Indy Racing League Mid-Season Update press conference transcript Watkins Glen International Saturday, July 4, 2009 AN INTERVIEW WITH BRIAN BARNHART, CHARLIE MORGAN, TERRY ANGSTADT THE MODERATOR: Like to thank everybody for sticking with us...
Indy Racing League Mid-Season Update press conference transcript
Watkins Glen International
Saturday, July 4, 2009
AN INTERVIEW WITH BRIAN BARNHART, CHARLIE MORGAN, TERRY ANGSTADT
THE MODERATOR: Like to thank everybody for sticking with us late this afternoon, we are going to offer a little IndyCar Series midseason media Q&A, just to introduce our principles up here, nearest me, Brian Barnhardt, president of competition for the IndyCar Series, Charlie Morgan in the middle seat, president of IMS production, and our first speaker, starting to my far left, Terry Angstadt, president of the commercial division of the IndyCar Series. Terry?
TERRY ANGSTADT: Thanks, John, and thank you again for hanging in with the schedule today. We did want to get in front of you to not only provide a bit of a midseason update, but also clearly there have been a couple of changes around IMS and the Indy Racing League this week and wanted to have you hear that news from us, and answer any questions that you may have about that. But I will touch on a couple of other subjects, as well.
But organizationally, which is probably the most important, we have certainly -- we, being the management team, in fact, on both sides of 16th Street have received assurances directly from the board that they are pretty pleased with the direction and the management of the company.
And we have a pretty high confidence level in that, because we see the financial statements and we know if we are either achieving the plan or we're not, and we are exceeding the plan.
So anyone that has an appreciation for business knows, and we can talk about a lot of new, good developments and where we are going. But at the end of the day, you get an income statement every month, and you are either doing your job or you're not. We are exceeding sponsorship sales year-to-date, our budget to date by sixfold and our net income by fivefold. And again, not getting into specifics because it's a private company, that's pretty solid performance against the plan. So just wanted to bring some relativity to that.
Also just in other subjects, the 2010 schedule, which is important, clearly, as to announcing that, we are working very hard at optimizing that and we hope to announce that by the end of July and we may actually do that at August 1 at Kentucky, that's been a network request, so we may do that.
We are really hanging in between 17 and 18 races. Our job is to try to hit the top DMAs in the country, and we do have an international expansion in the works that you've heard a little bit about. And we hope, it's not been confirmed like previously reported, but we hope to confirm that we are going to open in Brazil in the very near future. As we said before, we will not race internationally unless it's good for everybody involved.
And our model is holding up well; to be able to announce that we hope when we announce our schedule, we'll be down there would weeks from now making a final determination as to venue or venues, and make that announcement hopefully when we announce the rest of our schedule.
Just in terms of new sponsorship. Hopefully you've seen what happens when you do secure someone like an APEX-Brasil, you see them in the broadcast, you see them at the venue and other marketing efforts, as well as in IZOD, and I don't know all of you that understand the size of media commitment. But when we go to New York and you take over a Macy's store and you hold the kind of press event we had there, that's only because of good, strong partners like an IZOD, a PVH and a Macy's. Those are the kind of game-changers that we not only have secured a couple of this year, but we certainly hope to secure more in the future.
I think that that is kind of it for me, as I said, on the financial performance side. I get a little flared up when they say, "Gosh, the IndyCar Series got unified and the economy crashed around them." We have not taken that as an excuse and I think that's why we have been able to drive through some tough economic conditions and exceed our budget that we have developed before all of that happened.
So I think that's important for everyone to hear, not only when we talked about a little bit of a management change, but you know, where is the stability of the Indy Racing League. We are exceeding that plan, and our job is to make it very stable in the future. We have a high confidence level in doing that, and I think kind of the final points on the organization, is when you consider Tony (George) as a member of the board, as a significant owner in the company, and a team owner, I don't think anyone here could question how aligned his interests are in our success.
