SBJ/October 10-16, 2011/Leagues and Governing Bodies

IndyCar faces push-back on global plans

Izod IndyCar Series President Randy Bernard is intent on expanding the number of races from 16 to 20 by 2013, and he wants to add as many as two races in emerging markets such as China or Brazil.

But the idea of more international races has become a divisive issue among team owners. Roger Penske, Chip Ganassi and other owners of large teams oppose the idea of more international races because it cuts into the domestic exposure they guarantee their seasonlong primary sponsors. But small-team managers and owners such as Dennis Reinbold and Panther Racing’s Chris Mower favor it because the series covers travel costs for those races and the markets offer opportunities for new, one-off sponsorships.

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Adding a second race in Brazil is among the plans the IndyCar Series is considering.
Bernard is aware of the divide and is trying to balance those competing viewpoints as the series finalizes its schedule for 2012, which is due out this weekend during the season finale in Las Vegas. In 2011, there were two international races on the schedule, Sao Paulo, Brazil, on May 2, and Motegi, Japan, on Sept. 18, and Bernard has talked about adding a second race in Brazil and a race in China in the future.

“I know some owners don’t care for it, but our sponsors overwhelmingly want to go to major markets like China and Brazil where they can do business,” Bernard said. “We’re not going to do events internationally [just] to do events. They have to be strategic for our partners and us.”

Part of the reason the series is looking to add races overseas is that it can secure larger sanctioning fees for those events and increase the value of its international TV rights. Cities in emerging markets often are willing to underwrite the cost of sanctioning fees in order to bring races that can showcase their city to a worldwide audience. IndyCar already has seen the benefit of holding races in Brazil, which the series says delivers a TV audience seven times as large as the one it gets in the U.S. That market’s been critical to the series’ ability to generate revenue in the low seven figures for international TV rights.

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“The majority of races have to be in the U.S.,” Bernard said. But he added that a complement of domestic and international races is what it will take to make the series “financially successful.”

Chris Lencheski, president of Phoenicia Sport, which represents Newman/Haas Racing for sponsorship sales, said Bernard needs to be careful in balancing the financial opportunity with the needs of the series and its teams.
“Going international gives them an opportunity to get significant sanctioning fees, so you can respect that,” Lencheski said. “It stabilizes the financials, potentially, but the trick will be using the new funds to raise the awareness of the series on television.”

Michael Andretti, owner of Andretti Autosport, said: “With some sponsors it affects them positively. With some, it doesn’t do any good. Randy’s going to have to be careful with the balance. One or two is OK, but the focus has to stay in North America.”

The biggest opponents to international expansion remain the sport’s most accomplished owners, Penske and Ganassi. Both criticized the idea during last month’s IndyCar race in Baltimore. Penske, whose primary sponsors are Izod, Verizon and Shell, said overseas events hurt sponsors, and Ganassi said they hurt television.

“As long as we stay in U.S. time zones, racing works,” said Ganassi, whose primary sponsor is Target, a U.S. retailer that only recently expanded to Canada. “We get 12 hours off the time zone, by the time that race airs on television, people are going to know the outcome already. You’re not going to watch a two- or three-hour race on tape delay.”

IndyCar’s international race this year in Brazil, which was postponed due to rain, drew 17,000 viewers on May 2. Japan, which was aired live and on tape-delay, drew 112,000 viewers and 109,000 viewers, respectively, for its two telecasts. By comparison, North American races are averaging 1.374 million viewers, or an average of 3.16 million viewers for four races on ABC and 430,000 viewers during 10 races on Versus.

Not only do North American sponsors get less exposure on domestic TV for an international race, they also lose an opportunity to host clients at the track.

“Our sponsors enjoy bringing a lot of people to the U.S. races, and when races are overseas, they can’t do that,” said Larry Foyt, team director for A.J. Foyt Racing, which is sponsored by ABC Supply Co., a roofing, siding and window distributor.

Some teams have looked abroad to find international sponsorship. Penske Racing President Tim Cindric said the team cut a sponsorship for last spring’s race in Brazil with Brazilian Petropolis Group and beer brand Itaipava for the team’s No. 3 car driven by Helio Castroneves. But he added that those deals aren’t easy to secure. The Itaipava deal was the result of a special, one-off partnership between Itaipava, Team Penske and Castroneves.

“We’re always able to make it work, given enough time,” Cindric said. “It just becomes a challenge in the case of full-season sponsorships.”

Teams that favor the idea, though, see race markets like China as fertile territory for cultivating new sponsors. KV Racing succeeded with that in the past by turning the series’ race in Japan, which the IRL, IndyCar’s predecessor, started in 2003, into a long-term partnership with Panasonic.

“From our standpoint, [international races] have paid dividends,” said KV Racing general manager Mark Johnson.
While international races do little for Ganassi’s primary sponsor, Target, that’s not true for every team that has a U.S.-based sponsor. Dreyer & Reinbold Racing saw HP increase its spending with the team so that it could sponsor Justin Wilson’s No. 22 car in Brazil.

“Those opportunities are out there depending on where we race,” said Reinbold, co-owner of the team. “We feel like China offers a lot of similar opportunities.”

Though a half-dozen IndyCar teams remain divided over whether the series should add more international events, all were unanimous that the vast majority of races still needs to be in North America.

“Canada and the U.S. are where our primary fan bases are, but it’s good to nurture other countries as well,” Reinbold said. “As long as we don’t get carried away and most of our races are in North America, then we’re OK.”

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