CART sanction fees

[nrc]

Some folks continue to harp on the notion that CART's sanction fees are too high. In a word: bull****. Two years ago, yes. Today that's no excuse for venues to bail.

CART's third quarter sanction fee revenue amounted to only 12.6 million dollars, which equates to an average sanction fee of 1.6 million for a quarter that included Toronto, Vancouver, Montreal and England (with England chipping in 2.8 all by itself).

The "co-promotion" deal that CART has offered up for struggling venues is a revenue sharing deal. Typically revenues are shared at one percentage split up to the original sanction fee amount and then at a different split above that.

According to CART's third quarter report, the four venues that renegotiated their deals to be revenue sharing deals last year paid only $4.6 million in sanction fees, an average of only $1.15 million each. When you consider that CART is paying over half a million in purse money for these events, and that other venues are paying $2 million or more as a sanction fee, there is no reasonable justification for Road America to ask to pay any less.

Let's just say for example that Road America sells just 30,000 tickets at an average price of $80. That's $2.4 million in revenue right there.

How can Road America justifiably complain about the "value" of CART when CART has already offered them a deal where Road America pays no more than a percentage of the revenue they bring in?

[Don Quixote]

Agreed. Plus, if they get an earl race with no sanction fee, they will have to sell the tickets for less, and my gut tells me the attendance gets cut in half. Less revenue from ticket sales, less concessions, etc. The only business sense would be if they are being offered a boatload of money from TG, T and H to do this. And even that would not be a good deal for RA because it would undoubtably be short lived. Otherwise they were just trying to play games by withholding payment to get a reduced sanction fee negotiated under the guise of a reduced value of CART. RA did more damage in alienating CART fans than they could have ever gained in lessening the sanction fee. To the vultures trying to feed off of the CART carcass: open your eyes, she isn't dead.

[Ziggy]

I have it on authority that Tony has spoken with Road America and promise to pay the purse and all associated legal fees. This on top of racing there for less sanction fee's

Ziggy

[racer2c]

Great stuff nrc.

Ziggy, I knew it! I knew it, I knew it, I knew it, I knew it, I knew it! I just knew it!

I said so too.

Have I ever mentioned that I don't like Tony? Well, I don't.

Seriously though, if RA takes up a contract with Tony and then plays it off in the media that they were left with choice (which I can very well envision) I hope the fans send a strong message of non attendance.

[mnkywrch]

Originally posted by nrc
How can Road America justifiably complain about the "value" of CART when CART has already offered them a deal where Road America pays no more than a percentage of the revenue they bring in?

Well, if someone else has guaranteed them more revenue...

[nrc]

Originally posted by mnkywrch
Well, if someone else has guaranteed them more revenue...

And that would affect the value of a CART race to fans and sponsors how?

You keep suggesting that CART is asking unreasonable sanction fees. Now you're saying that Road America is lying and that they've got an offer from someone else. If it's really the latter and not the former then this situation can hardly be blamed on CART.

[mnkywrch]

Originally posted by nrc
You keep suggesting that CART is asking unreasonable sanction fees. Now you're saying that Road America is lying and that they've got an offer from someone else. If it's really the latter and not the former then this situation can hardly be blamed on CART.

I suggest that given the current problems CART has that affect their draw at the gate, they're asking for unreasonable sancton fees.

But to make that point for sure, I'd want to see the last 7-8 years of what the sanctioning fee was, along with the RA atteandance.

I've heard it said quietly that attendance has been down the past year or two at RA.

If they're talking to the IRL, the IRL seems to be saying that they would isolate them financially from any risk. But my IRL sources are reasonably good and I've heard nothing about RA. Then again, I didn't hear about Honda in the IRL until 2 hours before the press conference.

[KobySon]

one thing we are not talking about is track sponsorship. One very noticeable difference at mid-ohio between 02 and 01 was the lack of Marlboro signage.

How much does Marlboro/toyo or honda pay the track or promoters for the race to be a title sponsor?

[Warlock!]

Miller was the big sponsor at MO in previous years, and from what I heard, it was a huge loss when they left... almost to the point that M-O didn't know how it was going to make it for the race in '02...

Winter Warlock!

[mnkywrch]

Originally posted by KobySon
one thing we are not talking about is track sponsorship. One very noticeable difference at mid-ohio between 02 and 01 was the lack of Marlboro signage.


Good point.

