February 9, 2015
Indycar has tried Formula One's method and failed miserably.
Formula One learned long ago that their outrageous sanctioning fees were not viable in the open market. However, governments that wanted to provide bread and circuses were more than willing to tax the sanctioning fees out of their peasants, give the money to F1 to bring a race to their country, and then charge the peasantry for the privilege of attending the race they had already been forced to fund.
Indycar saw the light and set up a similar scheme with Brazilian officials to hold the 2015 series opener at the Nelson Piquet Autodromo, complete with more than 100 million dollars in obligations that were ultimately to be passed along, of course, to the local tax victims.
Trouble is, Brazil is an economic train wreck. Overtaxed and deeply in debt, the South American nation can no longer attract economic investment or private enterprise because of their perpetual licensing and regulation. Little wonder that no one wants to do business in Brazil and the country's economy is in shambles.
Under widespread pressure from their tax victims, Brazilian officials chose to cancel both the Indycar race as well as the 2015 MotoGP event. No surprise so far.
The elephant in the room is the unspoken fact that Indycar and Formula One are having considerable difficulty competing in an open, fair market of voluntary transactions. If they could actually compete in the marketplace, they would be supporting their races through mutually beneficial sponsor arrangements, not by enticing governments to forcibly extract the funds from their tax victims.
So the real story here not that the Brazilian government canceled the event. After all, there was no other sensible option. The real story is that Indycar is not viable in the Brazilian market. No one there wants to pay the sanctioning fees. The price is too high.
Not many domestic races are financially enticing, either. If it weren't for Andretti Autosport underwriting the event, the Milwaukee race would have already died. Chicagoland, Las Vegas and Japan are gone. So are Kentucky, Watkins Glen and Kansas.
Compare this utter lack of stability to Indycar's glory days. The 1973 schedule included Phoenix, Indianapolis, Milwaukee, Pocono and Michigan. All of those events were still on the schedule in 1985. Why? Because they made money. The costs of staging an event or participating in one were at least remotely manageable. Today they are not.
Track owners do not have 100 million dollars to upgrade their facilities to meet the demands of the series. Sponsors are not willing to spend 5 million dollars for branding on a car. The expenses are simply more than the free market is willing to bear.
Somebody at Indycar had better figure that out… and with any luck, the Brazilian fiasco will help open their eyes.
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