CCWS To Turn A Profit In '05

[Dov]

Thanks to Starship from Cartfanatics.

From AR1:

"Champ Car to turn profit in 2005 Champ Car boss Kevin Kalkhoven is fairly confident the series will turn a profit as soon as 2005. In speaking to AutoRacing1.com in Montreal Kalkhoven revealed, "Things are looking unbelievably positive already. Our five-year plan didn't show us turning a profit for Champ Car until the third year but the way things are going I believe we will turn a profit in 2005, a full year ahead of plan." It's clear that Champ Car is now being managed by people who know how to run a business. 2005 will be the year Champ Car begins to solidify their schedule with profitable events, makes a return to network TV, brings on some major new sponsors, and begins to gain respectability worldwide. In 2006, when the next-generation Champ Car is slated to debut (hopefully very F1-like), Champ Car will be well on its way to filling the worldwide void for top-level open wheel racing that F1 can't satisfy. The confidence being displayed by messrs Kalkhoven, Gentilozzi and Forsythe might best be described as "quietly giddy" though its clear they are still working hard to succeed where those before them have failed. Mark C. "
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[Amar7605]

By eliminating expenses and cutting out the unprofitable races, the three owners have achieved this milestone. Congratulations!

[macdaddy]

Turning a profit in 05 - even WITH network TV-time!
This is great news! Long live OWRS!

[luke]

Good news.

[Muzza]

Folks,

Clearly this is good news, but let's please be careful. First, Kalkhoven would have said "I believe we will turn a profit in 2005", so to entitle the thread "CCWS To Turn A Profit In '05" is an exercise of wishful thinking.

What OWRS and Champ Cars most need now is a steady management, that can allow the series to be self-sustainable and enjoy a long-term growth. The alternation of cycles of feast and famine is so frequent in motorsports that one might say that it is part of its nature (although I don't agree with that), and Champ Cars is in such a fragile condition that it would surely not survive another slump.

Let's continue to be supportive without being fanatical; let's have a constructively critical attitude, applauding correct decisions and pointing out errors; let's learn from other series' mistakes instead of by Champ Car's own; let's press for OWRS to take well-though, extensively pondered decisions and not to jump into hasty moves.

Mark Cipolloni's grandiose words "In 2006, when the next-generation Champ Car is slated to debut (hopefully very F1-like), Champ Car will be well on its way to filling the worldwide void for top-level open wheel racing that F1 can't satisfy" are exactly what should not be said now.

OWRS has made a few good decisions recently, and it should continue to learn to walk before it can leap. Let's continue to repair the shed, then build a house. The castle is futher away.


Muzza

P.S.: As an illustration of how delicate is the situation of open-wheel racing in North America (and actually not only in North America), I would like to let you know that the IRL race in Sears Point is going to be promoted by that series itself, despite many statements by Tony George saying the opposite. If OWRS has trouble to find promoters to bankroll its races, the same happens to IRL; this is a clear indication that the hole is bigger than most had thought.

[Kicking-back]

It'll be very good news if OWRS/Champ Car makes a profit - but as for the other comments, the AR1/Marc Cippoloni website does have a habit of getting carried away.

[indycool]

Yes it does, Kicking-back.

At the risk of getting shot at, CART's annual report came out and it spent $143 million in expenses with $47 million in revenue. That's a loss of $90-million-plus.

I don't see enough change in OWRS' approach, other than cutting back some staff costs and network TV, that creates that much of a warranted turnaround prediction, particularly if they're going to buy network TV next year and INCREASE those costs.

[macdaddy]

That's why I'm so glad that we don't have those reports anymore!

Last year, didn't they have to purchase the engines? This year, it's basically just the maintenance contract. No lights at Cleveland, a streamlined front office, and "little" things like that can add up in a hurry. And there are less self-promoted events on this calendar, no trips to Europe...

[Kicking-back]

And only 14 races overall, too.

[luke]

I take it then it was the flight over to europe that was exspensive not hosting the races.

[Kicking-back]

It was the logistics of getting the whole circus over, yes.

[luke]

And maybe the lack of ovals so the teams didn't have to keep purchasing different chassis.

[macdaddy]

Lots of things were expensive last year.
(Not that some things are very different this year)

Network TV. And even SpeedTV.
Purchasing the engines.
Promoting own events.
Pookfare.
Lighting Cleveland.
Racing in Europe.
Pook's two-hundred trips to Europe to woo manufacturers.
And I'm sure there were a couple of lawsuits to contend with.

[macdaddy]

Heck, I'd bet they even dropped half-a-million on launching the new logo!

[Kicking-back]

Very true.

It's all looking much more positive for 2005.

The series being for "The Americas" North/Central/South plus a trip to Australia makes a lot of sense rather than trying to compete in a very crowded European scene.

[codename_47]

Originally posted by macdaddy
Heck, I'd bet they even dropped half-a-million on launching the new logo!

Heh, well maybe Mcdonalds will help fund a new one, like the Intel Inside deal, mention our name in your advert and we'll pay for half of the costs!

