The Monetizing of Indianapolis Motor Speedway and How I Came to Love it

It's just business ....

To be an IndyCar fan is to get used to the fact that the Indianapolis 500 is the HUGE fish in the small IndyCar pond. So much so that for many people, the month of May and the Indy 500 are the entire IndyCar series. To be an IndyCar fan is to hear fans of the 500 expound on its virtues with admirable passion all year.

I can finally confess that for a long time as someone who lives eight hours from Indianapolis these facts grated on me. Those of us who attend one or more of the dozen-ish non-Indy 500 races can feel like Children of a Lesser God .. er.. Event. HUGE THINGS PLANED FOR INDY 500! Well, what about us? Table scraps.

Jealousy and envy are as seductive as they are unsightly. So, Confession II: I fell into the trap of resenting all the focus put on the Indy 500 while the Iowa Speedway race got — at least in my opinion — cursory attention. Corollary: I believe that this phenomenon has contributed to the demise of many an IndyCar focused racing blog based outside driving distance of IMS, but … I digress.

I have seen the error of my ways. My epiphany went something like this:

1) You can argue very convincingly that a lot of the cash the Indy 500 gins up — whether generated at the track or through the TV ratings the race gets — makes a lot of the non-Indy races possible.

2) You can further argue that the type of stuff that happens at IMS would not be cost-effective outside Indianapolis due to the relatively low fan numbers out here, so pining for it to be offered is like pining for IndyCar to lose money.

3) Therefore, if you are a fan of a race outside of IMS (as I am of the race at Iowa Speedway) it’s in your best interest to hope that the Indy 500 generates a SHIT LOAD of money for IndyCar, because the more money races at IMS make the better the chances of your race continuing.

Numbers 1 through 3 above are based in reality. I’m a big fan of reality. SURE, it would be cool if IndyCar put money into the non-Indy 500 races, because it seems clear that the biggest potential for growth is among fans outside of driving distance to Indianapolis. But, again, reality … IndyCar doesn’t have the money to put into improving every race with, say, a HUGE fan zone and hauler parade and festival of driver appearances and … dare we hope … a ZIP LINE (Sarcasm! For a while there the inclusion of a ZIP LINE was seen as a savior of any event). Plus, who are we kidding, 192 people would show up to participate in those events outside IMS.

Cue the chicken and egg. It takes money to make money. IndyCar doesn’t have money. SO they need to — to use the coarsest term — milk the IMS functions for all they can get. It's just business. For us fans out here in the IndyCar hinterland there’s choice: A) be envious of all the excitement and buzz and big doings at IMS or B) be glad that IMS exists because No IMS, No IndyCar.

So I’ve changed my tune here, big time. I’m going with Option B. (I'm being serious here. I realize it is hard to tell sometimes.) In part because of my effort to make 2014 a “don’t worry, be happy” year. Expanding the types of racing I consume beyond IndyCar is part of that same “be happy” effort. Hey, why stress it? Why rail against the machine? Go with the flow on such minor (in the grand scope of life) matters. So I’ve gone from jealousy that all the new stuff and fan focus seems limited to events inside the Indianapolis Motor Speedway to gratitude that people are willing to spend money there. Seriously. No sarcasm!

That brings us to the Mark Miles Great Monetization Project. Mark Miles, the IMS/IndyCar CEO (in reality if not technically in title), took a look at IMS and said (seemingly) “this deal could generate a LOT more income than it is generating.” And, I hasten to add, I would do the same thing if I were in his shoes. Upon my first visit to IMS in 2004 I was incredulous. “All this is used just ONCE a year?” I thought. (Not sure if the NASCAR race was going on at IMS by then or not. If it was, I was oblivious to it.)

We live in a market-driven democracy, and compared to other A-Level events and venues, IMS/Indy 500 was leaving a whole lot of potential revenue on the table. Market-Driven Democracy 101: charge what the market will bear. (More on that in a minute.)

The market could clearly bear to pay more. Hey, don’t yell at me. Yell at the free-market system.

SO, Miles launched into “monetizing” (which means to use something of value [more elements of the IMS experience] as a source of [more] profit). Miles set about charging what the market will bear for stuff IMS already sells, charging for stuff people will pay for that maybe they gave away for free (parking) and finding new products to offer people (new events, glamping):

• He established a road race for early in the month.
• He is trying to tweak up the qualifying format to get more people to show up at the track and in front of their TVs.
• Raised some parking fees.
• Raised some ticket prices and/or changed the pricing structure.
• Offering “glamping” which I am reliably informed is “glamorous camping.”
• Most recently making a deal with a food and beverage provider to run all of IMS’s concession stands.

