• UNCONVENTIONAL WISDOM:

Tuesday, June 05, 2007

HISTORY's LESSON FOR NHRA's NEW BOSS

Welcome to Big Time Auto Racing, Eddy Hartenstein, and HD Partners.

Now that you are about to own the assets of NHRA's professional racing operations, please do all of us a favor: Study history. Specifically, recent American open-wheel history. You'll learn money isn't everything. It's having the RIGHT people with the RIGHT plan.

Trust me, reviewing this history is absolutely your best chance for success. And to do what you say you want to do -- and the racers have long dreamed would be a reality -- take drag racing to the "next level."

I'll skip most of the details of last Wednesday's thunderous announcement, the most important in NHRA history since 1975, when Winston began its 27-year series sponsorship. In brief, HD Partners Acquisition Corp. -- headed by former DirectTV chairman and president Hartenstein -- has signed a definitive agreement under which HD Partners will acquire all of NHRA’s professional racing assets. This includes, among other things, the POWERade series, a broad set of commercial rights, the four NHRA owned tracks plus the Pomona operational lease. The price? About $121 million, including approximately $100 million in cash and around $11.5 million in debt and liabilities. The new entity will be called NHRA Pro Racing. Hartenstein will be chairman and current NHRA president Tom Compton will be president and CEO. NHRA will remain a separate non-profit corporation, serve as the sanctioning body, and operate the sportsman class series. You can get more details at http://NHRA.com and view the investor roadshow (as I did) at http://www.hdpartnersacquisition.com .

I listened to Thursday's investor conference call. It was said about 100 financial and journalist types were on the line. As you would expect, it all sounded good. At first. You know, though, some ideas just aren't smart -- like telling Debra Messing she'd be more attractive with a short hairdo.

Based on my decades of motorsports business experience, a few comments really got my motor running: I laughed when the new boss described himself as a "fan" and said, "I just like stuff that goes fast . . . we're not just financial hacks."

It all got serious for me, though, when schedule expansion was mentioned as an obvious way to increase revenue. And let's be clear about this: Despite anyone's grandiose happy talk about love-of-sport motives, Priority No. 1 for ownership is to increase the revenue stream. Fair enough. But . . .

It was said two-three national events might be added to the existing 23-race schedule. My first question: Does the existing sponsorship/prize fund structure make it financially viable for owners to run more races? I happen to know what a few companies are paying and so take my word when I say this is a legitimate inquiry.

Then, international expansion was brought up, with "exhibitions" in Canada and Mexico put on the table. Historically set-in-stone fact: Non-championship "exhibitions" are not popular. USAC tried. CART tried. NHRA tried. Only NASCAR's remains. And let us remember the original purpose of The Winston, conjured up by NASCAR and RJR in the mid-1980s, was to generate publicity in May against the Indy 500. That need hasn't existed for a decade. The showbiz show has been recast as an "anything goes" Saturday night All-Star celebration (never mind Kenny Wallace was labeled an "All-Star") and, frankly, could easily disappear without much of a ripple other than the one created by Humpy Wheeler's inevitable dump of "The End Is Near!" press releases.

International racing is the biggest eye-opener, though, and I advise -- in the STRONGEST POSSIBLE WAY -- for HD Partners to immediately survey its team owner and corporate roster for comment. Every sponsor dollar I know of comes from U.S. marketing budgets and that is key . . . as we learn from the mistakes of CART.

When CART went public in 1998 and started piling-on non-U.S. events as if building a huge hero sandwich, the reasoning in the Board room was the major sanctioning fees such adventures could generate. A view of building the series for the long-term was replaced by the need to boost quarterly financial statements. The problem was that important sponsors expressed concern, either because they didn't have international operations, or the funding was coming from budgets allocated to domestic marketing efforts. Some of those I worked with flat-out told management that international races provided no opportunity for in-market promotions and the TV ratings/media coverage back to America were so insignificant as to provide no useful offset. Those events were listed as providing zero ROI. ZERO! The math was simple: If there were 18 races, but five were outside the U.S., the per-race cost to such a sponsor was calculated by dividing the total fee by 13, not the full 18. Thus, the per-race cost rose significantly, and for many, eventually was deemed to be not worth it.

