Indianapolis and the Grand Prix

Over the next fews weeks, Tony George and Bernie Ecclestone are going to be negotiating the future of the US Grand Prix. For eight years, Formula One has come to the Brickyard to race, which has re-established the series in the US. However, there are no guarantees that this event will continue.

The USGP has been successful in many respects, it is a lot more open and accessable than most other races on the calendar. Plus, the event is well-organized since the racetrack has played host to large races for almost a century. There are some factors that may convince both Tony and Bernie to go their separate ways.

One is money. Tony is paying Bernie $10 million or so per year to host the race. This is a fraction of what other races are paying and was largely due to the fact that F1 wanted a USGP at the time. Tony wants to make money on the race (or at least cover his costs) and raising the fee 2-3x the current rate would preclude that.

Another is popularity. F1 is not as popular in the US as NASCAR, so the USGP is dealing with a relatively small market for fans. I went to the first three USGPs and saw a lot of people from Europe and South America in the stands. Over the three years, these numbers declined and now you have a lot of empty seats. With only one American driver in the series (on a backmarker team) and little on-track action, you won't have the draw that NASCAR has.

Now if Marco Andretti goes to Honda in another year or two and Graham Rahal gets a seat somewhere, that may change. But the product on the track has to be good and frankly, F1 does not produce much of it.

Another factor is glitz. Indy is a third-tier city that happens to have a large racetrack. The demographic is very blue-collar and insular, the kind of folk that drive Fords and Chevys, drink Budweiser and Miller, shop at Wal-Mart, and watch NASCAR. For this race, the Speedway has to import fans from elsewhere. Frankly, Indy is not the travel destination that Montreal is. Believe me, I have been to both!

If Bernie has his choice, a USGP would be somewhere much more international and sophisticated. Indy is the hick from the sticks, not the kind of place F1 would choose to be. Las Vegas, Los Angeles, Miami, New York City, or DC are much more desireable locations. Those places could provide the atmosphere that Bernie desires for a Grand Prix. Getting a Grand Prix in any of those locations though is going to be difficult.

Personally, I think that the USGP will stay in Indy for a few more years. Miami and Las Vegas would be the two main competitors but they don't have a track right now. The manufacturers want to keep coming to the US because it is their number one market. Right now, they are wielding more influence because of their ownership position within F1 as well as the teams. In any event, expect an announcement in the next couple of weeks extending the contract for the USGP for another few years.