CART rolls the dice on co-promotion - The Biz - Championship Auto Racing Teams - Brief Article

HISTORICALLY, CART's business model called for the series to receive a large upfront sanctioning fee from event promoters, who in turn had control over a race's promotion and operation. Under this model, in exchange for its drivers and teams, the series earned a guaranteed pay-check, while promoters took on all of the risks--and rewards--of holding a race. If a race was successful financially and revenues exceeded the sanctioning fee, the promoters profited; if not, the losses came out of their own-pockets.

At this year's Grand Prix of Denver, on September 1, CART is planning to experiment with a new model, in which the series will take on slightly more risk. CART will co-promote the race in return for a reduced sanctioning fee.

Now, there win be a sort of warm-up for Denver. In late June, CART win serve as the sole promoter of the race at the Chicago Motor Speedway. In February, the CMS canceled the Target Grand Prix after it failed to renegotiate a lower sanctioning fee with the series. However, after hearing from its sponsors and the supporters of the event, CART decided to take on the race, and will actually pay a fee to the track for use of the facility. In 1999, approximately 75,000 fans showed up for the inaugural Target Grand Prix, but attendance dwindled to just 30,000 in 2001.

Later in the 2002 season, Kroenke Sports and the Grand Prix Association of Long Beach, the original Denver promoters, will receive a discount of approximately 25% on its fee and will transfer certain promotional and advertising responsibilities to CART for the Grand Prix of Denver. In return, the series will become more involved in the planning and presentation of the race and will share in its revenues. Depending on the success of the Chicago and Denver races, this model could become more popular in auto racing, although certain promoters might not be so happy about sharing their revenues in exchange for taking on slightly less risk.

In other CART news, the series recently relocated most employees at its Troy, Mich., headquarters to Indianapolis. CART had been in Troy since its inception in 1979, but president and CEO Chris Pook said that the move "puts us in the place we need to be," which is closer to the series' teams, drivers, and suppliers.

Pook's predecessor, Joe Heitzler--who ran CART for a year before being fired last December--is currently involved in multiple lawsuits with CART. In late March, the series filed a suit against Heitzler in Detroit, claiming that he entered into various contracts (totaling more than $500,000) without the approval of the series' board of directors. Not long afterward, Heitzler filed two lawsuits--one against the series and one naming Pat Patrick and Carl Haas, who are both CART board members and team owners. The first suit, against CART, claims that he was let go for taking actions to eliminate conflicts of interest and self-dealing by members of the series' board. The suit filed against Patrick and Haas, asking for $20 million, cites defamation.

NASCAR and In Demand, a New York-based pay-per-view arm of four cable operators, recently announced a three-year partnership to offer viewers a pay service called "NASCAR In Car on In Demand." The $99 package will offer a total of seven channels--one with a free network broadcast feed (which will also continue to air on free TV for non-subscribers), one with statistical race information, and five featuring views from in-car cameras with live team audio and real-time car data.

This year's service will begin on June 16 for the Michigan 400 and will be available to 12.5 million digital cable subscribers. Next year, the service will be available for the entire 36-race Winston Cup season. NASCAR's broadcast partners NBC, Fox, and TNT will all share in the service's revenues, and other revenue will be split in the same ratio as all other. NASCAR media revenue (65% to the tracks, 25% to teams, and 10% to the series).

In April, the Team Racing Auto Circuit (TRAC), the new series planned to launch next spring, announced a partial listing of its first season's schedule. By the end of May, the series had yet to secure its drivers, most owners, and a television contract--or even write its rules and regulations--but SMI still committed to host 10 TRAC races next year. The 10 races will be divided evenly among its tracks in Atlanta, Bristol, Tenn., Charlotte, Ft. Worth, and Las Vegas, and the 20-race schedule will run from April through September. The site of the other 10 events--as well as a season-ending All-Star event and championship race--is to be determined. The TRAC did, however, unveil its cars in April. The Riley & Scott-designed autos are based loosely on Dodge Vipers, Chevy Corvettes, and Ford Mustangs. The TRAC is currently looking to fill ownership roles for nine of its 10 teams, and is asking $11 million apiece, which includes a $2.5-million investment in the company that owns the series,

Amid dropping ratings on most network television programming, February's Daytona 500 on NBC earned the race's highest-ever ratings ever. Its 10.9 Nielsen rating and 26 share were both 9% increases over last year's Fox broadcast and the highest for any auto race since the 1984 Indianapolis 500. The 10.9 rating rely resents more than 11 million viewers and the 26 share is the percent of television viewers at the lime who watched the race.