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INDY RACING LEAGUE MEDIA CONFERENCE
March 4, 2006
THE MODERATOR: Welcome to our third press conference of the day to address the state of the Indy Racing League, Brian Barnhart.
BRIAN BARNHART: Good afternoon, everyone. Thank you for joining us here at the Homestead-Miami Speedway, a facility that very enthusiastically hosts us twice in the year. I'd like to thank the track president (indiscernible) and his entire staff for their efforts in making this event such a success.
I also would like to take a moment to thank our drivers and the teams that support a consistently strong product they put on the track and offer the fans week in and week out.
2005 was the type of season that fortunately has become the standard for our series: intense and unpredictable competition, superb individual and team efforts, eight races with a margin of victory of one second or less, 10 different winners, the close side-by-side racing that has become the hallmark, and our drivers deserve the credit for that. The neat thing is we can expect only more of the same as we approach 2006.
You of course can't look back at 2005 without reflecting on the league's debut on road and street course racing. All the technical challenges of road racing in 2005 were met without a hitch. The qualifying format was a huge success for the drivers, the fans and the teams.
There were three different race winners on the three different road races and three different polesitters as well, which is a continuation of the strong competition that has been evident in the previous nine seasons.
Similar close competition can be expected this year, and the drivers are very much looking forward to the events at all of our distinctly different venues.
I also would like to take a moment to commend Dan Wheldon and Andretti Green Racing for their 2005 achievements, Indy 500 title and the IndyCar Series championship, the first time in IRL history that a driver and team has accomplished such a feat in the same season.
This annual pre-season test always puts a big spotlight on us as we dawn on the upcoming season. The media and of course the fans look ahead and wonder about the season ahead, what is the state of IndyCar Series racing.
The IndyCar Series has talented drivers, yet regular guys and girls. It's a culture of family, friends, camaraderie and fun times. The IndyCar Series is the best racing on ovals, and after a sterling debut in 2005, it's the best racing on road and street circuits as well.
The IndyCar Series is relevant, welcoming and acceptable. It is diverse, authentic and real. IndyCar Series is the Indianapolis 500 and more. It's the most entertaining motorsports experience, it's innovative, three-wide racing. Clearly the IndyCar Series is many things to many people. Thus our branding this year, "I am Indy."
We have our challenges, as well. One of our goals is building value. 2005 was a watershed season for us, laying the foundation for more value. Television ratings were up 53% on ABC Sports. They increased 33% on ESPN and increased 50% on ESPN-2. Event attendance increased by 9% the entire season. Web traffic at IndyCar.com grew at an amazing 162%. At-track merchandise sales increased by 75%. Sponsor exposure, according to Joyce Julius & Associates, grew by 57%.
These numbers are impressive, but we must continue to grow these numbers to reach critical levels of value. This is a long-term goal for the league and not something that will happen just overnight.
I'd like to touch on a few areas that show steps we are taking to build additional value:
The 2006 season compresses our races into a spring to Labor Day format. While it presents fewer events the 2005 schedule, it allows for continuity with ABC and ESPN to provide motorsports fans with an IndyCar Series event nearly every week. The obvious exceptions are the event in Twin Ring Motegi and the month of May in Indianapolis.
Excluding the travel to and from Motegi, there are only five weekends that we are not on track from Easter to Labor Day. We're convinced that a compressed schedule will allow us to build momentum and develop appointment viewing of the IndyCar Series on television.
We're committed to ending our season early in the fall, yet we will grow our schedule in the spring as well as fill some of the gaps you currently see in the 2006 schedule.
New venues, and by that I mean venues that have previously hosted the IndyCar Series, as well as venues that have little or no history with the IndyCar Series, are on our radar screen. We had face-to-face meetings with all the venues currently on our schedule and are considering multi-year agreements with these tracks for the future.