And there is no question in my mind or I think anyone's mind close to our business, you know, this is kinds of a lifelong thing Tony signed on for. So he's going to be in and around our events, and trust me, very involved in our day-to-day business. Thanks.
THE MODERATOR: Thank you, Terry. As I noted earlier, Charlie manages our television relationships with VERSUS and ABC, and Charlie, if you would, give us a little update on that front.
CHARLIE MORGAN: Sure, just a quick update, we are halfway through year one on what is an ABC a four-year deal, and on VERSUS a ten-year deal. So it's certainly very early in the life of both of those deals.
When we put these deals together and we went out and actively sought the opportunity to shop our media rights early, last year, about this time, we were looking for a combination of things. We were looking for a way to keep our sport in the mainstream media, you know, some could say maybe on an old-school broadcast network for all of the great things that being visible on a mainstream broadcast network can do: High visibility; both the fans and a casual viewer can stumble upon and find your product, and hopefully like what they see, fall in love, and want to follow it.
We also recognize the importance of continuity in 45 years worth of history with the ABC family of networks, was very important to us, and to them. So we were able to put a deal together with them for four years, that includes the Indy 500 and four additional races of their choosing each year, will not necessarily be the same four races as they are this year.
In fact, the ABC package wraps up next week in Toronto. We have Indy, we have Milwaukee and Iowa and now here at Wadkins Glen and Toronto, and that will be this year's ABC package.
They have done I think a terrific job of promoting us across all of their platforms so far, and we will be begin a process with them almost immediately after the end of their package this season to do some significant brainstorming about how we can bring even more of Indy, IndyCar and IMS assets, and more Disney family assets to trying to make sure that the ratings have improvement in 2010 over 2009.
As far as the VERSUS side, the other thing we were looking for when we did this deal was a place we could get expanded coverage. One of the things Tony said a year ago was we have to have more time on the air to tell more of our stories and ESPN and ABC have different limits on the amount of time they can provide us, or any sport. And so we went out looking for a partner where we could be a cornerstone of their programming schedule and we found that in VERSUS.
Just an example of the kinds of benefits: They started their Tour de France coverage today. They don't have an IndyCar telecast again until Edmonton, and they are already promoting that Edmonton telecast coverage, today, in the Tour de France coverage, and will throughout; by the way, that finale is on the day of the Edmonton race, so I think we'll have a great sort of cross-pollination of audiences.
That's what we are looking for, expanded coverage and time, three-hour race windows and re-airs. That's what we went looking forward and found VERSUS. And we think together, really, one without the other does not provide what we were looking for in total. It is the combination of an ABC and VERSUS package that delivers what we went looking for.
Ratings so far, the VERSUS races, and here is how I look at it, as transparent as we know how to be: Race to race, they are obviously significantly lower rated, they have 75 million homes, vs. 95 million on the ESPN vs. 105 million on ABC.
But again, one of the things is we said if you get more coverage with fewer people, you still have a gross rating point for the coverage of the weekend that could be significant and the gross rating point for the first five races that are VERSUS races this year, last year, delivered a .65 average and this year it's a gross rating point of .55.
So we are in the game. We are in the ballpark. We have work to do. VERSUS has work to do. That's why it's a ten-year package. Their challenge is to continue to move themselves out of the premium tiers into basic tiers, and that will grow their reach beyond the 75 million.
And our job is to give them compelling content that will drive consumers to call their local cable supply, because that's really where their battles will take place now. As each local system comes up for renewal, they will be fighting their way off of premium and into basic tiers. And it is fans of the sport that they cover that will help bring pressure on those local systems to make that move.
Steps we have taken so far: Already beginning our marketing plans and creative work for the 2010 season with (Vice President of Marketing) John Lewis and his group to see if we can maybe interconnect some of that marketing look with one or both of our network partners, and might increase some consistency there if that makes sense. And we are scheduling a post-ABC season meeting in New York with a large number of their principals and ours to discuss 2010 plans now.