From almost dying in the off-season to predictions of profit within two years?? Who'd have thought it!

No matter how you spin it, that's a positive step!

[Snrub]

I don't mean to be a downer, but I don't believe for one second that there will be a profit in 2005. Indycool is right to point out the 2003 expenses, but I don't think all of it is true operational expenses. I think you could probably lob a few tens of millions off.

Why am I being so negative? We know it costs a lot of money to run these cars. Look at the sides and wings of the cars. With the exception of NH, Herdez and maybe Jourdain, none of them appear to have enough sponsorship to cover the cost of running (I don't think even the true pay drivers bring enough to the table). Most of the sponsors for the cars can't be covering more than 1/5th the real cost judging by company size and size of the lettering on the cars. So let's be very conservative and say that the series is paying out $2M/driver. That's $36M in expenses. In it's heyday the series couldn't cover those kind of expenses.

The OWRS guys have made wild claims in the past. Without reasonably visable evidence to back it up I'm not going to believe them.

[mountainstar]

Originally posted by Snrub
I don't mean to be a downer, but I don't believe for one second that there will be a profit in 2005. Indycool is right to point out the 2003 expenses, but I don't think all of it is true operational expenses. I think you could probably lob a few tens of millions off.

Why am I being so negative? We know it costs a lot of money to run these cars. Look at the sides and wings of the cars. With the exception of NH, Herdez and maybe Jourdain, none of them appear to have enough sponsorship to cover the cost of running (I don't think even the true pay drivers bring enough to the table). Most of the sponsors for the cars can't be covering more than 1/5th the real cost judging by company size and size of the lettering on the cars. So let's be very conservative and say that the series is paying out $2M/driver. That's $36M in expenses. In it's heyday the series couldn't cover those kind of expenses.

The OWRS guys have made wild claims in the past. Without reasonably visable evidence to back it up I'm not going to believe them.

Well that's the thing, they don't answer to anyone. I think it is pretty well known that they have made an investment, exactly how much no one knows. And how much has gone to the teams, again no one knows.

If they say they are likely to make a profit in 2005, then good on em. Time will tell anyways.

[Dov]

OWRS/CCWS is a private company now, so how can any of us really claim to know what's going on behind closed doors?!?!

[Snrub]

Common sense and the information we gather as hardcore fans would tell us that they're not going to make a profit in 2005. I have no idea how much they're losing right now, but it's clearly tens of millions. If we know they're not getting sweeter deals with promoters, there aren't more people in the stands, there isn't TV revenue and the teams can't support themselves, how could things be anywhere close to profit?

If Nortel came out tomorrow and said they made $40B profit in Q3 you'd call BS right? You're probably not following the company in detail, but everyone here knows that's not going to happen. Very basic business and common sense.

[fobi0]

Since this is coming from AR1, it must be the Shanghai street race that will push OWRS over the top.

[mountainstar]

Originally posted by Snrub
Common sense and the information we gather as hardcore fans would tell us that they're not going to make a profit in 2005. I have no idea how much they're losing right now, but it's clearly tens of millions. If we know they're not getting sweeter deals with promoters, there aren't more people in the stands, there isn't TV revenue and the teams can't support themselves, how could things be anywhere close to profit?

If Nortel came out tomorrow and said they made $40B profit in Q3 you'd call BS right? You're probably not following the company in detail, but everyone here knows that's not going to happen. Very basic business and common sense.

Well. I follow the business side of racing as close as any one and based on what I have seen and heard, they can make a profit in 2005. And I'm sticking to it.

[Fogelhund]

Certainly Snrub is right in being sceptical about this. This is an entity (including predecessor), that has been losing money hand over fist. There hasn't been too much fundamentally changed over previous seasons.

On the sceptical side, I wonder how the equation would change in you added in the Three Amigos Net Team losses, which is likely not small.

On the TV revenue side. It doesn't take a great deal to turn a profit on the TV. There are other organizations that have "bought" TV time, and are turning a profit from the advertisements during that time. It is possible with the proper Network deal, and marketing that the TV could be a profit generator, not a cost. I'm not passing judgement on OWRS either way here, as I don't know, but it is possible for them to make money.

In the end, who really cares if they turn a profit in 05' or it doesn't happen until 06'. That the suggestion is that the series is costing its owners less is good.

That there was an 04' in itself was a bit of a miracle, and the same goes with 05'. Certainly it looks more secure now, and the future getting better all the time.

Of course there is along way to go, and the might have certainly fallen. There is the IRL on road courses, so market share must be fought for. While the Hardcore will dismiss the IRL on road courses, those hardcore are a minority of race fans.

[Dov]

It will also cost the IRL more $$$ to run on road courses.

[fobi0]

Originally posted by Dov
It will also cost the IRL more $$$ to run on road courses.

Which is a completely pointless post since it shouldn't make any difference on whether OWRS would be able to make money next year or not.

But I am not a so-called "expert" so what do I know.