar must invest actively and aggressively alongside event promoters/venues at improving the product value to the event FANS (i.e. event goers).

    When there are too few resources/too little investment devoted to constantly increasing the perceived value to the event buyer, the devaluation for all product-related (TV, Sponsorship ROI, Merchandise, etc.) begins.

    Only when the event demand exceeds supply can reducing the cost of promotion ever be considered.

    • Amen. There’s nothing wrong with raising fees as long as the track owners are getting something. Do any of us have any solid figures on what the current fees are, what percentage they are proposing for an increase, or what IndyCar gives to a promoter for these fees? Until we do, I’m not sure that any of us should worry about that aspect of what some perceive to be wrong nor do I think it’s really any of our business,

  11. I agree with Ron Ford, Milwaukee was up and has steadily increased each year. I have been there each year and it is because Andretti gets it, he markets the event each and every year.

  12. The idea of raising sanctioning fees is something of a double edged sword, and neither edge is good. First, my guess is that the increased sanctioning fees will not hurt the foreign groups hoping to land an IndyCar event. (See Randy Bernard and his China event.) That may be good for the “books,” as the China deal was supposed to be, but only if it is sustainable. However, this thinking lends to a broadening of the international (spell that F-1 Lite) aspect, probably to the denigration of the domestic series.

    Second, raising the fees will almost certainly drive oval racing out of the series with the exception of Indianapolis. Margins for the oval tracks are razor thin as it is for any race not named the Indianapolis 500. If you want an all street racing series, that’s ok for you, but you can do it without me. I’ll watch Indy and let the rest of the series go pound sand. Also, the side-effect of raising the fees is that even the street course operators may find it hard to justify over the long haul, so I suspect that this could also have a negative effect on having any venue stability.

    Look, one of the really good things that NASCAR does is to keep and build date equity with their venues (in most cases, the exception being the Labor Day weekend which has gone from Fontana to Atlanta, and now probably to Darlington. Note that Darlington, one of their oldest venues, has been treated as something of a red-headed step-child, moving from two events to Labor Day to Mother’s Day Eve, to late April, and now, back to Labor Day over the last 15 years.)

    But for the most part, if it’s the first race of the year, it’s Daytona. Fourth of July as well. You’re going to have a spring and a fall race at Talladega, usually around the same week of the year, and the same goes for Charlotte, Michigan and Pocono: 2 races around the same time of year EVERY year.

    Frankly, I think the best way to promote oval racing is to run the entire “ladder” series at each oval venue, much as was done with the GP of Indy weekend. This lends itself to more racing for the fan, as well as more money for the promoter in terms of concessions. It also lends itself to better oval training for the up and coming rivers, many of whom don’t even GET to race on an oval except the Freedom 100 at Indy. If you DO that, perhaps you can justify an increase in the fee.

  13. My first reaction to all of this was “who cooked the books.” Is this all smoke and mirrors? I do agree that its good news that Hulman etc. didn’t lose as much money this season as they have in the past few years. But what about long range planning?

    One of the pluses was the change in how sponsorships are now packaged with both IMS and the series. Okay a good start. Verizon seems to be doing more in one year than IZOD ever did. And even though I am not a big fan of ABC’s coverage, being on the big network for the month of May and some early races is an advantage. Another point for Miles.

    Next year’s schedule is a concern. I am hoping it will be out momentarily. (Don’t even get me started on ending on Labor Day. And yes I do watch other sports besides IndyCar, but I make time for racing). Upping the sanction fee isn’t going to bring new venues into the series and may discourage others in renewing contracts. I would hate to lose any more ovals. However, I doubt Fontana made much money this year, even with MAV-TV as its sponsor. We shall see.

  14. Oh, so many thoughts.

    Like ‘skinky said above, Miles should absolutely WANT to raise sanctioning fees. More $$$ coming in = more $$$ he can spend on other stuff. However, I have a feeling that at this point, those convos will go something like this:

    Miles: “We’d like to raise your sanctioning fee.”

    Promoter(s): “Nope. If you do, we will cancel the remainder of the contract and we’ll never do business again.”

    Miles: “Okey-dokey, then! See you next year!”

    On the other hand, were Miles able to convince all the promoters to raise sanctioning fees by even as little as 2% (by all accounts, that’s between $10k and $30k, depending on event…and remember, that statement in the IBJ thing doesn’t talk about how much he wants to raise fees by or when he wants to do it, just that he’s interested in doing that SOMETIME in the future), and then convert that extra dough (which could be several hundred thousand dollars) into a couple extra marketers or PR folks, who he could then have work part time for IndyCar/IMS and part time on behalf of the promoters/tracks (which would, theoretically, help them offset that increase with an increase in ticket sales), perhaps this isn’t such a terrible idea…

    As far as Indy-centricity, I feel like I/we have addressed this in the past, but here’s how that works: IndyCar has one site where they attract several million eyeballs every year, including attendance that dwarfs the next largest event by a factor of 4 or 5. They have 14-16 other events (I’m too lazy to actually look up the real number right now). Hypothetically, if you have $1 million of discretionary cash that you can spend on increasing promotions, you can either A) plow all or the vast majority of that $1 million into the place where it’s most likely to be noticed, or B) divide it basically evenly among the 15-17 events (because if you leave a couple out, they will probably be superpissed), and wind up with just $50-70,000 per event to spend. Does that $50-70,000 worth of promotion at all 15-17 events buy you more than a handful of ticket sales and/or new fans? If the answer is “no” (because that’s really not all that much cash…worth maybe a few billboards, a handful of radio spots and a couple of in-person appearances by drivers, who have to be flown in, fed and put up in a hotel), then you’re better pooling your cash and spending it where it’ll make the biggest impact. This is why you see companies with almost zilch for advertising for most of the year go all-in for a Super Bowl ad: tons more people will see that one ad than will see 1,000 billboard ads or 10,000 spots during the local news or whatever.

    Meanwhile, here are the other things I still don’t get:

    1) The international races are meant to run at a profit to the Series and the teams by charging huge sanctioning and other fees. They’re (hopefully, if Mark Miles is worth his salt at all) going to be structured such that that that profitability won’t matter if a single person in the US even sees the race. And if the Series and teams can make a bunch of money off of the international races, then I don’t understand what the problem could possibly be with them.

    2) Everybody is complaining about the re-structuring of the schedule, in that “we fans” (that’s CURRENT fans) don’t like that we suddenly have no racing to watch. In nearly the same breath, many of those same folks talk about how IndyCar needs to focus on “attracting new fans”. Getting the schedule away from the NFL season is precisely what IndyCar is trying to do: make it more possible so that new fans can see the sport. If IndyCar is on TV during a weekend when potential fans are probably watching the NFL (which, statistically speaking, is pretty likely, given the NFL’s gigantic ratings), then there is about a 0.0% chance that any of those people would even consider IndyCar as an alternative. Why keep ramming your head into the wall wondering why you can’t pull squat for ratings after September 1st when it’s pretty obvious what most of America (again, statistically speaking) is doing instead?

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