As we look ahead to next season, it was our goal to announce the 2006 schedule earlier than ever before. From a marketing perspective, the IndyCar Series is placing a permanent brand positioning stake in the ground. We will be recognized as the premiere form of motorsports entertainment by owning our heritage, engaging the consumers and consistently setting the stage for the future. We are both taking advantage of the deep roots heritage and casting a wider net to draw attention to the excitement of who we are and what we do.
We must succeed in creating an emotional connection to the IndyCar Series and its drivers and teams, get more people watching or attending our events. This positioning aligns with our corporate vision, international leadership in motorsports entertainment and allows for considerable growth.
The positioning addresses our past by owning our heritage, our present by engaging the consumers, and the future by consistently setting the stage. This brand position says we are Indy, and allows us to build on the equity that is the Indianapolis 500.
Further stressing the point of value, you're all aware of our relationship with Simmons Abramson Marketing out of Hollywood. We feel that Gene Simmons and Rich Abramson are marketers without peer, their entertainment marketing and out-of-box thinking is sure to bring value to the league and excitement.
You've all read and heard, I mentioned earlier, the key component of new relationship is a campaign declaring, "I am Indy." The pursuit of the ultimate achievement in motorsports, victory at the Indianapolis 500, has allowed us to preserve and nurture the heritage of Indy-style oval-track racing. We're all about the focal point that brings all of us together in our mutual and individual pursuits of success: Indy. Indy carries over to each and every event on our schedule, both on and off the racetrack.
As part of our marketing efforts, we're working together with the tracks to schedule large-screen video boards at each venue. These boards will be vehicles for telling stories of our teams and drivers as they prepare for each race, taking fans behind the scenes and making the pauses in the racing action more entertaining.
On the television front, ABC and ESPN as long-term partners will be making significant changes to the on-air product of our series and the promotion of it. This is at the forefront of our marketing efforts. A significant redesign of the telecast from production to talent has begun to be made public. We're thrilled with the addition of Rusty Wallace and Marty Reed (ph) who will be joining Scott Goodyear, Jack Arute, Dr. Jerry Punch and Jamie Little from 2005. Additional changes to the production level including a new producer and director will be announced shortly.
We will welcome the addition of a tracking system to the telecast in 2006 so that viewers will have a constant visual connection to the racing action and the drivers they root for and against.
The storytelling of not only the race but the racers and participants and teams will be vastly improved as television makes each race more compelling and not to be missed by the casual and diehard fans alike as well as the new fans we'll be attracting.
We salute the long-standing and continuing support of outstanding sponsors and partners. Firestone has recently announced an exciting new strategy for 2006 that not only will continue its tradition of reaching motorsports fans with unique messages, but for the first time it will support the IndyCar Series with advertising in the pages of Time Magazine to go along with the traditional ad campaigns in more traditional outlets like Auto Week and National Speed Sport News.
As Honda continues its tremendous ad campaigns in USA Today, other new sponsors are poised to join the IndyCar Series family. We continue our efforts in the pursuit of title sponsorship. Well-rounded and active sponsors bring so much to the league such as marketing and PR plans, business-to-business programs, and they all add value to our sport.
Be it promoters, teams, drivers, partners, sponsors, vendors, our guiding principle is to operate and communicate as an integrated unit. We are meeting with our constituents individually to communicate our goals and strategies so that we may determine synergy and build together to strengthen in-market programs and identify opportunities together.
A great deal of time and energy has been pointed at our new engine program, and we feel this type of program is perfect for us at this point in our history. Just a few short years ago we welcomed an expanded roster of manufacturers to the series, and that helped us achieve some goals that we had set at that time.
In this era of value, a single-engine program will allow better cost containment and put us in a position to attract expanded teams or new teams to our series.
Since 2000, we've offered some of the most competitive racing in the world under and exclusive tire arrangement with Firestone, and taking our engine program to the same exclusive format we believe will take the IndyCar Series to a whole new competitive level beginning in 2006.
