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Why IndyCar needed to be transformed, Part I: 'Distressed asset' or sleeping giant? INDIANAPOLIS "The business is not broken." As Roger Penske took the reins of the racing series his team had dominated for decades while looking out over the Yard of Bricks at Indianapolis Motor Speedway, some of his most impactful words in his first day on the job were the way the billionaire described IndyCars place in the motorsports landscape.
Three decades prior, the winningest team owner in IndyCar and Indianapolis 500 history dominated American open-wheel racing at a time when tobacco and beer brands spent millions without a second thought to help names like Foyt, Andretti and Mears share mainstream cultural notoriety.
Major American open-wheel racing had Bernie Ecclestone and Formula 1 spooked.
NASCARs attempt to become America's favorite racing series appeared too tall a task to imagine.
And then a spat turned into The Split and tore the sport apart.
Nearly quarter century later, IndyCar is still recovering.
During those few blissful pre-pandemic months, the promise of Penskes stewardship knew no bounds.
Even two pandemic-altered 500s in, the paddocks view was that the sport may have ceased to exist in any meaningful form had Penske not bought the series from Tony George.
But within three years, those same believers began asking questions some uncertain of Penskes effectiveness as the sports leader.
F1 had overtaken IndyCar as Americas second-favorite racing series, adding two new races on U.S.
soil and, with the help of a hit Netflix docuseries, turned some of its team principals into bigger mainstream superstars than IndyCars most successful drivers.
An unquestionably more stable sport under Penskes watch was still struggling, all while NASCAR generated buzz with an exhibition inside a famed football stadium, a regular season race on dirt and the series first street race; and F1 spent half a billion dollars to race on the Las Vegas Strip.
Weve lit this fuse but where is this thing going to go? asked longtime Chip Ganassi Racing managing director Mike Hull to IndyStar in December 2022 in his office, saying what some drivers and owners had been whispering for the better part of a year.
IndyCar has everything it takes today, but it needs a rethink down in that sanctioning office about how to utilize what they have." Then, in the same breath as suggesting this journalist dive deeper into the famed White Papers that freed CART from what Hull believed was a similarly out-of-touch USAC sanctioning body in the 1970s, he suggested perhaps Penske & Co.
may not be fit for the moment.
If (F1 owner) Liberty (Media) came along and said, Were going to help enhance your brand and there will be more money coming your way commercially, what are we going to say? Were going to say, Yes! Because guess what we get to do? We get to race cars in a more effective way, Hull said.
Were ready to launch.
IndyCar racing has been around a long time and its suffered, its succeeded, its failed, its started again and its gotten itself into a good position more than once.
And it continues to be a series all about racing.
(The owners behind the White Papers), they were thinking, Were going to be out of business if we dont change this thing.
Today, were having that same conversation.
More than three years later, the dynamics in the paddock could not be more different.
For the second consecutive year, viewership of the Indianapolis 500 reached heights not seen since 2008.
Penske paid out a purse of more than $30 million and IMS sold out the grandstand tickets in back-to-back years something it had only previously done for its 100th edition.
IndyCar teams are fielding offers of more than $10 million for one of the 25 charters that soon will be required to run full-season efforts and contend for the 22 annual Leaders Circle payments that currently pay just more than $1.6 million each.
But even as the paddock braces for a new car expected to cost $100 million across the series, according to multiple paddock insiders, and several teams are settling (or soon to settle) into brand-new race shops, the potential windfall has not yet been persuasive enough to sell.
Continued participation in IndyCar, the current owners believe, will soon bring profits, with numerous drivers, team owners and series sources telling IndyStar it can largely be traced back to Penskes decision nearly 10 months ago: Selling a 33% share and three of Penske Entertainment's nine board seats to Fox Corp., estimated by paddock insiders to be for more than $120 million.
There had been a couple people that had called me, asking if IndyCar might be for sale, and its about a two-second conversation, Penske Entertainment Corp.
