Sports Business: CAR RACING
GENTLEMEN, START YOUR GRUDGE MATCH
Behind the bitter feud that's pitting the Indy 500 against the new U.S. 500
Suppose the Super Bowl was being played by a bunch of eager benchwarmers while the superstars passed the pigskin at a rival stadium. Well, that's what's about to happen at the Indianapolis 500.
On Memorial Day weekend, a clash of power and egos will turn perhaps the world's most famous auto race into a contest of mostly rookies. And just two hours after the green flag falls in Indianapolis, Bobby Rahal, Michael Andretti, Emerson Fittipaldi, Al Unser Jr., and other big-name drivers will be roaring around the first lap of Indy's spanking new rival, the U.S. 500, at Roger Penske's Michigan International Speedway. At stake is more than the trophies the winners will clutch to their grimy jumpsuits: Hundreds of millions in corporate dollars will be riding on which race grabs the most attention.
How did the Indy crack-up happen? It's the culmination of a long battle for control of the sport that has pitted the headstrong president of Indianapolis Motor Speedway, Tony George, against the fractious band of wealthy businessmen and ex-racers who own IndyCar teams. They include automotive tycoon Penske, auto importer Carl Haas, who co-owns a team with Paul Newman, and cellular-phone magnate Bruce McCaw. When George set new qualifying rules for the Indy 500 that owners said would shut them out, they launched their own race.
Of course, the big risk is that while the two camps feud, disillusioned fans and sponsors will turn to other sports. In the wake of the baseball and hockey strikes, IndyCar owners are painfully aware that Americans are fed up with rich athletes and even richer owners squabbling over money and whining about their rights. "It is potentially very damaging," concedes Andrew Craig, who runs Championship Auto Racing Teams (CART), the owner group. Still, others contend that two races double viewers' options. Says media buyer Paul Schulman in New York: "This is just a feast for motor-sports fans."
Sponsors, who kick in hundreds of thousands of dollars to see their company names plastered on race cars and speedway walls, have been caught in the crossfire. "It becomes a situation where two warring parties are saying, `You're with us or against us,"' says Mark Coughlin, director of motor-sports marketing at Valvoline Inc., a unit of Ashland Inc. that was attempting to sponsor both races. "If it lasts a long time, you won't see suppliers willing to get bruised in this fight." Indeed, Valvoline has withdrawn as Indy's official oil and fuel supplier, ending a 29-year tie.
Toyota Motor Corp. was banking on making a splash when it spent $40 million to develop a 2.65-liter, turbocharged engine for IndyCars. But as the fight with CART escalated, George changed Indy's engine rules for 1997, making Toyota's new engine obsolete there. So, Toyota is selling engines to CART and sponsoring the Michigan race. "We're not going to throw that money down the toilet and start over," says John Koenig, Toyota's motor-sports manager. Fifteen other major sponsors are following their teams to the U.S. 500, too.
DIXIE BREAKOUT. If IndyCar's popularity sputters, stock-car racing is in a good position to lap it. NASCAR has been expanding its audience with races outside its Southeastern base. This year, ratings for early races held by CART and George's new Indy Racing League (IRL) were anemic. NASCAR's Daytona 500 racked up a 9.2 rating, meaning 9.2% of all U.S. households with TVs were tuned in, up from 7.8 the year before. And while CART and the IRL bicker, NASCAR--long derided as a downmarket, redneck circuit--is broadening its sponsor ranks to include the likes of Tide detergent and the Cartoon Network.
NASCAR already leads in the dollar derby, but IndyCar is no slouch. IndyCar racing pulls in hundreds of millions in sponsorships, advertising, ticket sales, TV revenues, merchandise, tourism, and investments in high-tech engines and chassis. CART's annual corporate sponsorships alone add up to $331 million, according to IEG Sponsorship Report, a Chicago newsletter, and the IRL is already up to $26 million in sponsorships. As CART attendance, excluding the Indy 500, has grown--up 55% since 1989, to 2.3 million last year--so has its sponsor base. Alongside the traditional beer, cigarette, and oil companies are such retailers as True Value Hardware and such apparel makers as No Fear. Besides CART's widening popularity, sponsors are drawn by the IndyCar's primary audience of young, white, middle-class males.
