New payout system for the IRL

[ChaimWitz]

I hear that the IRL will formally announce the details of their new team support program for 2008 today and that IMS may also announce major, much needed enhancements to the Indy 500 purse structure at the same time.

I will be interested to see what impact these new factors have on what happens next.

[ChaimWitz]

Below are the IRL and IMS announcements.

"IRL announces new payout structure to teams
The IndyCar® Series announced a restructuring of its earnings distribution designed to provide a financial foundation for new and existing teams committed to running the entire IndyCar Series schedule.
Beginning in 2008, the program, called IndyCar TEAM: Team Enhancement and Allocation Matrix, will award a minimum of $1.2 million to each car entered to compete the entire season, including the Indianapolis 500. By implementing IndyCar TEAM, the Indy Racing League will dissolve its existing event purse formula.

"Today's introduction of IndyCar TEAM is an expansion of the Series' Leader's Circle Program and further enhances the value of racing in the IndyCar Series for all of our team entrants," said Brian Barnhart, president of the competition and operations division of the Indy Racing League, sanctioning body for the IndyCar Series. "This is a baseline program designed to increase as the series grows and as we are successful in attracting sponsors and enhancing league revenues."

In conjunction with the announcement of the IndyCar TEAM program, officials with the Indianapolis Motor Speedway announced that the purse for the 92nd Indianapolis 500 will increase to at least $13.4 million, a 25 percent increase over the record $10.67 million purse for the 2007 race.

"As the Indianapolis 500 and the Indianapolis Motor Speedway approach some historic milestones in 2009 and 2011, it's only appropriate we strengthen the incentive to compete in 'The Greatest Spectacle in Racing,'" said Joie Chitwood, president and COO of the Indianapolis Motor Speedway. "The new purse structure for the Indy 500 will help all entries earn more money than ever during the Month of May."

The winner of the 92nd Indianapolis 500 could receive at least $2.5 million, a 42 percent increase over the record winner's payout of $1.76 million awarded to Buddy Rice in 2004. The runner-up could earn at least $1.25 million, with the third-place finisher earning at least $750,000. Fourth- and fifth-place finishing cars will be guaranteed bonuses of $475,000 and $375,000, respectively.

The IndyCar Series champion will continue to receive a $1 million bonus, as in past seasons, with second through fifth place in the final point standings getting end-of-season bonuses of $250,000, $175,000, $125,000 and $75,000.

In addition to the guaranteed $1.2 million for participation in the series, teams will compete for bonuses of $35,000 for first place, $25,000 for second, $20,000 for third, $15,000 for fourth and $10,000 for fifth place at each IndyCar Series race outside of Indianapolis.

There also will be a record number of entries earning at least $1 million in an IndyCar Series season, creating greater depth and financial stability for series' teams.

"IndyCar TEAM really provides some tremendous stability and predictability for our existing teams with respect to their operating budgets, which will make them healthier while positioning us favorably for attracting more teams," said Terry Angstadt, president of the Indy Racing League's commercial division.

All contingency prizes, which totaled more than $1.2 million in 2007, will continue to be awarded to entrants/drivers for individual IndyCar Series events.

The Leader's Circle Program was established in 2002 to provide incentives to teams which participate in the series full time. The program leverages relationships built by the Indy Racing League with its partners, sponsors and suppliers to provide benefits directly to the teams."

[Aeron Hale]

The IRL has got to be bleeding money like that guy in Saw. Think about it, they’re going to be giving away at least $60 million in subsidizes to the teams. Where is all that money going to come from? Likely the Brickyard 400 and the sale of Chicagoland. When you factor in insurance, payroll, and other overhead the IRL would have to pull in at least $80 million just to break even.

To me this seems like a last chance effort to lure more teams into the sport. Why do they need to up the car count? To either fulfill contractual obligations with ABC and Honda, who are both gone next year, or put them in a place to renegotiate with those entities.

