RACER's Marshall Pruett sat down with Hulman & Company CEO Mark Miles at the Baltimore Grand Prix to discuss a variety of important topics related to the IndyCar Series, including the 2014 schedule, helping drivers and teams searching for money, the financial standing of the series, TV ratings and the ongoing search for a new commercial director.
MARSHALL PRUETT: Of all the topics IndyCar team owners raise as the one that needs immediate fixing, it's the hiring of a commercial leader to bring sponsors to the series, to raise overall awareness and value, and everything involved with getting the series back to a place of financial health. I understand the former San Diego Padres CEO (Tom Garfinkel) was close to taking the position but backed away. Does that leave you with a suitable pool of candidates left to choose from, or do you have to start the search over again?
MARK MILES: Contrary to some folks' perceptions, we never approached it as: "Let's go get that guy and if we don't get that guy we'll go to the next guy." We've always been trying to have a pool and add to it and vet the candidates. You're right about the person that was talked about from baseball. I can say there were probably at least five others at that time a month ago that were in the mix, we brought four of them in so far to Indy, and they wouldn't have gotten to Indy if I hadn't already spent at least a couple of two or three hour sessions with them myself. When they came to Indy, they spent an hour and a half with each member of our executive leadership team during the process.
So we got done with that, and I think this Tuesday our group will talk and I think we'll cut it to probably two and then get serious and do really intense on background checks. I think that will fast-track our ability to get this done. I think we have some strong options, and the choice will be quite good.
MP: IndyCar has often looked for magic personnel – a person who possesses a department's worth of specific skills to save the series. Is the search for your commercial CEO anything like that – like trying to find a unicorn – or are you OK with hiring someone who might not be a motor racing expert but can learn the intricate details of the job once they're hired?
MM: The first thing isn't any of that. That's all secondary. The first thing is, we're looking for people with integrity that you will never question in terms of once you hear from them and they're as concerned with the success of the whole company and their coworkers than they are caught up in their own success.
And there some very talented people who probably aren't the right fit for us but have remarkable Rolodexes and experience sets and all the rest of it but that's not where we're going to go. Like the Indianapolis Colts like to say, they really try to imagine character as well as talent when they draft.
I don't think you can build sustainable success without people of that sort, people with that sort of quality. So that's the first priority. At the same time obviously it's about their credentials and their skill sets and what they bring to the table. A lot of people think what we need is a salesman, and we sure as hell need sales. But we need sales, marketing, media, PR, social, television and licensing; we've got to be better at all of them. So I've come to believe what we need most from a technical perspective is a leader who can build the right team, who understands the environment and each of those technical elements of being a commercial success.
But I've become ambivalent about whether there is a particular strength in sales versus marketing, because you're going to need to bring in team members for all of them. So they've got to know it all, they've got to be good leaders, they've got to work hard, have a sense of urgency. Be able to build relationships.
The other thing I left out mentioning about this job description is we've got to do a better job of coalescing teams and racetracks to act collectively – to market and communicate in everything we do. So there's a stakeholder relationship, not in the sense of “we're buddies” but building a stakeholder's agenda. Being a portal for working with our partners, and not just making sanctioning deals with our promoters and the like and expecting each side to work independently and think it will all work out the way we want it to. This person needs to bring a cohesive approach to elevating everything we do and who we do those things with as one unit.
So there's a lot under this job description – too much for any one person. I don't know anybody who's the world's best marketer and market research person, best at analytics and sales and licensing and TV…
If the person is more of a marketer than a salesperson, then you'll have to figure out how to add extra sales resources more quickly and it's possible that we, at least in the near-term, look more towards working with some agencies to do that because we can extend ourselves faster and farther.
Conversely, if the person was more of a salesperson that has that kind of Rolodex, maybe we work more with some outside folks on the marketing side or some blend of that. But you can supplement whatever area is needed, based on the person you're bringing in.
MP: It wasn't so long ago that IndyCar's technical team was somewhat anonymous and understaffed, yet today, it's become a great example of what adding talent can do to a department. Do you foresee the same growth and expansion needs with your commercial department – to build it out and have it become a source of pride?
MM: My belief is that the headcount is not the linchpin issue. Some people thought when I started talking about merging or consolidating IMS commercially and IndyCar commercially that it must mean I was going to whack a bunch of jobs. I'm not thinking that and I'm not thinking that we have to add a lot of bodies yet. It may mean that there needs to be some changes in the way we invest the dollars we invest on talent, whether that's some agency help, some other marketing consultancy, PR consultancy, we'll see.
We think, and the Boston Consulting Group stuff suggested, there's probably enough money here already to go about growing, and if that's the case, then we'll grow. So I don't think we have to cut in other areas to make it happen. We may have to reallocate what's there now in the budget to make it happen.
