Guaranteed Spots Are Back on the Table
By now, most of you have already heard or read that the NTT IndyCar Series is tossing around the idea of some sort of charter or franchise system. This would presumably replace the current Leader Circle that rewards most of the teams for participating in the full season of the series.
I will use Chip Ganassi Racing (CGR) as an example here. CGR has been around for almost thirty-five years – longer than the Carolina Panthers of the NFL. Original Panther owner Jerry Richardson paid a $140 Million franchise fee to the NFL in the early 90s to begin play in 1995. In May of 2018, Richardson sold the Panthers to David Tepper for a reported $2.3 Billion (with a B). In about twenty-five years, Richardson made over two billion dollars on his investment – for a team that is sort of middle-of-the-pack. That is common in these days of pro sports. Franchise values increase exponentially in a relative short period of time.
Chip Ganassi Racing has won fifteen IndyCar championships and five Indianapolis 500s. CGR is always considered one of the Top-Two teams in the sport. Under the current system, however – if Chip Ganassi wanted to retire and sell his team, he would get the value of the assets and that is it. There would be no built-in franchise value – just the market price of his fleet of race cars, his building (if he owns, and doesn’t lease), the existing contracts of his drivers and team personnel, furniture, computers and staplers. All those championships don’t matter. It’s probably easier for someone to start their own team from scratch, than try and buy a successful team with a lot of history.
The charter system would theoretically change that. Team owners could reap the benefits by selling their charter or franchise, because that’s (supposedly) the only way a potential new owner could come into the fulltime series. I’m not saying that Ganassi could sell his team for a $2 Billion profit, but Ganassi could certainly get more value out of his franchise or charter than he could on just his assets alone.
It’s a lot more complicated than what I described, and this idea is currently in the discussion and brainstorming stage. Personally, I think it has the potential to be a good idea in today’s economic environment.
The discussion has produced a sidebar, which has produced a mostly one-sided reaction from fans. This idea has raised its ugly head before – and ended up being one of the biggest points of contention in The Split of 1996 – guaranteed spots in the Indianapolis 500.
The open-wheel split was almost thirty years ago. Those of us that were fans back then remember when Tony George introduced the 25-8 rule, which was meant to reserve twenty-five spots in the field of the Indianapolis 500 for full-season participants in his fledgling Indy racing League. The backlash from CART owners, including Roger Penske, was immediate outrage and led to the decision to run the US 500 at Michigan on the same day as the Indianapolis 500. There were hard feelings on both sides and that one issue alone, probably drove the biggest wedge between drivers, teams, fans and sponsors.
It infuriated anyone that had any appreciation for the history and tradition of the Indianapolis 500. The fact that there were no provisional spots, no guaranteed or reserved starting positions is one of the major reasons that this race has meant so much to so many for so long. The fastest 33 cars made the race. Period. Twenty eight years later, the 25-8 rule is still an affront to almost all fans of the Indianapolis 500.
After the 2019 Qualifying Weekend for the 500, team-owner Roger Penske raised eyebrows when he said that regular teams that run the full season should have guaranteed starting spots. This was after the two Carlin cars of Max Chilton and Pato O’Ward failed to make the staring grid. James Hinchcliffe was in danger of being left out of the race for the second year in a row. This also happened to be the same year that Juncos and Kyle Kaiser bumped Fernando Alonso and McLaren from the grid.
When Penske bought the track eight months later, there were whispers that this idea would be floated at some point. I guess we’ve reached that point.
Nathan Brown, of The Indianapolis Star, wrote a not-too surprising article on Tuesday with a sampling of some of the reaction to this idea. It’s a good read, but I didn’t have to read it to know the response. If you’ve read this site for very long, you already know that I am opposed to the idea of guaranteed spots, as well – but I understand the premise behind it.
I listened to Trackside on Monday night. I’ve always liked Kevin Lee because he is a voice of reason. Like all of us, he prefaced his remarks by saying he was against the idea of guaranteed spots. However, he added that immediately shooting it down without a rational discussion would be foolish. He hoped that those in charge of making such decisions would discuss the idea thoroughly, and maybe come up with alternative ideas while keeping the tradition of only the fastest 33 cars making the field.
If I’m arguing the other side, I would point out that this is not 1967, when not only the entire racing world was paying attention to what was going on in Indianapolis in May – the entire sporting world was. There were stars from USAC, Formula One, NASCAR and sports cars in the field. The Indianapolis 500 was huge, and mattered to a lot of people across the globe.
More cars missed the 1967 race than made the race. That was the case many times. But that was 57 years ago. Times are different.