Despite the cheery tone of this article times are bad for IRL. The Indy 500 had some of the lowest ratings ever. Ratings are down this year. They lost MIS. Sam and Dario are likely headed to NASCAR. RLR has supposedly lost Scott Sharp and Patron to the ALMS and already laid off employees. D&R and Sarah Fisher have apparently parted ways. Vision cut lose their two drivers and now there are rumors of AGR downsizing to three cars next season.

To me this looks like a Tony George and crew are trying to use band aide to stop internal bleeding.

[Speedsense]

The kind of money they are talking about can buy a lot of band aids.... 25% increase in prize money from last year to win the Indy 500 got to be the highest amount of money paid out for winning a race.....

[mark123]

Aeron - I respectifully would like to disagree. They are increasing the prize pool - how you can turn this into bad news is beyond me.

They are simply trying to redistribute the money to the lesser teams to encourage more to join. I guess TG feels that this is a better use of money then running two unsponsored cars for Vison.

during 2007:

Ratings were up on a lot of races. Sure the 500 was down, but hell - it was raining!!! how long and you sit down and watch that!!

I would not jump to any conclusions about RLR at the moment - if they have lost Sharp then that will be bad, but you must admit that he hardly set the world on fire on the road courses this year. I'm picking that he'll be back as he was with the IRL from day 1.

Sarah was terrible this year - would she be a loss for the series? are there better drivers out there looking for a ride?

AGR going to run 3 cars next year - where did you hear that? I heard read somewhere that they have already confirmed 4 cars for next year.

I'm picking that there will be 20 full time cars next year - maybe as many as 22.

the IRL's not going to fold. the other series might.

[FerrrariF1]

At the end of the day the IRL is paying for the year long engine lease as well as yearlong tire bill. A team still needs to buy chassis, equipment, pay personnel, travel expenses etc. They just rehashed the numbers. Big difference is that if you commit for the year they are guarenteeing that even if you get bumped you get 300g to show up for Indy. Hardly pays for being there for the month.

It is more show with very little go no matter what numbers they throw at anyone. At the end of the day when the team's do the math they will be at the same place they are today. Trouble is when do they get the money? You would have to assume that in order to prove that a team makes all the races that the payment would happen at the end of the year. How easy will it be for a team to commit, collect the check and head for the hills. Most likley the money would go directly to Honda and Firestone not the teams.

[Aeron Hale]

Aeron - I respectifully would like to disagree. They are increasing the prize pool - how you can turn this into bad news is beyond me.

They are simply trying to redistribute the money to the lesser teams to encourage more to join.

No they're not. They have said that with the bonus structure the top teams will earn about the same as they did this year. So effectively what they've done is give massive subsidies to low performing teams to fill out the field.

They are making the same mistake CART did. Chris Pook payed a lot of teams to show up, and then ran out of money. Yes this might temporarily raise the car count, but unless they lure a Champ Car team or two none of them are going to be competitive and will just be back markers.


Ratings were up on a lot of races. Sure the 500 was down, but hell - it was raining!!! how long and you sit down and watch that!!

Actually ratings were down across the board: http://sportsbusinessdaily.com/index.cfm?fuseaction=sbd.preview&storyId=SBD2007091928


I would not jump to any conclusions about RLR at the moment - if they have lost Sharp then that will be bad, but you must admit that he hardly set the world on fire on the road courses this year. I'm picking that he'll be back as he was with the IRL from day 1.

I'm not jumping the gun either, but the rumors have been pretty consistant. Sharp was seen at Seabring during the CC test, and Rahal attended more CC races than IRL this year. If he loses Patron and the IRL can't gift him another sponsor I wouldn't be surprised to see him drop down to the ALMS.


I'm picking that there will be 20 full time cars next year - maybe as many as 22.

the IRL's not going to fold. the other series might.


Lets do some math really quick:

22 full time cars = $26.4 million
Indy 500 purse = $13.4
Handouts for AGR, TCG and TP (TEAM) = $10.4
Point Fund = $1.625
Total = $51,820,000

That's almost $52 million paid out to teams alone. How much money do you think the IRL is making? In order to pay insurance, taxes, and other overhead costs the league would have to be taking in close to $100 million, and I don't think the league is making half that.