CEO Mark Miles told IndyStar in February 2023 during one of many exclusive sit-downs conducted over the course of several years for this story.
It is not and it wont be.
Roger and Penske Entertainment are entirely committed to the idea that it would be crazy to separate the series and (IMS) and the 500.
Theres big upside to both, and he has no interest whatsoever in selling any part of it.
According to multiple paddock sources, Liberty Media more than once approached Penske Entertainment to test the waters.
They were rebuffed.
Months away from Penske turning 90 years old, some significant stakeholders in the paddock stare at a series that has been transformed in the last 18 months and applaud Penske for his ability to relinquish control and also wonder if and when Fox may take an even firmer grasp on the sports future.
In Part I of this series, IndyStar looks at how and why the questions and doubts surfaced around Penske's stewardship of IndyCar during a tumultuous multi-year stretch.
'Sport has become more than sport' The IndyCar series Penske took stewardship of in January 2020 was operating in a most un-Penske fashion.
A race team owner known for pushing limits, cutting-edge technology and deep pockets began taking stock of a business running comparatively on a shoestring budget that many believed was largely propped up by the Indy 500 and eight-figure NASCAR TV check for the Brickyard 400.
SJ Luedtke, hired in February 2019 as IndyCars vice president of marketing following nearly a decade at Nike, was attempting to completely overhaul the series' approach.
When she was hired, IndyCars advertising budget was 80% print media in a campaign initiated by Miles to reel back in the aging American open-wheel racing fans IndyCar had lost in The Split.
She was pushing the sport increasingly through its digital channels to get younger but failing to gain much of a foothold, including: >>An ultimately disappointing effort to launch a video game >>While NASCAR and F1 were connected to LEGOs, Hot Wheels and Disney Pixar, IndyCar's best outreach for the younger generation were trading cards, support of independent childrens book titles and a years ago one-off episode of Blippi >>Flashy ad campaigns that became the butt of public and private jokes across the paddock For a while, we were very focused on the racing and our pride as the most competitive racing series out there, but what we forgot to do or werent equipped to do was pull our heads up and look at what was happening in the world, where sport has become more than sport, Luedtke told IndyStar in an exclusive February 2022 sit-down.
Im a disrupter, and I think IndyCar needs a disrupter and hopefully for good.
Sometimes, you have to challenge the status quo to move the sport forward.
Perhaps the most talked about project during Luedtke's short tenure she parted ways with Penske Entertainment in December 2022 came in IndyCars somewhat futile pursuit of a behind-the-scenes docuseries that Formula 1 used to super-charge its American fan base.
At the time, Netflix and F1s "Drive to Survive" was at its peak, offering viral on- and off-track content coming off Max Verstappen and Lewis Hamiltons down-to-the-wire title battle in 2021 and the rivalries that stemmed from it.
The first few seasons made the group that shot and produced it, Box to Box Films, a highly sought after partner in the sports documentary space as theyve come to work with the NHL, SEC college football, Tour de France and PGA Tour.
After talks with famed TV producer Jeff Jenkins the executive producer around viral reality TV shows "Keeping up with the Kardashians" and "Secret Lives of Mormon Wives" flamed out, IndyCar, Luedtke and Penske Entertainment engaged with Box to Box.
Depending who you speak to, the series had a shot at landing them in the fall of 2022.
According to multiple series sources, IndyCar decisionmakers ultimately opted to pair with VICE Media and The CW, in part, because Box to Box was still in the evaluation stage at a time Penske Entertainment felt they needed to make a decision.
The news that IndyCar had landed such a long-awaited opportunity for a behind-the-scenes docuseries with a channel many in the paddock hadnt heard of (even if it, technically, is a well-established broadcast TV network) landed with mixed emotions.
Though drivers embraced the project that attempted to tape, edit and cut episodes to run during the lead-up to the 500, they privately questioned why the series didn't wait to use Box to Box Films given its track record.