Providing engines for the entire IndyCar field is a significant change and dramatically different role for Honda from that as a competitor in a multi-manufacturer championship. It's clear Honda is committed to working with the league as a partner to continue to build value in the IndyCar Series. As we look ahead to the 2006 season, there will be minimal changes to the technical specifications of the Honda Racing Indy V8, and that's a tribute to our current specification.
The reliability and performance we have witnessed the last several years is outstanding. There's no reason to expect anything less this season, even with HPD supplying the entire field at the Indianapolis 500. There will be a level playing field, putting a priority on driver ability and team capability, with all the teams having the same engine program in terms of performance.
We've outlined a program where the engines will be serviced at HPD, Ilmor Engineering. Those engines will be shipped and held as a pool. The IRL will choose engines from that pool and randomly provide them to the teams. There's no chance for anything except complete, impartial treatment.
A single-engine supplier will potentially produce more race winners and a tighter championship. That equals increased interest, more exposure and more compelling story lines. It also reduces costs. An engine lease agreement in 2005 was $1.8 million per car. It will be $1.3 million for the upcoming season. And Honda performance development president Robert Clarke said it will be less than $1 million for 2007.
Those are significant reductions. Within the span of about 14 months, we will have reduced the cost to the teams by as much as 50%. Engine leases for a full-month program at the Indy 500, the 90th running this year, will be $250,000, less than half the cost of last year. After the first weekend of qualifying when the first 22 spots in the field have been filled, the engine program for participants wishing to practice and qualify the second weekend will be $115,000. Again, a significant reduction.
Anything that we can do that can have this significant of a reduction in the team's costs to participate is certainly a move in the right direction and we think it will help encourage more participation.
The fundamental and founding principles of Tony George that he brought to the series first and foremost included cost reduction. This is certainly going to play directly into that. The next was the availability of equipment. We will now be in a scenario that is much better for everyone to be guaranteed an equal chance of getting on the track with the same equipment and a chance to compete and win.
We appreciate the enthusiasm shown and the work done by Honda to ensure having the capability of providing the entire series in 2006. Robert Clarke and everyone at HPD and Ilmor have been true partners during this process, so much so they're committed to the IndyCar Series through 2009.
The IndyCar Series already is in line with President Bush's call for America to wean itself from foreign oil by embracing alternative fuel sources such as ethanol. An ethanol/methanol blend is currently in our cars and the series will turn to a hundred percent fuel grade ethanol beginning in the 2007 season.
In his State of the Union remarks, the president emphasized the important role ethanol can play in America's energy future, helping reduce our dependence on foreign oil while improving our environment. We're proud to be playing such an active role in the IndyCar Series, as it has always been recognized for its technical leadership in auto racing, and now the industry leader in renewable and environmentally friendly and responsible energy.
We feel a commitment to the environment and our country's energy security. It's consistent with our position and our legacy of race (indiscernible) innovation and leadership. Transition from methanol to ethanol over the next two IndyCar seasons has had no significant technical barriers and has been a seamless transition. Our cars don't sound or perform differently as they have in the past.
The Indy Pro Series continues to evolve as the perfect steppingstone into the IndyCar Series and we spent the off-season developing some initiatives to enhance participation and are pleased with the results we've seen to date.
Some of those enhancements include the average race purse for it's 12-race schedule in 2006 will be tripled, offering participants an overall prize money for the season of $3 million. The increase is broken into three levels, with two of the 12 races that are those hosted by the Indianapolis Motor Speedway offering $300,000 race purses at each event. Events at St. Petersburg and Infineon will consist of two races on the seem weekend and they will each offer $187,000 purses for each event held, both on Saturday and Sunday. These doubleheader Indy Pro Series weekends are a first for the league and will allow us to recruit even more drivers and teams moving forward. The remaining six races on the schedule will offer $275,000 in prize money.
As it relates to the schedule, after debuting on road courses and street-style events in 2005, the 2006 Indy Pro Series schedule will consist of six oval races and six road and street course races, including both racing surfaces at the Indianapolis Motor Speedway and, as I mentioned, doubleheaders at St. Petersburg and Infineon.