Sidebar: on the point of the concessions … bravo. I’ve always been hugely underwhelmed by the food offerings at IMS, most especially compared other A-Level events. The Sacred Tenderloin notwithstanding, I thought the food at IMS was very very blah. Wells Fargo Arena in downtown Des Moines offered more variety, from what I could tell. Admittedly I didn’t check EVERY concession stand at IMS, because I just won’t work that hard to buy your food when I’ve already paid $90 to get in. Concessions can only go up from where they are. And people WILL pay for quality items. I‘m not saying get rid of the (relatively) cheap standard items, like hamburgers and hot dogs, etc. I’m saying add some higher value stuff, like better food and a MUCH wider selection of beer.

Then, maybe, MARKET the availability of said premium items. Make them easy for customers to know about and find in the cavernous IMS. I’ll pay $7 for a 12-ounce craft-ish beer, but only if I am aware that it is for sale somewhere.

Now, Mr. Miles (since I know you are reading this) we need to talk about the Sacred Cooler policy. THAT is a crap ton of profit you are leaving on the table.

The cooler rule brings up the final thought. If Market-Driven Democracy 101 is “charge what the market will bear,” then eventually you’ll reach the limit of what it will bear. So the question is how much is too much? If you ditch the cooler policy, for example, will people revolt and not show up? Or, will they complain loudly and vow to stop coming … and then keep coming anyway?

Another sidebar: NASCAR TV viewers complain every race about the number of commercials … yet based on TV ratings the vast majority continues to watch. Clearly the market will bear the level of commercials included in a NASCAR broadcast.

Many have said one of the reasons they show up is because IMS was special in that it was used only once a year (OK, twice since the NASCAR race started there). By using it again for a road race does that make it less special and drive off some customers, thereby hurting overall revenue? There are about a million nuances at play here. It’s kind of high-stakes market poker and it’s been fascinating to watch it play out.

A good way to gauge the current mood is to check how the Indy 500 Devotees (and I use that term with no judgment or scorn) react to changes. Check the blogs. Most of them are ardent fans of the 500. I see at least a little bridling among some of the hardest-core Indy 500 fans. At the end of the day, I don’t think any of them will stay away. MAYBE if the cooler policy goes away. That would be a big test of how much the market will bear. For some, I think it would take a 100% ticket fee hike AND no coolers to driven them off. For others, the only straw that breaks the camel’s back would be to change the Indy 500 to a stock car race.

Like every good business leader, CEO Miles is Monetizing with one eye on the customer reaction. Again, rather than be jealous or pissy, as someone who works in marketing I’m watching it with fascination. And, on behalf of all of us outside driving distance of IMS, I have new appreciation for the Indy 500 fans’ continuing support.

Comments

[RoyHobbson]

Just throwing this out there...frankly I have no idea what bearing (if any) it has, but I find it fascinating:

At Augusta National for the Masters, a beer costs $1.50. A sandwich is the same. A Coke is $1.00. Snickers bars & the like are 50 cents. There is free parking on the grounds, and a 4-day badge is sold by Augusta Nat'l for $250 (which, on the secondary market has a re-sell value of about $7,000).

It's this way b/c it CAN be -- because of their massive tv deals. IMS banning coolers and offering glamping & whatnot are pittance compared to a similar tv deal. Making the race fascinating to the general public watching ON TELEVISION should be where their focus rests...not on getting a slightly less-terrible cheeseburgers for those in the stands.

Maybe that's a pipe-dream, but I still think it can be done.

[pressdog]

It's a good thought, Roy, but TV ratings have been "just a number" for so long among IndyCar leaders and the decade-long work to raise them has been so neglected that the smart immediately play is to do both. Monetize at IMS and start the disciplined work of building ratings. Given a decade of stagnant ratings, I have very little confidence that IndyCar has the discipline to raise TV ratings in any meaningful way.

[redcar]

agree, dog. hopefully the increased attention on IMS will not only help the Speedway, but in turn, help the entire series. folks may complain about change, but in order to make Indycar a viable series, change must come. Iowa is maybe the best race on the schedule, but unless Indycar can become profitable, there may not be a schedule.

