Editorial

Champ Car and IRL can learn from the SIRIUS/XM Merger
 
by Mark Cipolloni

 October 19, 2007

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Recent News: Satellite Radio: Cowen Says 70%-Plus Chance Deal Closes

In a brief note previewing the upcoming earnings announcements for XM Satellite Radio and Sirius Satellite Radio, Cowen analyst Tom Watts asserts that there is a “70%-plus chance” that the proposed merger of the two companies wins government approval.

Watts says a Department of Justice decision on the deal should come “relatively soon,” with the two companies in full compliance with the DoJ’s information requests. He says a ruling from the FCC should follow soon after.

Watts has Outperform ratings on both stocks, “even without M&A potential.” He thinks both companies can beat the market on free cash flow potential alone. He thinks both companies low-balled subscriber growth estimates for 2007, “setting the stage for outperformance in the second half.” If you have to pick just one, Watts prefers XM, based on stronger OEM relationships with automakers, and a better relative valuation.

XM reports earnings on October 25; Sirius on October 30.

So why do I bring this up?

Maybe the Champ Car World Series and Indy Racing League should again take a look at what the two satellite radio companies are doing.  There are a lot of things that are common in both cases;

1. SIRIUS Satellite Radio and XM Radio both provide radio, entertainment, sports, news/talk content.

Champ Car and IRL both provide great open wheel racing at various venues.

2. Both Satellite Radio companies spend millions on advertising, marketing and satellite hardware.

Champ Car and IRL do advertise, however very little.

3. Again, both Satellite Radio companies spend money on personnel, talent and Corporate offices.

Both Open Wheel series have the same type of personnel, driver talent and separate Corporate offices.

4. SIRIUS Satellite Radio and XM both have personalities and or content that have helped sell their services. (SIRIUS has Howard Stern, NFL, NBA, NASCAR and 100% commercial free music). (XM has MLB, Oprah, Opie and Anthony, the Golf Channel, IRL and NHL).

Champ Car and IRL have premier events. (CCWS; Australia, Long Beach, Cleveland, All Canadian/European Races, Mexico, Vegas. Tracy, Rahal, Wilson, Servia, Junqueira, Power, Tag and Legge). (IRL; Indy 500, Detroit, St. Pete, Mid Ohio. Kanaan, Castroneves, Dixon, Andretti and Patrick). Just to name a few.

5. SIRIUS and XM compete with other things, not just with each other. (Terrestrial radio, MP3/iPod players, CD, HD radio).

Champ Car and IRL compete against NASCAR, ALMS and F1.

So if you take a look at the whole picture.

Open wheel racing can capture their fans back if both sides can put their “egos” away and make racing Champ Cars/Indy Cars what it once used to be. Both series if combined would save millions of dollars on personnel (sales, marketing, communication etc), marketing and advertising coverage in print and/or television.


You would have the absolute best drivers in both series competing against each other and a larger car count. Sure, you’ll lose some teams and drivers, but haven’t both sides already experienced this already?

Look at what IRL started with in the beginning…..and look at the teams that bailed on Champ Car and went with the IRL. Then you have the top teams at CCWS that have stayed and teams that have come and gone.

Open wheel racing is being dominated by the NASCAR folks. Why continue to have the open wheel series compete with each other when it can and should dominate racing….period? 

Look again at what each open wheel series has; Indy 500, Long Beach, Australia, Canadian races, Belle Isle. We’re already going overseas for races right? You want Corporate Sponsorships to come back to support 1 series.

Australians get it here (in Surfers)….they’ve done this event right since day 1. The Canadians still love their racing. Long Beach is always a Southern California party. You can’t tell me guys like Kanaan, Castroneves and Dixon miss coming to these Champ Car events. And I know that Champ Car drivers would love to have another shot at winning the 500.

For those fans who have never experienced the Lexmark Indy 300 here in Surfers Paradise….you don’t know what you’re missing.  Four days of racing, fan events, etc.  This country gets what this event is all about……Paul Tracy said it best at Thursday’s press conference when asked about the state of Champ Car “maybe this series is taking on a little bit of water, but I’ll be here and the last one with the pail emptying the ship”. Tracy is Champ Car’s best spokesperson…..maybe they should try utilizing him to their full potential.

Maybe everyone should take a huge step back and look at the state of open wheel racing and see where both sides can “compromise” to save open wheel racing. It won’t happen overnight…..but this has to be looked at again. Sure cars will have to change, engines will have to be changed, people will lose jobs, new people will come in and the right people will stay and make open wheel racing successful again.

The split has been all about control of the sport.  Well guess what guys, you soon won't have anything to control because there won't be anything left.  It's time to put the control issue aside. 

One phrase I like to use is "When in doubt, follow the money."  A similar one is "When in doubt, just do what's right."

The author can be contacted at markc@autoracing1.com

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