Several drivers were also quick to note the glaring absence in the paddock for years of Susan Bradshaw, the renowned PR rep who worked extensively with Team Penske and helped land IndyCars series of driver reality TV appearances throughout the 2010s that still bear fruit to this day.
The lack of visibility in mainstream culture, combined with an uncertain platform for the series TV show, had drivers and team owners hopeful in late 2022 but not uniformly excited.
Graham Rahal noted the comparisons to F1 were unfair easy as they may be to make.
As Liberty Media embarked upon launching a new race on The Strip in Las Vegas, IndyCar had recently landed its own new street race in Nashville.
That next summer, the series was slated to bring Ed Sheeran, the top-charting artist in the world at the time, to the absolute middle of nowhere to perform at Iowa Speedways infield.
But Rahal, like many, also wondered how the series could turn its occasional successes into more as NASCAR and F1 pushed the limits on the ways motorsports could make the entertainment of its fans a top priority.
To me, weve got to think out of the box, or were just going to get overtaken, he told IndyStar in December 2022 in a one-on-one sit-down.
I dont know the financials of IndyCar, nor do I want to get the call from (Penske Corp.
president) Bud (Denker) saying, Why did you talk about that?' But I do know that on the marketing side, (Penske Entertainment) needs to spend considerably more than they have.
'How do we not explode that out?' In 2022, the prospect of a new car continued to feel further and further from a reality.
Penske Entertainment had signed a new three-year broadcast rights deal with NBC in 2021 that included double-digit network TV windows for IndyCars 17-race calendar but the sport still felt nowhere near as visible as its competitors.
We want to see IndyCar succeed.
Its not like were trying to throw shade at whats going on.
I just wish I could see something to where its like, Thats pretty cool.
IndyCars doing that, Conor Daly said in April 2022.
In October of 2022, one of IndyCars rising stars then-one-time champion Alex Palou found himself on one of the biggest motorsports stages outside the Month of May, hopping into the cockpit of a McLaren F1 car for a practice session more than a month into IndyCars painfully long offseason.
The Chip Ganassi Racing driver came within a couple tenths of the McLarens fellow young up-and-comer Lando Norris on identical tires; deemed by his peers a significant accomplishment.
IndyCars social media pages and website were silent, baffling drivers who believed the snub stemmed from the series view of F1 as a rival not to be paid attention to, even when its own drivers were involved.
When Palou was interviewed later that day on the Sky Sports broadcast, ex-IndyCar driver-turned-commentator Danica Patrick asked Palou about his day job.
"What changes are coming for next year in IndyCar?" Patrick said.
"Is there anything big happening?" Not really, no, Palou said, sheepishly.
I wish I could say, Yes..
Later that weekend, Palou would present the U.S.
Grand Prixs pole award to his Spanish countryman, Carlos Sainz.
We have a recent champion, a very good driver and the winner of our last race of the season, in Formula 1," Daly said in the fall of 2022 on his "Speed Street" podcast.
"I know its a competitor series but its still motor racing.
Youre not going to war with F1.
Just do anything anything to engage, because guess what? There were a lot of people engaging with Alex.
How do we not explode that out?! Later that weekend, Daly recalled a maddening interaction with a racing fan at a restaurant in Austin.
Someone comes up to (then-defending Indy 500 winner) Marcus (Ericsson) and says, Hey, Logan, can I get a picture with you?" Daly said on his podcast.
"They thought he was (then prospective American F1 driver) Logan Sargeant who hasnt even raced an F1 car yet.
Not only is Marcus the Indy 500 champ but he raced in F1 for five years.
Thats something that we as an IndyCar community should be furious about, because thats our guy.
We have to be able to be in peoples faces more.
In the ensuing weeks, the IndyCar drivers pooled their thoughts and concerns and wrote a letter to senior Penske Entertainment leadership: The sport needed to step up its marketing efforts in order for the success off the track to keep up with the action on it.