I think we're more likely to make investments in another way. In the partnerships we developed, we've got to work with folks who have the same view of the IndyCar brand that we're trying to develop and we're willing to invest in promoting. That's not a new thought. But if your emphasis as an organization is only about bringing in the next dollar, you're ultimately sacrificing the quality and integrity of the brand.
So here's an example of what I'm referring to, and this is something I need to get us thinking differently than we are right now: We recently had a contract plan on my desk for signature with a company I won't name. It's a small six-figure annual deal, with annual payouts. I read the contract and said, "What's this company buying?" What they were buying was the hope that we would be able to expose them to our teams and our tracks and ourselves and then a bunch of those folks would become customers for the particular service they provide. They would effectively be paying up front for the introductions.
Well, part of what we do is business-to-business, for sure. And that's fine. But a very small six-figure deal where we're going to be put in the position of hammering our stakeholders to do business with this person isn't right for our brand. The amount of time you'd have to spend to make those people happy, while risking our own stakeholder rapport…I sat back and I sent an an e-mail and I said: "We're not going to do this." The same amount of time spent selling a $500,000 deal to somebody that wants to work with us, can benefit from working with us to sell their product or service, but also wants to promote the IndyCar brand is how we ought to spend our time.
I don't mean to sound harsh, but the investment I want to make could involve charging a little less to partner with someone who wants to help the sport, and in turn, we'll help them. Signing a contract that has us opening up the paddock to our teams and our tracks without any benefit coming back to the series – other than a small sum of money – isn't the right approach to take. It can't be the way we look at things – that any deal involving a check is a good one.
Randy [Bernard] helped to improve the position of IndyCar financially; we've still got a long way to go, but more than anything, we're in a position where we've got to grow this sport with a strong long-term strategy, not just look for the short-term harvests.
The bottom line is if you don't know what you are as an organization, you don't know what to sell and how to market. For where I'm trying to take things, it's less about getting people – anybody – to write checks and more about caring more about the investments they'll make for the right reasons. It's about finding the right balance.
MP: There's nothing within the IndyCar Series that wouldn't be improved with an injection of cash. The primary directive the Hulman George family gave to Randy Bernard was to stop the annual losses associated with the series, and that has improved, but if it was needed, would they add some additional money to the pot to help get through the rebuilding process?
MM: Well, one of the topics addressed in our work with the Boston Consulting Group is a financial analysis that asks what is the best balance sheet model? They concluded – and I think I agree with it and it is our operating assumption – that we can self-finance this growth. Saying that, that doesn't mean the family couldn't contribute but I don't see the need at this point to ask for an equity raise from the family.
It was helpful to go to the state and to pass legislation that allows for some public help for the exact reason that you said. It's not that we couldn't do it, but we could do more, faster. So there's a $90 million influx in capital this year and in the next year that the Speedway, but the Speedway for me is IndyCar too; they aren't two separate things as I see them. Without that legislation, it would have been a slower rebuilding period for the Speedway and the IndyCar Series, for sure. We have the ability to finance investments if we need to but I think we can do this with organically funded sources and that's already at hand.
MP: I'm not a fan of a series coming out of pocket to put its drivers on the grid, but with so many big-name drivers on the market – the most popular veteran in Tony Kanaan and the most recognized young guy in James Hinchcliffe, not to mention Sebastien Bourdais, Alex Tagliani, and a few others – the series would clearly benefit from helping those drivers and their teams to keep them on the grid next year. Is there a way to do that without writing them checks, which I assume isn't an option?
MM: No, I think there's lots of ways to try to help teams and drivers, short of having a pool just to subsidize the gap close in those relationships. I won't give you the specifics, but we're doing some things right now to help teams cultivate their relationship with their sponsors by trying to add some benefits they can pool, showing some love, showing opportunities, going forward to the sponsors. In the end, the team has to have the money to hire the driver.
So I think the focus is more about helping the teams to do that. We're not out there at the moment saying: "Here's a driver, we just got to go write this check." But I think everybody knows we're interested in the topic and there's ways we could help by B2B means, but we're not the treasury here to write them checks.
MP: The other topic everyone wants to know about is the schedule for 2014. RACER's Robin Miller wrote about a lot of the expected items we'll see, and the one that stood out to me the most was the plan to end the season before the NFL season begins. I understand the reasoning behind not wanting to clash with football games on a Sunday afternoon, but it isn't like this is a new issue for IndyCar racing. So why then look to condense the season into a tight window with a long off-season?
MM: Let's first look at the general calendar ranges we're interested in. What we want to do next year is start about when we did this year. 15 events in North America, maybe start a week or two earlier. So say start mid-March and end Labor Day weekend. We've talked to our broadcasters, we talked to others to do market research and analytics, and there just isn't any doubt that if we care about television ratings, we need to have our season finale by Labor Day weekend.
It might be a different discussion if the NFL or college football started having major games regular-season games in August, but they don't. So first of all, I think it's just irrefutable – just go look at the [NASCAR] Chase ratings. It's the culmination of the series, their season finale, and going up against football has a serious impact on the overall ratings number [the Chase] generates. There's a noticeable difference.
