Saturday, March 04, 2006

KK, TG, What is this Merger Thingy?

I wrote this over two years ago and at the time I never thought it would be so timeless. Last year I didn't dust it off until April or so but the latest speculation about the merger of CCWS and IRL has jump started the dusting this year. And because I am only a lowly blogger I shouldn't have to obey the phoney gag order!

I particularly like the part where I called it a merger...........whatever happened to REUNIFICATION? HA!

Enjoy................

Perhaps the term reunification is adding to open wheel racing’s problems. Reunification implies that at some time in the past there was unity. Reunification, it would seem, suggests a return to that unity. Does anyone remember the blissful co-existence of CART and the IRL. I don’t’ think so! Okay, let’s call this proposed getting together of these businesses a merger, or buy out, or perhaps you prefer to take the business edge off and refer to it as unification. Whatever term you prefer there’s no escaping the fact that CCWS and IRL are businesses with all the trappings and their products are the sport of open wheel racing.

When one looks at CCWS and IRL strictly from the business view you can’t help but realize how frail they both are. Hard core racing fans, no matter which side they affiliate with, tend to be blinded to frailty of these businesses. Either or both could easily fail. Auto racing is very expensive and requires funding from many sources. Someone once said if you want to make a small fortune in racing you will need to start with a big one!

When CART was formed there were some very successful business people involved yet in the end they were not able to generate a meaningful and lasting growth so the business wound in up in bankruptcy court. However those same founders have continued to operate and lead their personal businesses with astounding success. They had a nice run with CART until the IRL came along. In business this is called competition. It was not just competition though, there was plenty of that from NASCAR and others, but this was direct competition in the form of open wheel racing. The business of CART failed to recognize the IRL as competition and went about racing as before and finally went bankrupt. What’s difficult to understand is how this group of extraordinarily successful businessmen with their independent successes could have failed so dismally in this joint venture. They all must have good business acumen, yet as a group that business acumen must have been somehow gotten cancelled.

For a business to succeed it must make money, what other reason would there be for a business to exist? So long as CART was a public corporation their profitability, or lack of, was public knowledge. Determining the financial status of a private company is difficult at best so we aren’t likely to know much more than they want us to about them. Yes, it’s possible to set up a similar business on paper and plug in some expense and revenue estimates and make a good guess but that’s all it is - a guess. The CCWS and the IRL can be infused with private money until the owners run out or they can be made profitable by the use of good business practices and we aren’t likely to know for sure which is the case. If the owners have to continue funding the business then it is not likely to continue for very long. If either CCWS or IRL, or both, can execute a solid business plan then the fans will be rewarded with continuation of open wheel racing in this country.

With the two series beginning to look like gas stations on opposite side of the street it will surely be difficult for both series to survive. There may not be enough fans left to support one series let alone two. On the other hand if two businesses are managed properly perhaps they can both grow their respective fan and sponsorship bases, both of which are badly needed to assure the continuation of open wheel racing in this country.

There have been many suggestions as to how to combine (reunify?) the two series, but so far all we have is an agreement to disagree, whatever that is. Perhaps the combined series would be the best solution but then again maybe not. Competition is good for business, what would the quality of the products we buy be like without it. There are many businesses whose products are similar if not the same. Can two open wheel racing series survive? In time we should know. The future of open wheel racing in this country is in the hands of four individuals. Three of whom were successful in other business before forming a new racing series. Does this sound familiar? The other has used the family money to form a racing series and has never really demonstrated business success in any market.

Perhaps it was never meant to be, if open wheel racing was profitable wouldn’t there have been other investors lining up to get a piece of the action. Is open wheel racing just the floundering stepchild of wealthy egomaniacs that aren’t interested in anything but being king? For the sake of this 50 year fan of open wheel racing and all other fans, I hope someone figures out how to make it work.

Bill Sheets © Copyright 2004

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