Thursday, February 08, 2007

Racing Economics 101

By Robin Miller:

Reprinted from Speed Channel web site:

While waiting for Champ Car to announce any driver, Gene Simmons to unveil another verse of "I Am Indy," and ESPN to give Michael Waltrip his own channel, all this down time gave me a chance to do a little research on the state of purses and payouts in American motorsports.

And the return vs. the investment.

As you might imagine, NASCAR Nextel Cup is so far ahead in this department it's embarassing.

Last year, Jimmie Johnson earned $8,909,140 in prize money for Hendrick Motorsport on his way to his initial title and that's not counting the $6,785,982 he received in series sponsor points.

That's $15,770,125 for those of you keeping score at home. FOR ONE TEAM!

The total payout (with no bonuses) for the 78 drivers who competed in one, some or all of the 36 events in 2006 was a staggering $219 million.

By comparison, the Indy Racing League dolled out a total of $24 million in purses ($10 million coming from the Indianapolis 500) with Sam Hornish Jr. collecting $3,835,205 for his third championship. That included $1 million bonus for capturing the title, not bad for 14 races.

But still way out of whack considering a budget to run up front is anywhere from $6-9 million per car.

Further north on Indy's westside, Champ Car paid $6,553,000 in purses to its competitors for 14 starts and another $1,550,000 in point money. Or about the same as Johnson's bonus check.

Even though a competitive budget for Champ Car might be as low as $5 million, the payout still explains why ride buyers can flourish in this series.

For his third consecutive championship and seven victories, Sebastien Bourdais grossed $1,282,500 and that included $500,000 for the title. To give you an idea of how disproportionate things are, Kenny Wallace finished 43rd in the Cup standings in 2006 and brought in more money ($1.3 million) than Bourdais.

And the second-tier Busch series even paid its champ (Kevin Harvick) $1.3 million.

In 13 seasons, Paul Tracy has racked up $12.3 million in earnings while Jeff Gordon has eclipsed $60 million during the same time frame.

But the bottom line is even sadder in sports cars.

The Grand Am series was founded and funded by NASCAR but you won't confuse it with the stock car division.

Other than the Rolex 24 Hours (which paid $100,000 to win last month), a victory in Jim France's series is worth a piddly $25,000 (unless you're not a member of the Pacesetter's Club and then it only pays $15,000).

There's quite a dropoff in the Daytona Prototypes at the big race since second is worth $35,000 and fifth brings in $10,000. "Not enough to pay the hotel bill," said one owner.

Chip Ganassi, whose budget with sponsor Telmex and Carlos Slim's deep pockets is thought to be in the $4 million range, raked in a whopping $150,000 in purse money last year for taking the 14-race team title.

In the current realities of open-wheel racing, it may be easier for team owners to survive in Atlantics (above) and IPS than in Champ Car or the IndyCar Series. (LAT Photo)Jorg Bergmeister, who captured the driver's crown, received a Rolex watch, a discount pass to Daytona USA and a firm handshake from president Roger Edmonson.

In the more sophisticated American Le Mans Series, where slick cars like the Audi and Porsche are seven-figure creations, the purses are also seven figures but only if you count cents.

The winner of this month's Mobil 1 12 Hours of Sebring classic will win $24,000 or, to be more precise, about $2,000 an hour which, ironically, is the going rate at a wind tunnel.

Honda is battling Porsche this season in LMP2 and they'll spend more on hospitality than their three-team lineup can earn.

ALMS also has a unique pay scale. If you are a full factory team, you are not eligible for prize money and, in 2005 at Sebring, 22 of the 38 starters got zero prize money.
My beloved USAC midget racing is also a financial train wreck. Engines can cost as much as $45,000 yet the purses have hardly increased since the 1970s and the winner is lucky to get $1,500 most nights.

At least you can go outlaw sprint car racing in Indiana for a reasonable amount of money and have a shot to win $4,000.

The Formula Atlantic series boasted a $2 million prize for the winner (Simon Pagenaud) to take to Champ Car and $3.7 million in purses while the IRL's Indy Pro Series is paying out $4 million in 2007 and offers as much as $41,000 for a win. An owner can't get rich running either open wheel feeder series but it's possible to survive.

Obviously, with Nextel, FOX, NBC, ABC, TNT, SPEED and ESPN spending hundreds of millions to be partners, it's good to be a car owner and better to be a driver in NASCAR's top tier.

Until IRL and Champ Car can secure a title sponsor, improve TV ratings substantially (or quit having to buy time) and find a way to put money into their teams (without Tony George, Kevin Kalkhoven and Gerald Forsythe writing checks), the economics of open wheel will be hopeless.

A good shoe in Champ Car or IRL can make a decent living off of their retainer but not many would want to make it on 40 percent of the purse (especially in Champ Car) like the old days.

Grand Am sports a ton of good drivers yet doesn't draw much of a crowd but it does have the France faction to keep things afloat while ALMS suddenly has some muscle from manufacturers and some momentum. But neither sports car series makes financial sense at the moment and drivers have to scramble to make a living.

And, if things weren't depressing enough for open wheel and sports cars after reading this, there was this headline in Wednesday's editions of USA Today: "$18 Million on Line at Daytona."

That's a whole year of Champ Car, IPS, Atlantics, USAC, ALMS and Grand Am in four hours.

WickerBill sez;
Thank you Robin..............! It's about time more attention is given the the financial side of racing!


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