I'm afraid banning coolers might have the same effect as banning breaded pork products but they could limit the number of coolers folks wheel inside I guess.

Camping (I refuse to use "glamping" because it's about as obnoxious as people who insist on calling martinis "tinis" or margaritas "ritas") inside the oval for the 500--I wish I could afford that. Sounds very cool.

[SkipinSC]

Bill, an excellent post!

I submit there are two "levels" of 500 fans. Level 1 is the "infield" fan. Back in the day, the Level 1 fan would sit in the ORIGINAL Snake Pit in turn 1; nowadays, he's in turn 3 in the "new" Snake Pit, or maybe on the spectator mounds in 4. He's younger and on a budget, but he's there to party. He may not give two hoots in Hell if he sees a race car all day, but that techno-DJ in turn three will get his attention.

If you take away the Level 1 fan's ability to bring his own beverages, he may still come, but I suspect it will be in far fewer numbers. Yet, every Level 1 fan is contributing (at minimum) his $40 general admission fare to the "kitty."

The Level 2 fan, on the other hand, will pay for his reserved seat. His ticket contribution will range from $72 to $186, so he's not afraid to spend some money. If you took away his ability to bring his own food/beverages, it's reasonable to assume, he'll buy what is available and not sweat it. And, he expects a little more from his 500 experience, whether it's clean restrooms, more and better food and drink choices, whatever; He's there to be a part of the race.

This might indicate the possibility of an "infield only" coolers policy, if nothing else than as a transition to a "NO coolers" policy.

The Level 2 fan may also be older; consequently, he would appreciate anything that can be done to help him get to his seat and leave the facility more easily. (This also makes it less likely that he will want to deal with a cooler.) He'd also prefer to have just a bit more ass-room for a seat. And, face it, if you ride the bus out to the Speedway, as many do, it's a pretty fair walk for an older person to get to the main straightaway seating, not to mention anything north of the pit entrance.

Speaking personally, as one whose wife cannot deal with a lot of walking, a tram system to get from the main gate to the seating areas would be a MAJOR plus. Without one, it's a virtual guarantee she'll never go again.

We still have friends and family in the Indianapolis area, so that is about the only chance we get to see an IndyCar race live, although I'd certainly go to either Rockingham or Darlington to see a race were one to magically appear on a future schedule.

[DZ]

I've had similar thoughts to Hobbsy here. I hold the 500 up against The Masters, Kentucky Derby, et. al. and still see no reason why it shouldn't get it's due w a massive TV payday except for what appears the poorest of negotiating.

I see little reason The 500 couldn't aspire to the polished and lofty perch that the Masters has. Their TV and online presence are 2nd to none. The massive direct deals, corporate backing, and co-promotion with CBS is staggering.

The connections within the Masters Club is no doubt a massive help as well, but the 500 as an event is no less a national sporting milepost in tradition and history.

It's only up to IMS to see it that way and then, just maybe, once they've convinced themselves they are worth it, ratchet up some new speed records and go find a network who wants exclusive rights to one of the greatest American sporting events and treat it as such. Ideally, the agreement would include well-enough upfront $$$ to pay off ABC's contract and be free.

I struggle with following the assumption that the trickle-down from IMS hauls will make more than a negligible difference to the other races on the schedule.

Making the product so very appetizing to the TV and online viewer should forever and ever be the primary focus.

[The Speedgeek]

As I alluded to on Twitter: BOOM! This is the good stuff, right here. Great post, 'Dog.

It's all about making money. And, no, I don't mean that in a bad way. Racing is expensive. It costs a lot of money to go to the races as a fan, to run a race team, to run a racetrack, to run a race series. That money has to come from somewhere. Outside of pursuing immoral means of doing so (and by that, I mean Immoral Means like setting up a meth lab in the Turn 2 Suites, not "immoral means" like inviting popular bands that I don't like to play Carb Day that'll bring in 10,000+ extra fans...I can get over that stuff because life is too short to worry), I want IMS and IndyCar to pursue every avenue of generating income possible. Increase ticket/concession prices? Sure. They've always been cheap, in comparison to similar level sporting events. Just make sure you spreadsheet it out, so that you've more than balanced the decrease in volume that you'll see as a result. More events? Great! As long as they're in the black, I'm all good there. Charging for parking (in selected, premium areas like the infield)? Um, of course. You mean you weren't charging for that before?!? And as long as I'm going to insist on being too cheap to do anything other than park in the Coke Lot for free, what do I care? "Glamping"? Well, I'm not going to do it, but if you can make an extra $100,000 by offering it, then by all means!

