Hello fans!
I’d like to apologize for not updating for a few weeks, but there really hasn’t been much to update with. I’m trying to sell my old race car to pay for the Formula Ford, and trying to get a job so we can pay for a garage, sales associate, etc. These things all take time, and as soon as things progress I’ll post an update.
However, not leaving anybody wanting, I thought I would take this time to explain how I am approaching this project, my career, and the business of motor racing in general.
Many who know me have heard me rant about it before, but for those who havent, and those wondering why I think I can resurrect my career without $20million burning a hole in my pocket, here you are.
I’d like to start by discussing the myth that car racing is an absurdly expensive sport. While that may be true in amateur motorsport, once you get into the professional ranks, it’s absolutely false. In fact, it’s actually the cheapest of all professional sports. And that is including Formula One. You may be wondering, “how could that possibly be?! Didn’t you just now say you need $20million to get to Formula One?!” Well, let’s start by dissecting what you would spend that $20million on. I’m far more familiar with the racing ladder in the U.S., so I’ll use that as an example. The Road To Indy is, frankly, a pretty awesome concept created by INDYCAR to nurture and develop future talent. After karting, one starts in USF2000, moves on to Star Mazda, Indy Lights and then they start making millions in INDYCAR and become world famous. So what is the toll fare for taking the Road To Indy? Below are rough estimates for a single car budget in each series:
Season in USF2000- $200,000
Season in Star Mazda- $300,000
Indy Lights- $750,000
So to get from karts to Indycars, if a hotshot driver whizzed up through the ranks he would need to have started with $1,250,000. Let’s say he’s only slightly superhuman and takes two years in each series, which would bring the bill to $2.5million. I know what you’re thinking, that’s a lot of money. Football players, basketball players, baseball players don’t have to spend that kind of money on their careers to make it to the professional leagues. Indeed they don’t, but only because someone else is.
Below is an estimated budget for three different levels of minor league baseball teams. This was taken from an economic impact survey used by a city council in the midwest U.S., to decide on funding for a local team. So the numbers are reliable enough for the sake of argument.
Take a look at the second to last line, “Total Expenses.” A single-A minor league baseball team burns through $3.4million a year!! Even if you ran 2 cars and spent another $1million on sponsorship and marketing, a USF2000 team would still come in $1,000,000 less than a baseball team at the same competitive level. It’s a better investment as well, although I will acknowledge that any investment in professional sports is one of passion, rather than solid financial savvy. If the business went belly-up and you had to sell your baseball team, what do you have? You don’t have the ballpark, or the land it’s on. All of that is owned by the city. If you had good lawyers writing your players’ contracts you might be able to sell them to other teams, but aside from that all you’re left with are some bats and dirty uniforms. If you had a racing team you’d have at least 2 race cars you could sell to club racers, one or two trucks to sell to shipping companies or other racing teams, and perhaps even a shop to sell or lease.
“Ok, it may be like that at the bottom, but Formula One teams have the most outrageous budgets in the entire world! Surely it’s ludicrous to suggest that they are a “good deal.” Really? Ask Dietrich Mateschitz. According to this article, he spent $690million from when he bought Jaguar F1 to 2009, the year before Red Bull Racing won the World Championship. That’s half as much as it would cost just to buy an NFL franchise. And again, Red Bull Racing trumps any NFL team in terms of hard assets. He has a fleet of awesome cars and trucks, a jaw dropping mobile hospitality suite, and a factory he could surely sell if he ever wanted to liquidate his team. Just like the single-A baseball team, most NFL franchises don’t own their only hard asset, the stadium.
Obviously, the reason single-A baseball teams can spend that much is because they have ways to generate revenue. They sell tickets, they sell hot dogs, and beer, and jerseys, and oversized novelty foam hands. As an industry, we need to get over ourselves about how much it costs to go racing. For far too long we’ve been so distracted by cutting costs that we’ve never even thought to turn our heads around and look at ways to generate revenue. Of course, since teams don’t own a racetrack they can’t sell tickets, or charge for parking or food or any other things the baseball team does. But that doesn’t mean there aren’t any ways for a team to make money. Sponsorship is the most obvious, but in all of my years studying motorsports business, I’ve never heard of a junior formula team that had a sponsorship department (and no, a “PR” rep is not a sponsorship department). Sponsorship doesn’t just happen, and it’s not something that can be wrangled together by a team owner who has a lot of heart but no background beyond mechanical engineering. I’ve seen it tried. It takes a rather large team of sales experts and marketing professionals.
It can be done, even for teams in USF2000 and Star Mazda, who aren’t on TV. I once had a professor who was the president of a sports marketing company. For one class, he brought in a year-end review of one of the deals he did with a Major League Soccer team. As I read through it I very carefully considered each key part in the deal and how it could be applied to a racing team. I finished reading the document convinced a racing team could actually do a better job. As it was almost entirely a business-to-business deal, it didn’t rely on massive exposure, and a racing team, with events in markets across the entire country, has much better reach than a team anchored to one city. This deal was worth mid 7-figures over 3 years.
So if racing is such a good deal, and the sport is actually well positioned for marketing, why doesn’t it happen? This is because, as I previously stated, teams aren’t prepared for it. Across all genres of professional motorsport, from F1, INDYCAR, NASCAR, rally racing, boat racing, etc., I suspect I could count on my fingers and toes all the teams who are equipped to seek, find, and secure sponsorship. Certainly in the junior ranks of open wheel racing there are none. From USF2000 to Indy Lights, from the British Formula Ford Championship to GP2, I have never seen a team with a fully staffed sponsorship department, and a management that takes revenue generation as seriously as it does winning races.
The end result of this is that the burden of finding funding falls on the driver. It’s then no wonder why sponsorship is so difficult, when as an industry we are relying on teenagers and early 20-somethings to put together six-figure sponsorship deals entirely on their own. Kids who either haven’t finished college or aren’t attending, who have no sales experience, no marketing credentials, and no credibility when making a presentation to a company CMO and asking for large sums of money. Racing drivers by definition are smart, ambitious, and competitive. But sports marketing is an extremely complicated business that is way over the head of most aspring drivers. I’ve been studying it for the last decade and I still can’t make sense of all of it.
So that is my opinion on the current state of junior open wheel racing. In my next post I’ll explain how I’m trying to change the business model, and what I’ll be doing differently next season.
Cheers!