Where that audience will be on May 26 is anybody's guess, but Indianapolis is already feeling the effects of the feud. Usually, the Memorial Day weekend race and monthlong time trials and festivities that precede it pour upwards of $40 million into the city. Already, the first weekend of qualifying, May 11-12, was unusually quiet. By midmonth, more than 20 local hotels still had vacancies for Memorial Day weekend, vs. 9 a year earlier.
The financial impact on the Speedway is harder to gauge. George's privately held Hulman & Co., doesn't disclose its race revenues. Despite the boycott, though, this year's take should be healthy, even if some fans are no-shows. Tickets for the race sold out almost a year ago. And the speedway lined up corporate sponsors and sold broadcast rights to ABC before talks with CART spun out of control.
NEW RECORD. Indy officials vow this year's race won't disappoint, as fans get a chance to see exciting new talent. True, the field includes a record 22 rookies. Better-known drivers such as Arie Luyendyk and Roberto Guerrero will share the track with ex-rodeo cowboy Brad Murphey, Formula One veteran Michele Alboreto, and Johnny Unser, Al Jr.'s cousin. And Scott Brayton's record 233.718 mph qualifying time bodes well for a fast race.
Still, the unseemly backbiting between George and CART can hardly be what Indy promoters mean when they boast of "the greatest spectacle in racing." The fracas revved up in 1991 after George failed in an attempt to wrest control of Indy racing from the high-octane owners who have held sway over the sport for almost two decades. George had assumed control two years before, at age 30, of the speedway that his grandfather, Anton Hulman, had built into a motor-sports mecca. George envisioned an Indy circuit run enly on U.S. oval tracks and dominated by American drivers. That put him on a collision course with CART's owners, who had steered IndyCars onto a circuit that included Australia, Brazil, and Canada and layouts varying from road courses to ovals. When CART repeatedly snubbed George's proposals to trim IndyCar's exorbitant engine costs and level the playing field, he started his own league.
Then, last summer, the black flag dropped at Indy. George announced he was reserving 25 of Indy's 33 slots for IRL racers. Since CART's schedule keeps most of its teams out of IRL races, they would only be eligible to vie for the few remaining slots. Grouses team owner and ex-driver Jim Hall: "I don't think it really makes sense for 25 owners to go and spend a month at the Indianapolis Motor Speedway busting their butt to try to get into eight places." In December, CART said it was taking its cars and stomping off to Penske's Brooklyn (Mich.) track.
Despite numerous efforts to negotiate a truce, the fracas seemed to be getting fiercer. On May 6, the IRL sued CART in federal court to block the defectors from using the IndyCar name. Huffs George: "CART continues to trade on our good name at the same time it maligns us and the Indy Racing League and boycotts our race."
A TRUCE? On May 26, the rubber meets the road. Sponsors will scrutinize turnout and TV ratings for both races to gauge fan loyalty. With many big sponsors defecting to the U.S. 500, ad rates for ABC's Indy broadcast have dipped to $160,000 for a 30-second spot from $200,000 last year, says one major media buyer. Still, ABC on May 10 paid an undisclosed sum for the rights to broadcast IRL races, including the Indy 500, through 1999. ESPN, which will air the U.S. 500, has sold out the ad time for an estimated $35,000 per 30-second slot. The upstart race is expected to reach about half as many viewers as Indy.
Where will it all end? Hall predicts a downward spiral for Indy: "If they run a lot of second-class cars with second-class drivers for very many years, nobody is going to go there anymore." George retorts that Indy has weathered other struggles, including a threatened boycott by owners and drivers in 1947. "There's an 80-year history we're talking about, and it hasn't always been peaches and cream. If none of these owners ever come here again...in two, three, or five years, people will forget about [them]."
Worried outsiders hope that after sideswiping one another on Memorial Day, the two sides will patch up their differences. Tom Floyd, senior vice-president for marketing at Houston-based Pennzoil Co., a sponsor of both races, is an optimist: "It's hard for me to believe this polarized activity is going to continue into the future." But Craig calls a reconciliation "very, very unlikely."
In the end, though, it will be the fans and sponsors who decide what really counts. Is it the tradition of Indy, where most of the sport's celebrities made their names? Or is it the cars and stars?By Kathleen Kerwin in Detroit and Bill Koenig in IndianapolisReturn to top