If CART brings less track sponsorship due to having less sponsors, and if the title sponsorship can perhaps only be sold for a fraction of what the tracks used to get, wouldn't that reduce the value of a CART event to a track, regardless of co-promotion agreements?

[KobySon]

Originally posted by mnkywrch
Good point.

If CART brings less track sponsorship due to having less sponsors, and if the title sponsorship can perhaps only be sold for a fraction of what the tracks used to get, wouldn't that reduce the value of a CART event to a track, regardless of co-promotion agreements?

The loss of Penske to the IRL was almost more detrimental in this regard than in competition or car count.
:mad: :thumdown: :thumdown: :thumdown:

So if the IRL can produce a race at a much lower sanctioning fee plus guarantee 2 to 5 million in race sponsorship from Miller and Marlboro, then RA or whichever track is already looking at a profit before ticket sales, vending, camping and parking.

This strategy will not work for long if the IRL can't get people to the track and the 497.5 #s keep sinking. Sponsor interest will wane.

[mnkywrch]

Originally posted by KobySon
This strategy will not work for long if the IRL can't get people to the track and the 497.5 #s keep sinking. Sponsor interest will wane.

Yes, but TG's bank account likely won't... not unless he loses his WC date.

Maybe CART should buy a Winston Cup date; it's like an ATM with no limit on withdrawals...

[JLMannin]

What would look like a good plan to me for sanction fees would be a percentage of gate receipts for the weekend with a minimum guarantee for CART and a maximum cap for the track. CART would take a more prominent role in race promotion and not leave it all to the track/organizers. Depending on the facility and what the vending contracts are, a percentage of vending could be in order.

However, there are significant disadvantages of this for a publically traded company - your sanction fees are not predictable (with the exception of the minimums) and are highly dependent of uncontrollable factors like weather and world events. This situation would be perfect if CART were private again.

[KobySon]

Originally posted by mnkywrch
Yes, but TG's bank account likely won't... not unless he loses his WC date.

Maybe CART should buy a Winston Cup date; it's like an ATM with no limit on withdrawals...

Is there any credence to the hulman/george sister rumor? The one where she didn't like how much money he was spending and wanted to reign him in?

kk

[Napoleon]

Originally posted by KobySon
Is there any credence to the hulman/george sister rumor? The one where she didn't like how much money he was spending and wanted to reign him in?

I don't believe so.

[nrc]

Originally posted by JLMannin
What would look like a good plan to me for sanction fees would be a percentage of gate receipts for the weekend with a minimum guarantee for CART and a maximum cap for the track.

That's very much like the deal they've given their co-promotion events. They share the revenues at one percentage up to the original sanction fee amount and then at a different percentage above it.

My guess is that the real squabble here may be over the exact amount of revenue involved.

In any case, CART needs to establish a sanction fee structure that will allow their venues to ride through this rough spot and still allow them to turn their business around. By all accounts outside of Road America the co-promotion plan seems to fit that bill. CART can't allow themselves to be baited into sanctioning agreements that will leave the company bankrupt by the threat of IRL events.

[RARules]

If the finances really make sense, why couldn't CART rent the track like it did with the "Paper Clip"? This would seem like money put to a much better purpose. Then CART would be responsible for the promotion costs, of course.

Don't you hate it when you see two friends of yours quarrelling?

[JLMannin]

The track rent of the paperclip was a different deal, as that facility had went bankrupt and was not in operation at all. If CART did the track rent deal with RA and basically threw a valid contract out the window, then every venue could expect (or demand) the same thing, rendering all current contracts potentailly meaningless. If CART were to sign a new contract with RA for 2004 and beyond with track rent and self promotion, that would be a different deal.

Wow, my 100th post. It usually takes me well over a year to accomplish that!

[nrc]

CART mentioned in their press release that they had already offered RA a better deal to try to resolve the situation. My guess is that CART has been looking to put together a multi-year extension and RA is trying to keep their options open going into 2004. This may be why CART seems to suspect that there is some kind of IRL dalliance going on behind the scenes.

The idea of a track rental assumes that RA is willing to offer that on reasonable terms.

[Jag_Warrior]

Originally posted by nrc

The idea of a track rental assumes that RA is willing to offer that on reasonable terms.

I'm not suggesting that CART should do this (especially in light of RA's contract default), but roughly what would it cost to rent a track like Road America for a race weekend?