The Indy Pro Series is about opportunity, opportunity for drivers, owners and team members to compete at a high level of open-wheel racing, opportunity to compete on the biggest racing stage in the world, the Indianapolis Motor Speedway, and the opportunity to advance to the highest level of open-wheel racing in North America, the IndyCar Series.
New testing rules introduced for the IndyCar Series for 2006 will further the opportunity to present to the Indy Pro Series teams and drivers. While IndyCar Series teams will be limited to open tests only, they can earn bonus days of testing by full-time participation in the Indy Pro Series.
The combination of a nice blend of oval and road course events combined with the dramatic increase in race purse prize monies and the new testing policy will appeal to an even greater number of team owners and young talented drivers. Anything we can do to create more opportunities is huge for all those who aspire to drive in the IndyCar Series and the Indianapolis 500.
Of course, the icing on the cake continues to be that the Indy Pro Series is the only racing series in the world to race twice at the Indianapolis Motor Speedway in the same year.
In closing, I'd like to reaffirm our efforts to grow the Indy Racing League, with eyes to the season ahead and the future beyond that. We put in place the ingredients for all of us to win, both on and off the racetrack. We've added to a solid stable of executive and management talent to the league. They and those they joined are invigorated, excited and passionate and prepared for 2006 and beyond.
We're ready to go. We thank you for being ready to go with us. At this time, I'd like to open it up for questions.
Q. If you could elaborate more on the effort that Honda is going to be a single-engine producer. Talking to Robert Clarke yesterday, he was saying the greatest challenge is you can make the engines more reliable, you don't have to go to the R&D as much as when they were in competition. Talk about what they've accomplished.
BRIAN BARNHART: Well, obviously he's correct. I think the biggest aspect of that has been the timing. I think at the Fontana race they announced they were going to become and continue to be supportive of the IndyCar Series through 2009. I think at that point they anticipated the potential of being the sole engine supplier in the beginning of 2007.
The fact that it came about in late November or early December of 2005, they're the sole supplier for 2006, greatly accelerated that time frame.
As you mentioned, I don't think their focus is going to be on research and development. It's on production and reliability. In that time frame for us to be on track, to have 16 cars at the Phoenix test three weeks in January, we have 18 cars on track here for the open test this week, and I expect us to begin the season the end of this month with 20 cars on track at Homestead for our season opener.
They've just done a phenomenal job stepping up and meeting that in terms of time, production and supply to meet that demand. Of course, quickly on the heels of that, a month and a half from now, two months from now, we're going to begin the Indianapolis 500. They're going to be supplying at least 33 cars with engines for the month of May. They've done a tremendous job accepting that challenge and stepping up to the podium.
Q. Could you address the southwest market. A big hole in the schedule. Is that something you're looking at?
BRIAN BARNHART: Absolutely. It's a shame that with the direction we went with the schedule in 2006, we really worked hard with our long-time television partners at ABC and ESPN to create that compelling story line. In doing so, it it's very difficult under those dates that are available to us to get into important market (indiscernible). The Los Angeles market is very important, second largest market, and we would love to be out there.
When you stop and consider the -- as I mentioned, even with the schedule we have, from Easter to Labor Day, we only have five weekends that we're not running. If you look at those five available weekends, it's not possible for us to run at Fontana on any of those due to conflicts with one of either of their two Cup dates. We really don't have a whole lot of opportunity to be in Fontana at this point in time.
But, sure, the southwest market, LA in particular, is vitally important to us. As I mentioned, venues that we've been at before as well as some we've never been at are on our radar. We can look for expansion as early as 2007.
Q. Is the 2006 schedule final or is there a chance something can still be added?
BRIAN BARNHART: The 2006 schedule is final. The 14-race schedule announced late last fall is exactly what we will run.
Q. A lot of buzz (inaudible).
BRIAN BARNHART: I don't have much to comment about. I don't think there's much to comment on. There have been a couple of social visits between Tony and Kevin Kalkhoven. They've been exactly that. There are no negotiations, no talks going forward. I think it's great for them to get to know each other better and understand their philosophies and directions a little bit. But there currently are no plans for negotiations or reunification.
