IRL could fold by 2013 UPDATE Indy Racing League founder Tony George dropped a bombshell in December when he told an industry group that he would shut down the open-wheel series if it didn’t break into the black soon.
When pressed about the possibility of being profitable by 2013, George responded, “It has to be, or there won’t be a 2013. We expect a return on that investment.”
|Tony George wearing a hat with what is beyond a doubt the goofiest slogan in all of sports. People have been known to fall off their chair with laughter when they see it. Actually, the only person fit to wear such a hat is George himself because he owns Indy. Regardless, the phrase is ludicrous.|
The remark before the Sports Business Journal Motorsports Marketing Forum in New York was scarcely reported outside racing circles and received virtually no attention from Indianapolis media.
Now racing analysts wonder what would happen to the fabled Indianapolis Motor Speedway if the IRL were to collapse.
“It’s difficult to envision the Indianapolis 500 without a supporting series,” said Tim Frost, president of Frost Motorsports, a Chicago-based business consultancy. “I’m not sure any of us know what would happen if Tony George pulled the plug on the Indy Racing League. I can tell you, it wouldn’t be good.”
Most analysts are optimistic George will hit the goal and see the series thrive. Even Frost rates the IRL’s chances of reaching profitability within four years at around 70 percent—a figure other analysts agree is reasonable.
It’s been an uphill battle. Analysts estimate George has poured more than $250 million into the series in its 13 seasons. When asked in the New York forum if the league had turned a profit, George responded, “Not yet.”
IRL lieutenants are preparing for an all-out sales and marketing assault during one of the worst economic downturns since the Great Depression. The marketers are counting on last year’s unification with rival open-wheel series CART, and a three-year centennial celebration surrounding the Indianapolis Motor Speedway and Indianapolis 500 that starts this year, to rev the engine.
One thing is certain: Results of the campaign will profoundly affect open-wheel racing worldwide, not to mention in Indiana.
“We’re talking about tens of thousands of jobs and hundreds of millions of dollars in economic impact,” said Tom Weisenbach, Indiana Motorsports Association executive director. “We find new racing-related companies in Indiana every day.”
If the IRL doesn’t turn a profit in the next four years and George keeps his word, the Speedway would face interesting options. George, who is also IMS chairman, could maintain the Indianapolis 500 as a stand-alone open-wheel event, or make it part of an open-wheel series that starts in the wake of IRL’s death. Both options seem unlikely.
The other option would be to join Formula One. As strange as the idea might sound, the Indianapolis 500 was a fixture on the F1 calendar from 1950-60, though most of the drivers who raced here didn’t compete in many other F1 races.
“If the IRL went away, they wouldn’t have tumbleweeds blowing down the front stretch,” Frost said. “It’s just too much of a valued fixed asset to let sit during May.”
The Allstate 400 at the Brickyard NASCAR race and the MotoGP motorcycle race are thought to bring in a combined $35 million to $50 million in revenue, but motorsports analysts said those races don’t hold a candle to the revenue generated by the Indianapolis 500.
The Speedway doesn’t release the number, but ticket sales are just the tip of the iceberg. Whatever the number, it’s augmented by hospitality, merchandise and concession sales during almost the entire month of May, Frost said.
Progress and skepticism
While the IRL has gained some traction in the last year, skepticism abounds about its future.
“I’m not sure I’d bet they’ll be in the black within four years,” said Dennis McAlpine, a motorsports financial analyst based in New York.
However, Terry Angstadt, president of IRL’s Commercial Division, pointed out that the series has signed five major sponsors this year: Apex Brasil, Izod, Hot Wheels, Orbitz and The National Guard. The Apex, Izod and Hot Wheels deals now constitute three of the series’ five biggest sponsors, Angstadt said, along with Honda and Firestone.
Angstadt said there’s a 70-percent chance the league could sign a title sponsor for 2010. IRL officials hope for a deal worth at least $10 million a year. More at IBJ.com12/03/08 Day one of the ninth annual SportsBusiness Daily/SportsBusiness Journal Motorsports Marketing Forum at the Westin at Times Square in N.Y. yesterday featured a one-on-one with IRL CEO Tony George. A few key quotes by George, including the fact that he is prepared to fold the IRL if it does not turn a profit by 2013:
Q: How many races will there be on the 2010 schedule?
George: Sixteen to 20 is a comfortable number for what we do. There will be opportunities for us to do more international outreach. ... Drivers want to drive every week. Assuming the operating budgets and sponsorships are there, we could do 20-22 races a year.
Q: Is IRL profitable as a stand-alone business?
George: Not yet.
Q: In 2013?
George: It has to be or there won’t be a 2013.