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23 Francesco Dracone 7
24 Carlos Huertas 6
IndyCar: It's the TV Ratings Stupid!

by Mark J. Cipolloni
Monday, October 21, 2013

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We here at AR1.com have harped on the fact that the low TV ratings are killing IndyCar.  How it would be far better for IndyCar to put all 18 races on ABC as the best investment they could possibly do for the series.  I figured it was time to better explain why we say what we say about the recent losses of sponsors Go Daddy, HP, IZOD, and the impact of IndyCar’s TV on this.

AR1.com laid out the only possible solution for a permanent fix, but the powers to be think they know better and will continue to run the sport into the ground because they don't yet realized the root cause of the problem. It's all spelled out in that 2-part article.

But the permanent fix will take time to institute.  Right now there is a more immediate issue (sponsors dropping like flies) that must be addressed, that has a quick fix.

Let's do a comparison and put it into terms that you can better understand.  One of these is CPM, which is regularly used in the advertising industry to quantify the value of audience impressions.  This is basically a "cost it takes to reach 1000 impressions", and is used regularly to establish the costs and values of :30 second spots, taking into account the Rating/audience size of the programming. 

If you do a simple comparison of the NASCAR properties and the IndyCar product, you will quickly see why sponsors are leaving IndyCar and going elsewhere, it is due to the costs associated with Team sponsorship and the lack of TV viewers in IndyCar. 

Let's take the NASCAR Sprint Cup Series, where full year sponsorships are around the $18 million per year range.  With 36 races per year (not including the 3 "special events"), and an average of 6.5 million viewers per race, you can get a total of approx. 234 million impressions on TV.  This means that the NASCAR Sprint Cup team sponsorship offers a CPM of $76.92.  That means it costs a primary team sponsor $76.92 for every 1000 impressions (at $18 million/year investment).

If you take a look at the Nationwide Series, which is a bit closer to IndyCar in terms of what a sponsorship costs, you can see that the CPM goes up, but the overall investment is lower.  This is mainly due to the fact that TV viewers are smaller for the Nationwide series.  A typical $6 million primary sponsorship of a top team, and the average viewership of 1.5 million viewers per race, means that a sponsor would pay $121.21 per 1000 impressions (33 races at 1.5 million viewers is 49.5m impressions).

When you take a look at the IndyCar Series analysis, you see a few things that are a problem.  One is that the primary sponsorship of a car is close to what Nationwide charges for a primary, which is about $5 million for IndyCar. 

Secondly, you see that while the costs are similar for sponsorship, IndyCar has almost half as many races, which means smaller overall viewership opportunities.

Thirdly, the IndyCar ratings/viewership is abysmal compared to even Nationwide.  If you take an average of 380,000 viewers per race for 17 races, then add an additional 3 million viewers for Indy 500, then you get 9,460,000 viewers for IndyCar for a season. When you factor in the $5 million sponsorship fee that a company would pay to be with a good team, then the cost per 1000 impressions for IndyCar is $528.54. 

There are not too many marketing directors that could keep their jobs if they were spending almost 5 times more for IndyCar than Nationwide to reach 1000 impressions.

Therein lies the problem with IndyCar and sponsorship right now.  While many would say that $18 million for a Sprint Cup sponsorship is expensive, it is actually CHEAPER than IndyCar’s $5 million due to the fact that Sprint Cup has hundreds of millions more impressions than IndyCar does. 

The good news is, this very simple analysis should show the leadership of IndyCar where they need to focus on getting more competitive for sponsorship dollars.  One is obviously to increase the number of impressions of the product through a better TV rating.  Second is to bring down the costs of entry for teams, so they can reduce the sponsorship dollars required to run in the series.  Thirdly, is to INCREASE the number of events, not decrease them.  This means there are more impressions gained by holding more events, both on TV and live attendance. 

For example, if they put all races on ABC, they would get about 1.4 million viewers for each of the 17 races plus 3 million viewers for Indy = 26,800,000 viewers for the IndyCar season (vs. 9,460,000 now).  When you factor in the $5 million sponsorship fee that a company would pay to be with a good team, then the cost per 1000 impressions for IndyCar is $186.56 (vs.$528.54 now).  If they increase the number of races to 20 the cost per 1000 impressions would be $168.92

That number is more in line with the Nationwide series.

My fear is that until this situation is resolved, more brands will continue to leave the sport and the knowledgeable companies will stay away from IndyCar sponsorship.  With the economy worse than ever in the sponsorship world, companies turn to this type of analysis, and I have to believe that IndyCar is a very tough sell right now.

So as someone who has followed and advised on this sport for many years, the best possible thing the owners of the IndyCar series can do right now is run, not walk, to ABC (and its 1.0+ ratings and 1.4 to 1.6 million viewers average) and do a deal to put all races on network TV. 

Your future and your survival depends on it.

Mark Cipolloni
President
AutoRacing1.com (AR1.com)

Feedback can be sent to feedback@autoracing1.com

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