IMS making money = IndyCar making money (IndyCar could theoretically "charge" IMS an increased "sanctioning fee" as a way to launder the dough between divisions of Hulman Racing) = hiring more marketing people/increase Leader's Circle payouts/race purses (the latter two of which free up teams to hire drivers who don't bring as big of a check) = all things that have potential to increase eyeballs on IMS and The Series = improved long term viability of the sport as a whole. Everybody wins. For real.

One last point: I'm halfway surprised that IMS and other similar sporting venues haven't adopted some sort of "cooler license" system (not that I've ever heard of such a thing...I might have just made it up, in which case I'd like 0.0001% of their future revenues in return). It'd be something along the lines of "$10 to bring in a cooler of whatever size with whatever legal items inside (current rules still applying)". IMS/whatever venue gets an extra bump in revenue, the fans still save some cash (at current prices, so long as your cooler contains more than a single sandwich and two bottles of pop, you're carrying in more than $10 worth of concession value)...this could be a model that IMS pursues instead of the fan revolt that banning coolers all together might bring.

[Mark Wilkinson (New Track Record)]

Welcome back to the fold. I just wrote some similar sentiments at my blog yesterday. You know I believe that money should be made when it can be made. I assume "make hay while the sun shines" means the same in Iowa as it does in Indy, as does "what's sauce for the goose is sauce for the gander."

Personally, I have no problem with stopping coolers, but if they do, then being able to have enough drinks and food may be a problem at a venue that size. Quite a few point-of-sales there. They could just make the coolers smaller, or like Roy says, make concessions so affordable a cooler would be redundant. I assume someone with higher math skills could figure out the profits here.

I will continue to be Indy-centric, as you know me to be, but will hopefully always be able to see the bigger picture of the health of the series.

[indy317]

please don't take my cooler away

[Nat Krieger]

The thing about monetizing the 500 is all well and good, IF the increased $$ indeed flow down to the series and help the other events and not just serve as monetizing the pockets of the Hulman-George family. There is a lot of 4th generation family now on the payroll.

There are certainly places that some extra profit can be squeezed. There are places that IMS still is a screaming bargain. But squeezing the paying folks does have its limits.

Personally, I come from NY every year for the 500 and by the time all is said and done between flights, hotels, food, race tickets (paddock Penthouse), and other misc expenses the 3 or 4 day 500 weekend ends up costing between $1500 and $2000. I pay this amount gladly because I love the race and series. BUT If I begin to feel neglected and nickel and dimed I may just find it easier not to bother...

P-Dog you're beloved Iowa race, I went to the race last yr for the 1st time and had a good time..enjoyed the side trip to Rube's, but I digress.. I probably will not go back to Newton again. Why, because the track wouldn't let me bring in a can of sunscreen..this to me screams of nickel and diming a fan..

[Ted Wolfram]

I enjoyed your idea, but as a business consultant....I'd do everything you and Miles might do...except eliminate coolers...that would be self defeating...but since the "500" and the Speedway make money...I'd NOT recommend to a client to piss it all away supporting what is and has been a losing series! It would be financially, if the series was sold/closed/given away, possible to increase the purse for the "500" and attract, (if a new formula was put in place with cost controls) at least 50 entries. Make it $500,000 to start and $10,000,000 to win...and 50 entries would be a laydown.

I do attend races at other venues as well as Indy....but the "500" is the only one that drives our open wheel interests. And Yes I do follow, watch and attend races in NASCAR, and am considering COTA for this year's calendar.

[Ron Ford]

Before reading your epiphany I thought glamping was something Miley Cyrus was going to do at the snake pit. (The word glamping ranks right up there with blog)

Anyway, while IMS goes about trying to squeeze as much blood from us turnips as possible, I think they should also minimize costs for children in every way possible. The future of Indy is not with all the old hardcores (including me), but with getting kids hooked on the sights, sounnds, and smells of open wheel racing at dangerous speeds.

[Ron Ford]

Norris McDonald posted this morning that Roger Penske shot a hole-in-one at Augusta National last weekend. While he did not stay in a fancy tent, he may have celebrated with one of those $1.50 beers.