They have to be operating in a deficiet in the hopes of outspending Champ Car enough to bury it in 2008 and be in a stronger position to negotitate deals and attract sponsors.

[gofastandwynn]

I'm not jumping the gun either, but the rumors have been pretty consistent. Sharp was seen at Sebring during the CC test, and Rahal attended more CC races than IRL this year. If he loses Patron and the IRL can't gift him another sponsor I wouldn't be surprised to see him drop down to the ALMS.




Lets do some math really quick:

22 full time cars = $26.4 million
Indy 500 purse = $13.4
Handouts for AGR, TCG and TP (TEAM) = $10.4
Point Fund = $1.625
Total = $51,820,000

That's almost $52 million paid out to teams alone. How much money do you think the IRL is making? In order to pay insurance, taxes, and other overhead costs the league would have to be taking in close to $100 million, and I don't think the league is making half that.



Again, I don't know what ccf site you have been on, but Sharp was not spotted in Sebring, he was in Scotland the whole time, and Rahal has been at the races because of his son (although he skipped Assen to be at Detroit with PLN). Heck, Rahal has been at more CC races that ALMS so he must be pulling out of there as well.

Easy, there is no USGP that the Hulman Family has to pay for, which frees up about 50 million per year right there.

Every on of the IRL teams owners like this idea as does the press, but clearly you and your internet knowledge know better than maybe you should share it on the other board you post on or under your old name... :rolleyes:

[Hoss Ghoul]

Easy, there is no USGP that the Hulman Family has to pay for, which frees up about 50 million per year right there.



I don't think it was costing them anywhere near that to have the USGP. I can't find that article, it might have been in AutoWeek, but I thought I read it was around $6million per year that IMS was paying. Regardless, this SpeedTV article puts the number at $60 million for all eight years. I don't know if that includes any money for the actual design of the course or the new Pagoda, however those can be seen as capital improvements that will continue to make them money(Motorcylces, for example).
http://www.speedtv.com/articles/auto/formulaone/38692/

Here Bob Varsha say's the sanctioning fee was an estimated $15 milliion per year, and Bernie wanted to double that going forward. Either way, significantly less than $50 million, but no race is worth even the reported $30 F1 was asking.

http://www.speedtv.com/chat/index.php?action=viewarchivedchat&chat_id=82

I guess all that's off topic, but it came to my mind as I was reading this thread.

As for the revenue sharing plan, who knows, I wouldn't expect anyone to poo poo it immediately, so let's just see how it works out. The teams and drivers have been pretty stable the last 4-5 years and if this adds to that, its a good thing, IMO.

I wouldn't expect it to be enough to bring any teams over from Champ Car, neither would I expect it to push any teams out of the IRL. If anything it might be enough for an IPS team to think about moving up. Robin Miller was asked about this in a chat a week ago on Speed and he thought it would take $2-3M for any team to jump from CC with this plan, for what that's worth.

[millencolin]

Again, I don't know what ccf site you have been on



you mean there is more than one? OH GOD!!!

[indycool]

Aeron, I do NOT understand your numbers at all. Your line item of $10 million for handouts to three teams isn't anything I'm familiar with.

This plan is also little different than NASCAR's Winner's Circle plan for teams and is just a boost and alteration of the Leader's Circle plan the IRL patterned after NASCAR's starting five years ago.

The Indianapolis 500 was paying $10-million plus as a purse before and the other IRL races were paying $1 million purses. That's $25 million-plus right there plus the point fund. This is $35 million plus, plus minimal per-race bonus payoffs to the top five plus the point fund.

So, that's roughly $10 million or so over what they were already paying, $3-plus million coming through the Indy purse. Significant, yes. Good for small to midpack teams, yes. Does it allow teams to approach sponsors knowing what it already has to compete and can tailor an appropriate program for a sponsor that will meet his ROI and bang for the buck? Yes.