Following the conference call, I reached out for reaction, and this pro-activity on my part resulted in a surprise. ESPN? No comment, at least for now. Budweiser? Ditto. John Force? Ditto. Don Prudhomme? Ditto. Kenny Bernstein? A disappointing (and obvious), "I think it has the potential of being really, really good . . . "

Thankfully, Don Schumacher stood tall. (Thank you Judy Stropus.) The series' Jack Roush-Rick Hendrick spoke to the issues I put on the table.

"It's hard to say what value the sponsors will see with adding two or three more races," said Schumacher. "Of the three races that they're talking about, one is in Epping, N.H., which is a good market in the northern east coast. Second one is up in the Toronto, Canada, area, and the third one is down in Monterrey, Mexico. There's some sponsors that may not have an interest out of the continental United States market. So that's always a concern, and it costs a great deal for the teams to travel to those markets, and to race in those markets. I feel it's the right thing to do to go to those additional markets, but each team and each sponsor has their own preferences."

More:

"Each sponsor has their own individual likes and dislikes about going outside of the United States, whether it be to Canada, Mexico or Europe, and you can't give a blanket answer to any of it. I know Matco Tools, from my previous communication with them in reference to the Mexico market, do not have a presence in Mexico, so they don't have an interest in the Mexican market. But we're racing for a championship here which pretty much necessitates our racing in all of these races to be in the top eight to go on to be in the top four and to win the championship. So it really leaves the teams with little choice but to make those additional forays into the other countries to continue on for the points championship. Even though the format has changed, I think it's still going to necessitate us going to all of the markets, whether your sponsors are totally in support of it or not."

Bottom line:

"I believe the change in ownership is a positive step. I'm definitely in favor of it. Time will tell how beneficial it is to all of the sponsors and all of the teams. We need a change out here and I feel good about the change."

I interviewed one of Schumacher's Funny Car drivers, Gary Scelzi, earlier this season. Scelzi is stepping away from the sport, at least temporarily, at the end of this campaign. He's long been unhappy with NHRA's lack of promotion and told me, "I don’t know if NHRA has the capital to take this to the next level. I don’t know that it’s as important to them to go to the next level. I don’t see, I don’t hear, what it takes to do that."

Now, all of that has changed. At least, we hope so. History's lesson for HD Partners is this: Yes, you've got to invest in your series. But no matter how much money you have, racing -- like any other enterprise -- is a people business. You've got to have the RIGHT people, with the RIGHT plan, and the RIGHT budget. Champ Car and IRL had the cash. Sometimes, it seemed they had the plan. Almost never have they had the right people.

Good luck, Eddy.
********************************************************************
Indy 500 Wrap-Up:

When the Indy 500 isn't a 500, is that news?
Apparently not to a surprising number of journalists. Many outlets, including the Indianapolis Star, Sports Illustrated and USA Today, reported in their race stories that rain ended the event after 166 laps -- but FAILED to say the completed distance was only 415 miles. That represented a BASIC NEWS FACT, one central to a reader's understanding of what happened. (!) I know math isn't easy, but 166 x 2.5 shouldn't be much of a media brain-bender. Or, keep a calculator handy. And, just WHERE were the eagle-eyed editors, paid to "catch" such omissions?