Back then, it was more a bruise to the ego than it was the bottom line if a car missed the race. Don’t get me wrong, lots of money went into making the Indianapolis 500 in 1967. If they missed it – it was a financial hit. But not like it is today.
In today’s world, sponsor budgets are pretty well drawn up the year before. Teams present budgets based on making the 500. Sponsors enter into agreements working under the assumption that their car will be seen by a large TV audience and also many thousand in attendance all month. While it is a possibility, neither a team or a sponsor give serious thought to missing the race, like it was in the 60s.
When it happens to a James Hinchcliffe or Graham Rahal – it sends their program into chaos. Sponsors are as unprepared for such a possibilities as the teams are. Did Graham Rahal really think he had a serious chance of getting bumped from the Indianapolis 500 last year, before the season started? Probably not.
The idea of guaranteed spots for the fulltime teams is not born of greed, so that IndyCar or Roger Penske can line their pockets. It is to protect the smaller teams that participate in the entire season. Kevin Lee was quick to point out that when two of the three Carlin cars failed to make the 2019 Indianapolis 500, they were gone after the 2021 season. When Hinchcliffe failed to make the race in 2018, team-owner Sam Schmidt had to crawl in bed with McLaren to save his team in the middle of the following year. We cannot underestimate the financial hardship caused by a fulltime team missing out on the Indianapolis 500.
Some say too bad. If you can’t take the financial hit, you shouldn’t be racing. Well, that’s easy to say when you aren’t putting the money up to begin with. These are not the same economic times. All motorsports outside of F1 are operating on extremely thin budgets. To be truthful, probably those Formula One teams not named Mercedes, Ferrari, McLaren or Red Bull are probably a lot leaner than we think.
So have I weakened and am now arguing for reserved spots in the Indianapolis 500? Absolutely not. But I think there needs to be a serious discussion about it, and the fans need to be listened to and considered. Ultimately though, I hope the decision is made to continue with the Indianapolis 500 playing no favorites, with a grid made up of the fastest 33 cars. But if another decision is made; I won’t like it one bit, but I’ll at least understand why.
George Phillips
Oilpressure 
February 7, 2024 at 6:29 am
Qualifications for the 500 have historically been as exciting, or more exciting, than the race. The drama–the heartbreak, the joy–of qualifying is at the heart of the 500. Guaranteed spots is another step towards destroying everything that made the 500 a great event. If they want to gut everything special about quals, everything special about the 500, then what a great way to do it. My enthusiasm for this race, and therefore this series as whole, will be greatly diminished.
February 7, 2024 at 8:55 am
Red flag with less than five laps to the finish…….. Green/white flag with one lap to go…………… Now where did they hide the yellow with less than five laps to the finish? ……………… NASCAR may take credit for it’s inventing it…………….But INDY Car does not gain fan support for copying it………
F1 has charter or franchise $ystem ……………. F1 is extermely profitable & fan popular…………. We $hould copy that $ucce$$ful $ystem…………….
All apparently comes down to the $ .
See you at the Club the end of March ……. :o)
February 7, 2024 at 9:02 am
Here are some quick thoughts, and my apologies in advance if they are not fully baked:
I think the value of a franchise in the NFL derives from a couple of things. One is a share of the revenue that the NFL generates. The other is the fact that you have a guaranteed place in the league. You can’t be relegated, as in most soccer leagues around the world.
Let’s think about how each of these sources of value would apply to an IndyCar charter. The value of a slice of the revenue that IndyCar generates is easy enough to understand. But that’s only going to grow in the manner that the value of an NFL franchise has grown if the revenue generated by IndyCar grows in the same way that revenue generated by the NFL has grown over the last few decades.
The other source is the guarantee of a place in the Indy 500, which is analogous to the protection against relegation for an NFL franchise. What is the value of this guarantee? Half of the time, IndyCar is scrambling to try to fill the field of 33. The value in those years seems to be zero.
In the other years, there is some bumping going on, but not a lot. It bites someone from one of the big teams from time to time (even Penske’s Will Power came close to getting bumped a couple of years ago). But when there are 34 or 35 cars looking for 33 slots, the likelihood that you’ll get the short end of the stick is still pretty low. So I don’t see the value of bump insurance as being really high because the risk of bumping, while there, isn’t enormous. And I certainly don’t think it would grow significantly in value unless we get to a situation where the demand to be in the 500 significantly exceeds the supply of available starting slots.
It seems to be that people are conflating these two sources. The primary source of value, and the potential driver for increases in the value of the charter, would be the slice of IndyCar revenue. The guarantee of a starting position in the 500, which I suspect doesn’t contribute a lot to the value, is also the controversial part.