[ChaimWitz]

Lets do some math really quick:

22 full time cars = $26.4 million
Indy 500 purse = $13.4
Handouts for AGR, TCG and TP (TEAM) = $10.4
Point Fund = $1.625
Total = $51,820,000

That's almost $52 million paid out to teams alone. How much money do you think the IRL is making? In order to pay insurance, taxes, and other overhead costs the league would have to be taking in close to $100 million, and I don't think the league is making half that.

They have to be operating in a deficiet in the hopes of outspending Champ Car enough to bury it in 2008 and be in a stronger position to negotitate deals and attract sponsors.

Thanks Aeron. You answered my question to Sanguin (are you two related?) from another thread about how much the Amigo Posse thinks TG is underwriting. I guess everyone has to have a dream and like the Amigo's repeated assertions to me privately that Honda would be gone once Toyota left the IRL, you and the OWRS owners must still be hanging tough in your hope that TG will bleed out and Champ Car will win through his demise. Good luck with that but forgive me if I no longer follow your 'logic".

So, let's just say "the league is making half that" of the $100 million you mention. That means the IRL is losing a whopping $1.82 million dollars annually on team support, purses and prizes as "They have to be operating in a deficiet in the hopes of outspending Champ Car enough to bury it in 2008 and be in a stronger position to negotitate deals and attract sponsors."

From what I can see so far, this supposedly evil IRL tactic is working while the OWRS owners and management struggle to hold together what cannot amount to even one fifth of the total annual income that you suggest is there for the IRL.

Don't forget the financial might of IMS and the Indy 500, both of which likely still spin off serious profits (which, IMO, will probably improve without the USGP drain). Bottom line is that TG can probably afford to do this for quite some time.

Believe what you will about the Amigos claiming there are no subsidies. There must be or there would not be 17 cars on the grid for most Champ Car races.

So Aeron, since you are so handy with a calculator, would you care to run the income and expense numbers on Champ Car like you have for the IRL? That should provide an interesting comparison. If you do the math, ask yourself this question: just where does all the money come from to make Champ Car tick? Roshfrans? Lexington Energy? iRise? Sherwin Williams? China? Denver? Phoenix? San Jose? The Vegas GP Fueled by Visa? Perhaps Mazda has far more invested in Atlantics that we can all imagine?

Say what you will about the IRL, but they have real income streams from TV rights fees, sanction fees and sponsorships. They also have a brand that most people have heard of and an event that still means something despite the foolishness of The Split. Have you ever tried to explain what Champ Car is to someone while trying to sell them on the series? I have... it is about as much fun as trying to tell them where Assen and Zolder are and why there are only two Americans in the series. Therein lies the story. But I digress...

Will this latest IRL Tony Bucks plan work? Time will tell but IMO the timing could not be better for them or worse for Champ Car since the OWRS owners now seem to be choosing to run their series on a shoestring budget.

In racing, money talks and BS walks. It looks to me like TG is doing the talking the Amigos are doing the walking. In my mind, that is what the TEAM plan is really all about. Like it or not, this plan communicates commitment.

[Aeron Hale]

Also, the question I have is say Champ Car does fold between now and homestead. How does the IRL come with an additional $14.4 million in subsidy payments for the 12 or so teams that would likely go racing in the IRL?

[mark123]

Aeron - we may have to agree to disagree on this.

[Wilf]

Also, the question I have is say Champ Car does fold between now and homestead. How does the IRL come with an additional $14.4 million in subsidy payments for the 12 or so teams that would likely go racing in the IRL?

And the answer is:

"This is an extension of our Leader's Circle program. Historically our Leader's Circle program has been restricted to 24 participants. And I think we will probably at least stick with that to begin with. If we need to adjust, show some flexibility, that would be a good situation to find ourselves in. If we find we have more than 24 cars interested in participating on a full-time basis, I think we would take a look at doing what we need to do. But right now we're anticipating it just being for the 24 Leader's Circle teams."

Brian Barnhardt 10/2/2007

[indycool]

Aeron, I'd still like to know what your line item of "handouts" for three teams -- $10.4 million is.