The specific contents of the letter have not been shared publicly but the response it received from offices at 16th and Georgetown, as well as Penske Corp.
headquarters, have been subject of lore.
1,000% they do not like to be told they arent doing a good job, one driver involved with the letter told IndyStar after the fact.
Were all trying to help and all we want is to see this be successful.
Theres no other reason why we critique.
But you have to be OK with needing to be better.
According to one series source, Penske Entertainments initial response to drivers was, essentially: Fall in line.
Eventually, the two sides met a small group of Penske Corp.
and Penske Entertainment execs that included Bud Denker, Jonathan Gibson and Mark Miles, along with representative drivers during the latters annual meetings in early December.
Miles would later say he felt a large reason for the disconnect stemmed from Penske Entertainment working diligently behind the scenes and simply not being ready earlier in the fall to lay out what the sports future marketing plans would be at a time where drivers were grappling with a lengthy offseason and becoming increasingly frustrated with a sport out of the conversation.
Though some drivers came away from that discussion largely seeing eye-to-eye with Miles, others felt as if their concerns had been discounted.
(The letter) was never supposed to get out.
It was never supposed to be a media thing, Daly told IndyStar in December 2022.
But we do want to be able to voice concerns, and I wish certain people wouldnt have reacted a certain way to it, because it was supposed to be positive.
If everyones going to be, Hey, everythings wonderful! then thats wrong, so if the drivers have to say, Just letting you know, this is whats happening, and someone needs to acknowledge it, then I think thats fine.
Finally, a plan At the luxurious Thermal Club, site of IndyCar's spring training in February 2023, Miles gave IndyStar insight into what even if had been long in the works came across as the sports response to the offseason turmoil.
It feels like the timing is right to really up our investments in marketing and promotions in IndyCar, he said.
Penske Entertainment was doubling IndyCar's marketing budget to around $17 million as it doubled the size of its promoter relations staff (from two to four), boosted its social and video team to eight (it had been two people a couple years prior), added a traveling state-of-the-art merchandise store and prepped a driver-centric tune-in ad campaign for the start of the season in an attempt to boost ratings.
We feel confident in our strategy and the results will speak for themselves, Miles told IndyStar in an exclusive sit-down that week in Southern California.
If youre going to have a role in leading an enterprise, you have to appreciate all the perspectives and come to your own view on whats going to grow the sport.
..
And I look at that moment two months ago (with the drivers) as a moment where we werent ready to show them our way but I think whatever angst there was at that moment went away very quickly.
The day prior, Penske Entertainment leadership had separately walked its drivers and team owners through the marketing plan.
Notable was that a sizable chunk $3.3 million of the sports marketing increase for that season would be, effectively, coming out of the pockets of its team owners in the form of decreased Leaders Circle payments by $150,000 per entry.
Team owners IndyStar spoke with at the time largely didnt take issue with the last-minute budget switch.
There remained, however, some team owners who felt the presentation was too little, too late and pushed back at Penske Entertainments lack of specifics and measurable metrics in its plan to grow the sport.
What they showed us was a good step forward and Im cautiously optimistic, one team owner said, but it lacked a roadmap.
Im fine with the Leaders Circle (reduction) but if Im paying, then I want to know what Im getting.
A common criticism of Penske Entertainments leadership at the time was that it was too conservative not only in a lack of creativity, risk-taking and long-term vision and execution, but a comparably paltry spend on promoting the sport.
That Thermal presentation came with an exasperated sigh of "Finally," for some, rather than joy and hope.
"I think IndyCar is trying to have a plan but its clearly not one from a position of strength," said then-Andretti Global COO Rob Edwards, who is now the chief performance officer of TWG Motorsports.
Those won over by the presentations notably including Hull, who just two months previously was questioning Penskes leadership were just happy to see the sport taking some sort of step forward.