So you're just shooting yourself in the foot if you continue to do things that are counterproductive to television ratings. And second, what are we really giving up here? Right now we're here, and it's Labor Day weekend, and you and I are not going to see each other again for a month [at Houston]. What the hell is that? And then we're not going to see each other until a few weeks later [for Fontana]. I mean, that's the culmination of the season? Fans are going to follow that? Really? You know, it doesn't make any sense. So we're not talking about less racing, we're not talking about fewer races and we aren't trying to have a long off-season, either...
Largely because of climate, we don't have a lot of good choices for places to race in North America in February. And we don't have a lot of good choices or they'd already be on this calendar that goes to October in the fall. So we're going to condense what we've got. And I think that's important for your readers to understand. This isn't less.
Now, saying that, when we do that and we don't go head-to-head with the NFL and their favorite college football teams, we create the opportunity for two shoulder seasons. The first I think it starts in '15 as early as about the beginning of February. We could do three races in the southern hemisphere between, say, the beginning of February and mid-March and if we could get reasonable rights fees and pass it along to the teams, you can do your own math on if that would be beneficial.
MP: The “post-season” races wouldn't be part of the championship, obviously, but what about the “pre-season” races in February?
MM: Right now, they would be part of the championship. What we will do is end the championship in North America on Labor Day weekend. I don't see any problem starting the season out of the country, but I want to run the majority of the races here and finish it and have the culmination here. So the first three southern hemisphere races could be part of the championship. I'd like to believe that we start in mid-September and run through October; there's room for maybe three Australasian events that are not points races. Some kind of [IndyCar] Series Cup or Asia Cup.
We can do six of those, three right after the championship ends and three early the next year, and make each of those a decent matter economically to the teams. We can more than double what they're getting from us today in '15. So I don't think that is primarily a North American marketing thing but I think it adds breadth, it strengthens employment for the teams. Now we're talking about these guys are busy from the beginning of February to the middle of October. This isn't less IndyCar.
MP: Are we speaking about things IndyCar would like to do – ideas the series has that need action put behind them to see if there's any interest Down Under and in Latin America – or have you already done that research?
MM: There's definitely interest and we've already done a fair amount of investigating. I've spent 15 years expanding another sport all over the globe, particularly in the Middle East and Africa, in South America and in Asia and Australia too. We definitely expanded our footprint meaningfully. We, as IndyCar, have been approached often and we've reached out to people we know in those places and there is real interest now.
Now, I basically want to get on a plane and go away for a month to meet with all of the interested parties to make big strides with this plan. And that will have to happen after we get this [chief marketing officer] position filled, maybe right after the season ends, but it'll be a very high priority at the end of this year to put in place for '15.
I'm not interested in gouging promoters and being there for a year and then they figure it out and so it goes away. It takes the right partner and the right situation to work longer term. Our mission is to build something in the way we described for the long haul and I think there are real prospects.
MP: We always talk about TV at some point, so let's close on that topic. Team owners tell me every week – and I'm sure they tell you every day – that they need higher ratings to increase the value of the sponsorships they're trying to sell. The network races bring higher ratings, which is what you'd expect, but are there any immediate moves you can make to bring the cable ratings up?
MM: The first thing I'd say is we obviously want to have higher, stronger television ratings. Even with the ratings that we have today, there's a lot of value in our business-to-business sponsorships. So to me the way I think of it is, OK, yeah, but we want to get beyond that and be more appealing for commercial brands, but we're looking at how to improve the overall value for our teams, and it isn't only through ratings.
It's business-to-business and brand building. I think we did a pretty good job as a sport with the first part of that but we've got to get ratings up in the right direction to be confident in that and to move toward being a more powerful consumer brand.
Look, there is a market for live television and lots of live television programming. We have existing relationships [with NBCSN and ABC] to go for a few years. Both of our partners just were involved in new arrangements with NASCAR, which are very substantial, and I am more convinced after this weekend than at any other time that those new arrangements will make opportunities for us.
So we met this week with John Miller at NBC Sports for two and a half hours, and from an NBC perspective, they showed us the data on what happens to our ratings when we overlap with other motorsports programming like NASCAR. It makes a material difference. The ratings are much better when we don't air at the same time as NASCAR, and that probably isn't a surprise. Well, if NBC and NBCSN broadcasts NASCAR and IndyCar, we won't be overlapping, we're told. So that in and of itself is what the analytics suggests will be a measureable improvement.
Their strategy is to build what they call the strongest motorsports vertical; they're going to have a dedicated guy from PR in motorsports, their sales force will be oriented that way, and all the rest of it. They're going to pay more attention in general to motorsports and NASCAR for sure is a big part of that. But the programming possibilities, to lead in and come out of strongly rated shows will help us. One way or another, I think our ratings should improve.