I'm not going to make a big issue out of the ESPN on ABC ratings because of the long rain delay. But, for all those "everything is great" people I referenced last week, I hope they think about the fact that the final Nielsen Media Research numbers were almost 16 percent down from 2006 -- and Indy was edged by NASCAR at Charlotte (down, without weather woes, by almost 12 percent). The Indy 500 was accepted into approximately 4.76 million households. No one should be happy with that -- and it's ridiculous to pretend otherwise. As for the telecast, I'm not going to nitpick it. Praise again to ABC for staying with the show despite the almost three-hour pause. I was, however, VERY disappointed with Marty Reid for saying, "The depth of this field is astounding." I know Marty to be a much better broadcaster than that statement would indicate. There was very little competitive depth in that field of 33 and anyone in the know knew it would have been a surprise for the winner not to have come from the first two rows. It's fair to knock Marty for this because it was not some impromptu comment, but rather, his well thought-out and rehearsed open. Unfortunately, Rusty Wallace jumped on Marty's statement by adding, "This is the most competitive field I've ever seen at Indy." Question: Given his decades of NASCAR commitments, just how MANY Indys has Rusty actually seen?

I've been a Sports Illustrated subscriber continuously since the early 1970s. I remember when the motorsports' coverage not only was substantive, sometimes, it was thrilling. So, I was disappointed -- but certainly not surprised -- to read the "Five lingering thoughts" column posted on the magazine's website. It was over-weighted in favor of Danica Patrick. The writer admitted he camped-out on the grid to watch the eighth-place finisher before she got in her car and "hung out in Patrick's pit" during the rain. The story said, "Aside from race winner Dario Franchitti, the most impressive driver at the Brickyard was Danica Patrick." (Hmmm . . . Helio Castroneves, who went from the front to the back and then near the front? Super aggressive Marco Andretti? Fastest man of the day Tony Kanaan? A pushing hard Tomas Scheckter?) The writer expects she soon will win. Duly noted. (The great race merited only one page of text in the magazine.)

I'm a big fan of creative headline writing. I won the Philadelphia Press Association's "Best Headline" Award in the dark ages of 1978. When Philadelphia 76ers owner F. Eugene ("Fitz") Dixon Jr. fired Coach Gene Shue, my Page One headline for the Daily News was, "Shue No Longer Fitz". Anyway, when Milka Duno wrecked, I predicted this headline to a few writers: "Milka Crashes; Hugo Chavez Blames Bush".

Here's a behind-the-scenes example showing that Indy isn't all the glitz-and-glamour it was in better times. Back in the 1980s, when PPG was the race's single-biggest sponsor, my friend Jim Chapman created the "Starter" award. Jim believed any driver good enough to qualify for the Indy 500 should be honored for that achievement, and so at the public drivers meeting, he would pass out a Jostens-made gold ring to each competitor. It included the driver's name, qualifying speed, and featured a large green stone in the center. It was beautiful -- I know, because I have one. Porsche driver Teo Fabi gave me his for the 1988 race as an expression of his appreciation of my work as the team's PR rep during a month of speed struggles for the legendary German automaker. The "Starter" award still exists but Jostens no longer makes 'em. When the rings were distributed at the rainy May 26 drivers meeting, I'm reliably told some veterans -- who know better -- grumbled, "What gives with the cheesy rings?"
********************************************************************
Sometimes, I can't help but wonder what people are thinking. Case in point: Former NASCAR and driver/team PR man Chip Williams was sentenced to 26 years in prison last Friday for having sex with an underage girl he met over the Internet. According to the Greensboro News & Record, the presiding U.S. District Court judge said, "This, by far, involved far more torture and forms of activity the court has ever seen in a case of this nature." Yet, the paper reported, Williams' attorney read into the record "two letters from Nextel Cup drivers in support of the former publicist. Although (he) did not disclose who wrote the letters, he called them 'household names in North Carolina.' (He) also gave the court letters from 15 other people, including a sportswriter and several racing-team owners." I hope the identity of each one who wrote a letter is revealed.
********************************************************************
Bill France Jr. was one of the most significant figures in motorsports history. I'll remind you of this: As the most important part of AARWBA's 50th Anniversary Celebration in 2005, members voted the France family as "Newsmaker of the Half-Century."

Please come back Thursday. I'll share some personal remembrances of Bill Jr.


[ more Thursday . . . ]