Hull called it a reasonable presentation with a good foundation and thoughtfulness.
Michael Shank said it left him anxious to get this into action.
We need to make gains of 10-15% a year, Shank said.
I saw Red Bull (in F1) is turning partners away because they have so much popularity right now.
Thats the perfect world and we want to get IndyCar in North America to be near or at that level.
Importantly, Rahal argued at the time that the series needed to take a notable step forward with these changes.
Disgruntled drives and team owners shouldnt feel unsatisfied or unheard a year from now.
I thought their message was clean and clear and crisp in what theyre trying to do.
The money theyre putting behind it is refreshing, Rahal said.
I still naturally have my reservations not that theyre doing the job but we need to see it come together.
'Were trying to cut our way to success' The night before annual preseason content days in Indianapolis weeks into 2024, Penske Entertainment executives met with a veteran driver from each of its most notable teams, over steaks and wine at St.
Elmo, in an effort to apprise them of the work going on behind the scenes to shore up a sport whose offseason had been rather tumultuous.
The series unceremoniously dropped Texas Motor Speedway the longest-running annual stop on the calendar not named IMS from the 2024 calendar.
Penske Entertainment would also part ways with its video game partner as it fell into financial ruin.
After a months-long intensive testing program, IndyCars new hybrid unit was still not ready.
Honda Racing Corp.s executives became so disillusioned that they questioned whether the company would continue with the series past 2026.
Alexander Rossi told media and fans that next morning to trust the process.
Rahal added: The reality is, when you sit in a room and you listen to the things that are being done ..
maybe its not stuff that affects us today, but I think it does on a longer-term plan.
I feel upbeat about it.
Fan-favorite driver Pato OWard, however, was not at the dinner and cast a very different tone.
For years, the young Mexican driver had been one of few drivers unafraid to speak his mind in any situation.
Now, IndyCar was coming off NBCs second-lowest non-pandemic Indy 500 broadcast and a less than 2% season-long ratings increase in 2023 with media rights negotiations about to restart.
Change will usually rattle people.
Itll move things around.
Some people will like it and some people wont, but when you dont evolve, and when you dont change, you sure as hell will not grow, OWard said.
We have the potential to be (doubling or tripling our reach), not growing 5-10% a year.
Were selling ourselves short by just wanting to grow incrementally like that.
You have to fuel it if you want to see that.
Miles was no stranger to the criticism but he rarely if ever would acknowledge any validity in it.
Oftentimes, he wouldnt even acknowledge that those sentiments existed in the paddock.
The argument of his detractors was this: IndyCar could be viewed as a distressed asset, one owner said.
Imagine Roger Penske buying an underperforming car dealership what would he do next? Shut it down.
Give it a fresh coat of paint.
Reimagine the floor plan.
Give it new management.
And now, you walk in, and the business is almost unrecognizable.
Were not investing in growth.
Theyre just putting in money to keep it going, a team owner said in February 2024.
Were trying to cut our way to success.
Miles most popular refrain was to point to Liberty Medias acquisition of Formula 1 in 2017 and the fact that the sport didnt really explode large in part to a Netflix series for more than three years.
It wasnt until five years later that F1 succeeded in one of Libertys primary goals at the outset adding an American grand prix.
A series that Penske took ownership of mere months before the pandemic needed to be given a bit more grace, Miles said.
IMS, Miles would also say, bounced back much quicker, financially, from the pandemic hence the companys push to spend more than $60 million in capital investments, almost all of which dont directly generate more revenue.
I think (Rogers) been aggressive.
Smart and aggressive, Miles told IndyStar at Thermal in 2023.
Youd be hard-pressed to find a more successful businessman than Roger Penske.
His careful thoughtfulness on what to invest in and when and how to achieve solid, sustainable growth is second to none.
We couldve gone to parts of the world to race where, in one race, we couldve doubled our sanctioning fees, but Roger said, No, lets not do that.
We want to build real assets that are part of the fabric of the series.