Q. In that regard, do you expect any Champ Car teams to enter the Indianapolis 500?
BRIAN BARNHART: Well, I don't know for sure. I think the 2005 event had just the Newman/Haas team participating. At this point in time I don't have an indication whether they're going to come back in 2006 or not. I think the Champ Car schedule is a little different. I don't know if that allows for participation or not. We'll wait and see. Either way, with or without them, we'll make sure we have 33 and have the full-field.
Q. With the engine situation as it is, do you think there is the possibility of making Indy an all-comers race like it used to be? It provides the opportunity a little bit easier for teams to do one-offs, run that race, that aren't going to run the whole season.
BRIAN BARNHART: Absolutely. I think the availability of that equipment and the price reduction, the stability we had in terms of chassis, using the same chassis as we introduced for the 2003 season with minimal updates, able to run in '04, '05. There are no updates for 2006. Everyone who has chassis from last year is capable of running them again this year. Honda has done a fabulous job making the engines available at a reduced price. That encourages participation for one-offs at Indy, as well as guys going for full-time participation in the whole season.
Q. Speaking of chassis, are we going to get a new one in '07 or '08? What is the thought process on that?
BRIAN BARNHART: I think the most important thing we can provide to our team owners right now is stability and direction. Along those lines of stability in the chassis, (indiscernible), these cars have proven last year and of course, 2600 laps the last two days here, they're great road racing cars. There's no reason for us to change those cars at this point in time. I anticipate using these cars for all of the 2006 season as well as 2007.
BRIAN BARNHART: That's something we'll keep an eye on. That's why we won't commit where we are. We haven't officially committed 2007. We clearly will keep an eye on that as we go through the season. That's always our No. 1 priority, safety. We'll see how we finish 2006, make a decision by mid-season this year, make sure we stay in line, and without any issues of safety, we'll use them again in 2007.
Q. Rusty seems to bring an awful lot of enthusiasm to his new role here. Obviously that is something you probably want to get across. Can he be any type of ratings increase or interest in the series, maybe broadening the audience a little bit?
BRIAN BARNHART: Well, I think it demonstrates ABC's commitment to us by bringing Rusty to our television booth for the 2006 season. You're right, he's incredibly enthusiastic. He has been around through his relationship with Roger Penske, he's been to several IRL races in the past. I think he has an appreciation and a respect for what our guys do and how they do it. And after a (indiscernible), he now has a better understanding of what it's like to drive one as well. I think that's important for him to be able to do that. I also think his enthusiasm, if anything, has continued to increase after getting behind the wheel of a car, having a better appreciation and understanding. But I think he also has a lot of fun doing what he was doing.
Rusty has potential of exposing us to motorsports fans in general, which are fans that we want to attract, fans of NHRA, fans of NASCAR. Fans of racing are good fans. That's a market we need to be focusing on. We think he has the ability to expose our product to fans of NASCAR-style racing. Obviously, there's a lot of those out there. If that can increase our numbers, that's a good thing.
I think it demonstrates a commitment that ABC has made of better presentation of our product and kind of reinventing our telecast as we move forward.
Q. I'm maybe naive about this. When you looked into these figures, what affect did Danica have on those figures?
BRIAN BARNHART: Well, obviously it had a lot to do with it. I think as we looked into it more involved, some of the (indiscernible) at Milwaukee, races she had problems at, our viewership did not fall off when she went out of the race. I think that's a tribute to the product we put on the racetrack. I think the excitement and energy she created attracted viewers to what we do. The quality product that we put on the racetrack made them race fans. Whether she was involved in the battle at the front at the time or out of the race, people kept watching. I think that's a real tribute to the quality of our race product that we put on. We'll make them race fans. She certainly helped bring them to the table. But the product that all of our teams and all of our drivers put on converted people and made them fans.
THE MODERATOR: Thank you.
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