Finally, I’d point out that while Mark Miles says that bumping would continue, guaranteeing a certain number of slots will concentrate the risk of being bumped on a much smaller number of entrants. If 35 cars want to be in the race and 25 slots are guaranteed, the remaining cars now have a 20% chance on average of not making the field. This increases risk for them, which may drive one or two of them out. So, while the proposal may not explicitly eliminate bumping, it may implicitly do so because it concentrates the risk on the cars that don’t have guaranteed slots, which in turn drives them out.
February 7, 2024 at 9:42 am
Guaranteeing starting spots in the Indianapolis 500 would be an especially hard pill for me to swallow. Not due to the sanctity of tradition, but rather the sanctity of competition. Qualifying for the Indianapolis 500 is not simply setting the grid, it is a competition itself. And the attention it receives bares that out, it draws attendance and television ratings on par with much of the non-Indy races. That may continue regardless of guaranteed spots, but I suspect that seeing a car and driver go home that was much faster than several guaranteed entries will cause a stir.
Imagine a scenario something like the 2nd NASCAR race at Talladega in 2007 playing out at Indy… the top 11 qualifiers (with 4 more in the top half of qualifiers) were driving cars that were not among the 35 with guaranteed starting spots. 7 drivers , including 2 of the top 10 qualifiers, failed to qualify for that race. Yes, the non-guarantee cars knew the rules and the risks when they entered the race, as such teams would at Indy, but still… to be faster than so much of the actual starting grid and and not getting to race would look asinine. Probably much more so at Indy with its long qualifying tradition and heightened media coverage.
I find the idea behind the franchises/charters to be understandable and not without merit, but it must be noted that it is antithetical to the way auto racing has long operated. The openness to new competition that auto racing has long had is surely part of its appeal to some fans. I would hate to discourage new teams from joining the sport by making them jump through F1-Andretti-esque hoops. On a practical note, I would fear that Indycar could have a hard time creating real value for their franchises. Seeing a franchise abandoned by a team shutting down if they could not find a buyer would be embarrassing, and would immediately tank the value of every team’s franchise to pretty much nothing. I’m generally positive on the health of Indycar’s teams and it does seem that there is an avid appetite for participation these days… but we are not all that far removed from the sport being in a state that would devastate a charter system.
February 7, 2024 at 9:49 am
I personally do not like the idea of guaranteed spots for full time teams. But if I was go for it, I would make it on a one-car per team concept. Each team would have one position that was guaranteed for the big race. That would leave more than 20 positions available for everyone else, rather than less than 10. Also, those guaranteed slots would start at the rear of the pack… kind of a penalty for using them. Each full-time team would have the ability to use, or not use their guaranteed slot for a struggling car or driver. Just a thought… So right now there are eight (?) full time teams and that would leave 25 positions available to the rest of the field. And that’s only if each team decided to use its one guaranteed slot. So the actual bumping would be ahead of the guaranteed starting positions at 25th place on the grid.
February 7, 2024 at 12:14 pm
The more grid slots that are guaranteed the less likely a sponsor will be to write a cheque for the 500.
February 7, 2024 at 12:16 pm
We need to ask D&R what number of guaranteed grid places would be crossing a line on them entering. I see it as an end to Indy500 only entrants.
February 7, 2024 at 12:29 pm
It’s a bad idea for a lot of reasons. Also, probably unnecessary since all the teams have to do is only support 33 entries if its such a big deal.
If they go through with it, will it include an apology to Tony George?
February 8, 2024 at 7:30 am
I like the concept of a charter system in that the teams could be more like franchises in a sporting league. Problem is, what value do they put on it? NFL franchises are worth so much because last season 17.9 million people on average tuned in each week of the regular season. Outside of the 500, how many people watch an IndyCar race? 1.2M?
As far as the 500 is concerned, I too don’t like guaranteed spots, but if they did ever implement a charter system, there would almost have to be some sort of locked in deal for those teams I suppose. It’s all enough to make your head spin.
February 14, 2024 at 10:32 pm
I’m writing this as I have the Daytona 500 “Qualifying” on as background noise on 2/14/24. You made some great points in the article both for and against the guaranteed positions. The charter system may be good for the finances of the team owners, but if there is any way to avoid doing whatever the hell it is that NASCAR is doing, I hope Indycar will do it. Indianapolis 500 qualifying is probably the second most exciting event of the season. Daytona 500 qualifying reminds me of watching a snake shed it’s skin. I don’t know what the hell is going on, I just know that it’s creepy.
February 15, 2024 at 5:35 am
That’s one of the best analogies I’ve heard in a while. – GP