I said one of the things our goals there is to eliminate the chance for someone to say, if only we had thought of that sooner, we might have been able to do it. We are going to start thinking about it now, so that when we roll into next year, Indy 500 and beyond, we have the time to execute those plans.
Beyond TV, a couple other quick notes. As everybody knows here we are on an XM channel and now that XM and SIRIUS combined, the IndyCar programming is part of the best of XM package that's available to SIRIUS subscribers for an additional premium each month. So we have some expanded reach there.
They have expanded their coverage of us. They are now picking up the qualifying coverage from the IMS Radio Network that we do for IndyCar.com, that is now carried on our XM channel and we have actually begun exploration with one of our teams and drivers who has some sponsorship money about doing a driver-hosted show, as well. So some expanded coverage happening there, and more possible in the future.
The last piece of media discussion is our race-control product which is our online, what we call complimentary package, whether ABC or VERSUS, includes the in-car cameras that a viewer can select which ones they want to follow and includes telemetry timing and scoring. Last year that was a paid service, and this year we decided it was more important to the growth of sport to make it available for free instead of paid. And it has shown good, solid growth as a result of that, and we had about 12,000 people using that product in May and Indy, and we average around 3,000 users on every IndyCar race.
THE MODERATOR: Thank you, Charlie. We'll turn it over now to Brian Barnhart.
BRIAN BARNHART: Just a couple of quick updates on the engine front. We have previously confirmed five engine manufacturers have expressed continued interest in participating in the IndyCar Series in the future, including Honda, Audi, Fiat, Power Train, Porsche and Volkswagen, and as I said, they continue to show great interest. Plans for introducing a new engine spec, while remaining and maintaining the series position, as a leader in the use of ethanol biofuels remains an ongoing process with considerable OEM input. We are expecting to finalize the engine specifications in the next few months.
On the chassis side, we pretty well know that down to two directions to go, with two parallel path programs that are significantly different from each other. We will continue in that direction and make a choice on deciding which one of those chassis we are going to choose. Again, probably within the next couple of months with the primary focus area being on a reduction in the cost of participation. We really need to find a way to allow the team participation in a cost effective manner.
One of the changes we have made with regards to the specifications for the upcoming events that we have done, we have done a bulletin out and in trying to address the on-track product of what we've seen the last couple of months and what we've done, we have had considerable conversations with the drivers, team managers engineers, owners and whatnot and we have come to a conclusion that we are going to try to allow them more tools and options to determine the amount of level, downforce they want to race with and we are going to allow the rear tire ramps and extensions and wheel base to be used at their discretion at the remaining four mile-and-a-half tracks for the season-enders. And we have tried to focus on those changes and kept them between the wheel bases of the cars, tried to stay away from wing angles as that tends to get into pit sensitivity of the cars. And it is an efficient and effective form of downforce and their choice.
They don't have to qualify and race in the same configurations, and gives them some effective tools to hopefully improve the car's handling and capabilities of racing better on the racetracks.
They are all items they currently possess and nobody has to buy anything and they are all items they have great familiarity with and don't have to test with, and so from a financial standpoint it was a right direction to move from a team standpoint.
THE MODERATOR: All right, yes, thank you very much, we will open up to Q&A.
Q: Terry, if you could clarify, Jeffrey Belskus is the CEO of the IMS Corporation and Indianapolis Motor Speedway, does he also maintain the CEO status at the Indy Racing League?
TERRY ANGSTADT: Technically it is not included in his title, but actually our reporting structure is through Jeff to the board, so that is the way it will work. And I think we all have a pretty high confidence level in Jeff, and look forward to that transition.
Q: It's my understanding you guys just met with the majority of the team owners a few minutes ago. What is the main message you communicated?