Were not going to go on a fools errand to chase money.
That isnt part of building a great league.
'Roger needed to hear it' By early 2024, team owners were fuming that Penske was attempting to instead boost his revenue by dipping into their pocketbooks.
The series had proposed doubling fees for hard cards essentially doubling the cost of having each individual team member on the ground at race weekends, which for larger teams would amount to tens of thousands of dollars in increased costs.
An even larger line item? In the early days of drawing up the language for charter ownership, teams would have to pay $1 million to temporarily own them, at a time when the guaranteed annual payouts for teams from the Leaders Circle had dipped below $1 million per car.
IndyCar executives boasted to media in a lengthy preseason Zoom of being the only major motorsports series to see a ratings increase in 2023 and one that saw attendance rise 24%, merchandise sales increase 26% and its sponsorship base grow 40% over the prior three years.
Given that growth, the cuts didnt sit right with owners.
Miles would note more than 40% of IndyCars annual revenues were paid to teams via the Leaders Circle and an ever-increasing Indy 500 purse.
Miles believed, as he had said before, that the inter-paddock bickering was nothing more than a product of a long offseason where segments of the paddock felt theyd been too frequently left in the dark.
I dont think were tone deaf.
Weve heard that sense (of frustration) from a number of different corners but I think its a long offseason, and when we get back on track and start racing, that will make a difference, Miles said.
For weeks prior, most of the team owners had held multiple private meetings to discuss frustrations that were reaching a tipping point.
Money whether it be the exorbitant costs spent on a hybrid system that wouldnt debut until July, the aforementioned charter or hard card fees or Penskes perceived lack of investment in supercharging the sport was the primary topic.
Central, too, was how to approach Penske with their frustrations without setting off a civil war.
Asked at the time why IndyCar team ownership hadnt banded together to create something akin to NASCAR teams Race Team Alliance with representatives who negotiate and bring issues to series execs, one owner told IndyStar, simply, We dont have leverage.
And so, at the place Miles hoped would calm the brewing storm within the paddock, Michael Andretti used maybe the one power he did have: his voice.
In a sit-down with journalists from IndyStar, the Associated Press, NBC Sports and Forbes, the legendary driver turned team owner said what had been whispered by so many.
We need a big influx of cash to go out and do what these other series do to make them worth all that money.
Now, am I an expert on that? No, but we need to find talent that knows how to do those things and spend the money to make it happen, Andretti said Friday morning of the season kickoff weekend to IndyCars 2024 campaign inside a conference room at his teams hospitality unit in St.
Pete.
The one thing we do still have is the best series in the world that no one knows about.
But now, dont be trying to do it by trying to have us pay for it.
It should be noted that Andretti believed Penske had, at least partially, already gotten the message in the offseason.
Team owner meetings had become more frequent.
Additional plans for the sports future including the announcement that fall of the Grand Prix of Arlington, the series new TV deal with Fox and purchasing the famed Grand Prix of Long Beach to save it from competitors without question moved the needle.
But as the series faced a booming competitor in F1 that now had three races in the U.S.
and was matching or topping IndyCar in average TV viewership outside the 500 with a domestic broadcast schedule far more heavily weighted in cable races and an annual rights free that tripled that of IndyCar Andretti argued it wasnt nearly enough to keep pace, let alone somehow sprint ahead.
Roger has to decide where he wants this to go.
Does he want to make this an elite series that you can put in front of the world? Or do you want to keep it at the level it is, Andretti said.
And if his answer, from a spending standpoint, is the latter? Then sell the series.
I think theres people on the sidelines thinking, This is a diamond in the rough, if you do it right, Andretti said.
But what you need is big money behind it to get it to that level, and if hes not willing to do it, I think he should step aside and let somebody else buy it.
Said by another team owner a year later: Michaels comments were totally accurate.
He just shouldnt have said them on the record.
But Roger needed to hear it.
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