IndyCar- The business of racing 2.0

Which of these drivers would you hire?

Driver A has 104 career IndyCar starts. He has 8 wins, 26 podiums, 37 Top Fives, 13 Poles, 10 Fastest Laps with a lowest full time season placing of 6th.

Driver B has 82 career IndyCar starts. he has 1 win, 8 podiums, 16 Top Fives, 2 Poles, zero Fastest Laps with a best full time season placing of 7th.

Driver A spent most of those starts at the helm of one of the series’ top seats. He’s been in championship contention, raced well on both ovals and twisties, but generally missed the lofty expectations designed by his teammates’ successes. He’s widely regarded as the ideal teammate, great with the press, polished in front of a camera and knowledgable when it comes to racing technology. He has upside potential, but is currently in the prime of his career and needs immediate results. He’s been forced to take a different career path this season because of funding issues, but looks set to return to the series next season.

Driver B has also spent a good bit of his career in a top seat. He’s had lofty expectations as well, but generally falls short of his goals. He’s notorious for being a slow starter to the season, but unfortunately lets those early season let downs sabotage the rest of his season. He wants to be the #1 shoe on his team, but doesn’t put up results worthy of #1 status. He’s been consistenly outpaced by his teammates and is known to not always play well with others. He is good on camera and is generally friendly with the press, but has a reputation for being mercurial around the paddock. He has a ton of potential, but hasn’t capitalized on it quite yet. He was forced at one point to take an unusual career path, but came out of it with a top ride. For a number of reasons, it didn’t work out, so he found himself in his current situation. He also no longer has funding issues for the most part, but he’s been very proactive in securing his seat.

Driver A follows the traditional North American method. A driver with talent and a helmet can hope to find a paying ride. Driver B follows the European style. A driver with some talent and funding can always find a ride.

The truth of the matter is we’ve experienced a paradigm shift in the way drivers get rides here in North America. Honestly, Auto Racing as a whole is going through a change in business models, much like how the Music Industry experienced a similar shift in the early 2000’s. Let’s retrace the steps…

For a very long time, the music industry was dominated by the six major labels; Warner Music Group, EMI, Sony(long known as CBS Records,) BMG, Universal Music Group and Polygram. With the advent of the internet, torrenting, digital sales and mp3 players, profits dwindled as the way people acquired music and even listened to it drastically changed. Now we’re left with the big three labels.  Universal Music Group absorbed EMI and Polygram. EMI’s publishing end became part of Sony, which had previously acquired BMG. Warner Music Group took on EMI’s Parlophone label, as well as Virgin Classics. Basically, the industry cannibalized it’s own parts and left us with the shell of a system we have today. The plus side? The very same thing that killed the major labels has given us the rise of independant labels. With the dawn of the mp3 era, it’s now quite simple (and cheap) for anyone to start and run a label. focusing on a digital only business model, anyone can run a label now. The majors struggle with this concept, while the independants thrive. Music is no longer a commodity, but a service.

Racers are no longer a commodity, but a service.

Much as the major record label still exist, paid drives still exist. Much as how the major labels have consolidated into a handful of entities, there are gracious few paid rides still available.

The bottom line is, well, the bottom line. If a driver shows talent and can bring a hefty check along with them, they are more valuable than a driver with talent and no funding. That is why Driver B is more valuable than Driver A in the scenario I gave earlier. Driver A definitely has better results, but Driver B brings the cash to make it happen. Instead of drivers waiting to be contacted by teams, now the driver must do some of the lifting and be active in their pursuit of a ride.

Tony Kanaan won the 2013 Indianapolis 500 Mile Race and is a former series champion. He has admitted that finding the funding needed for 2014 has been difficult. He also feels that due to his status in the Series, he shouldn’t have to do the lifting on his own. Perhaps this is true. Perhaps having an Indy 500 winner on staff should be enough for KV Racing Technology to go out and find sponsors. Perhaps TK should be able to chill at home in Miami instead of flying around, shmoozing for dollars.

Unfortunately, this is no longer the case. Most of the drivers on the IndyCar grid have to bring some sort of funding. Even if it’s simply a personal sponsorship to pay their own salary, drivers are being forced to become more business savvy than ever. Gone are the days of simply showing up at the track with a helmet, a heavy right foot and a dream. That’s why Driver B in the scenario earlier is still in IndyCar. When faced with the funding issue, he pounded pavement to get the finances together. Granted he may have had a bit of family help, but it doesn’t really matter how a driver gets the funding, they have it and that’s all that matters. Driver A had some good offers, but he held out for a better offer, which never landed on the table. Instead, he was forced to look to other series.

From Formula One all the way down to USF2000, drivers need to bring funding. It is the new normal in racing, and it’s not changing. The drivers who get rides are the drivers who actively pursue sponsorship and parlay that into the best drive they can afford. For years, European drivers have had benefactors who helped foot the costs of racing in order to advance their careers. It was only at the upper echelons did they find an actual paycheck instead of a driver sponsor agreement. Even that is changing in F1, as paid rides become fewer and farther between.

Consider the changing world economy as the catalyst for this change. Companies have changed their advertising strategies. In the modern era, companies spend less on advertising in general and expect a high rate of return on what they do spend. The sad truth of the matter is due to consolidation and cutbacks, even well established drivers are having a hard time making this connection. Consider that Dale Earnhardt, Jr. has a split sponsorship between National Guard and Diet Mountain Dew, but still needed a last minute deal with Time-Warner Cable to seal his 2013 sponsorship. Tony Stewart has struggled for sponsorship to run the #39 car for Ryan Newman, an established Sprint Cup Series driver with a winning reputation.

Simply put, the big deals where a single sponsor would fund a ride for an entire season generally do not happen anymore. The need for a driver to provide funding helps the team cobble together needed cash to help operate. With changing economic conditions around the world, more drivers are competing for a smaller amount of funding. Due to the general uneasiness of Corporate America right now, North American drivers are finding it tough to get those dollars at home. I’ve had more than one conversation with a driver where they said “I’d love to do XYZ, but the funding just isn’t there.”

So back to my original question. The driver you choose is based on your pocket book generally. If you have the money, Driver A looks pretty good. If you’re where most teams are though, Driver B is probably the choice. Drivers, teams and even sanctioning bodies have to come to grips with the new economic models. Those who do, like independant music labels, should succeed and reap the benefits of an engaged fanbase. Those who don’t, like the three major labels, continue to flounder and look back to their old ways for guidance. Like the major labels, they continue to struggle as the market changes around them, leaving them behind as new methods and new thoughts prove successful. Motorsports is truly at a crossroad of change.

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