TERRY ANGSTADT: We met with every team owner; it wasn't the majority. And I think it was a very positive meeting. It was a lot of what we just covered with you. In fact, it was everything of what we just covered with you. And again, it exceeded my expectations, and I think it was a very good kind of flow of communication and I think everyone left very positively. You can ask them, as well.
Q: Terry, where does Milwaukee stand? Since we talked to you last, there's been new news about how much the promoter is in debt; and secondly, Australia, have they contacted you about getting back into the game, perhaps?
TERRY ANGSTADT: The easy one first. Australia has not contacted us, and we have left that I think very positively last year, but do not have an ongoing interest of racing there.
And in Milwaukee continues to be a challenge, that has I think probably gotten a bit worse since we have talked last, just in terms of a future possibility.
We felt like we may be able to develop a plan with the current promoter to not only fulfill outstanding obligations, but give us a confidence level that we could put it on the schedule.
We are not announcing the schedule until the end of July, and so I guess there could be something developed, but kind of remains to be seen. It does look like pretty tough operating conditions up there right now. So we'll just monitor that, and as I said, we have an alternative developed on the schedule and again we hope to be able to include Milwaukee and we just don't know that yet.
Q: In Canada we get the ABC broadcast but not the VERSUS, so we have to rely on TSN to give us coverage of the series in Canada and TSN has chose tone only give us the race coverage and we don't get the qualifies or the Indy Lights. I think in a couple instances, there's been a time shift to the middle of the night and there's also one race that wasn't covered at all. Any comments on what we can expect for improvement in the future?
CHARLIE MORGAN: It's a great question and a little complicated to explain but let me see how I can tackle it.
The rights for our international coverage, the 5:00 AM B.C. race, as you indicated, are a part of the package that ABC ESPN has and where they have owned and branded networks they broadcast those races; and beyond that it goes into what is referred to as syndication and is available basically on the open market for virtually anyone to make an offer, whether it's pay TV, free TV, a local station or a pan-regional network, and we have examples of all those.
TSN is the network that purchased the syndication package initially at the start of the season. I am aware that there were some challenges there. We have followed up.
The interesting part that makes it a little complicated is that while those rights are actually VERSUS rights, they have hired ESPN International to do their syndication for them as ESPN had traditionally been syndicating race coverage beyond their own networks and we felt initially in combination with VERSUS and the IndyCar side, that they offered our best chance to continue to maintain good coverage. They had more relationships with folks buying auto racing.
That deal is a two-year deal, and so they have done that for us this year and next year. And, in fact, I had a meeting today with ESPN International sort of reviewing some of the challenges you spoke about, discussing some action steps we can take to try to make sure we improve it for 2010, in particular.
With TSN we did address as you mentioned, the one race that was not covered, and have been assured that those problems have been fixed. And I'm also told, and you might be able to confirm this or not, that they do bounce around between TSN and TSN2, and the TSN2 has recently struck a deal with Rogers for some increased distribution. So hopefully moving forward that provides us some additional exposure in Canada.
Q: Yes, it was a serious problem in TSN in the Toronto market was Rogers is the cable supplier in the Toronto market so that dispute affected car racing as well as many other popular sports. I would point out, of course, that in Canada, there's been a tremendous interest in open-wheel racing, traditionally, and you know, it's disappointing I think to those traditional race fans who are perhaps having some difficulty making the conversion to the new era, that a new style of racing for them -- because they were, as you know, CART fans, true blue, when the coverage is limited.
CHARLIE MORGAN: Absolutely understand that, and we are committed to working with all of the various rightsholders and partners to improve that.
One thing I'll even mention that we are doing to try to address, probably does not apply in Canada because we do have a syndication rightsholder, but where some of these races have not been available because they were not ABC, ESPN races and no syndication partner picked it up. We are developing a streaming product that will be available for a very low-cost purchase race by race, in countries where there is not coverage. So we are making additional steps to try to make sure our product is available, but certainly understand the sensitivity.
Continued in part 2