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State of the Racing Market Report
By John Kilroy on October 24, 2011

Here's a sneak peek at the "State of the Racing Market" report we're publishing in the November Show Issue.

Innovative changes in auto racing are creating new opportunities for racing entrepreneurs throughout the sport. Please note that there will be some of this copy cut to fit the report into the available space in the publication...

Hard work, high energy and a comfortableness with reinvention seems to have been regular themes in the racing industry in 2011. Issues with costs were dealt with in 2009 and 2010, while 2011 was a year of creativity as a way to adjust to new realities regarding both the economy and the changing habits of today’s consumers.

No one would dare answer a new idea today with, “But we’ve always done it this way.”

To take a reading on the state of the racing industry in 2011, we reviewed all of the comments and news published in issues of Performance Racing Industry magazine this year. Steve Wolcott, of ProMedia, Santa Ana, California, captured this welcoming of innovation in the January issue when he said, “One thing is for sure: Successful businesses, tracks and sanctions are not burying their heads in the sand or operating with a business-as usual attitude through this economic downturn. Successful organizations are holding their own, and in some cases, thriving, by listening to their customers, making adjustments within their businesses, and offering affordable products with high value.”

Another way of highlighting changes in racing tradition, in a very 2011 way, is noting that Tanner Foust’s Hot Wheels jump at the Indy 500 had 6,338,598 views on YouTube at press time.

Following this year's Indy 500, Bobby Rahal said in his August issue’s Industry Insights interview that he appreciated the renewed energy surrounding the event. “When fans left the Speedway after May’s 500, there was talk…a huge buzz. It was a great event. Now, there’s still a lot of work to do, but we needed an event like this year’s Indy 500 to set a positive trend,” he said.

Let’s review some quick notes about the notion of change right now in the racing industry. When you say Roush-Yates today, many now think of a retail store in Mooresville or a national race engine business active in just about everything, from dirt late models to drag racing. Lucas Oil, one of racing’s biggest sponsors, just went out and bought its own cable TV network in MavTV. Carburetors on a NASCAR Cup car? Those days are over.

12,000 fans jam Toyota Speedway at Irwindale, one of America’s finest short tracks, for the Formula Drift finale. The next big thing in grassroots road racing appears to be B-spec, announced at the PRI Trade Show just last year. Rent-a-ride programs, especially popular as a form of young driver development, is no longer just a road racing phenomenon, as it makes its way into oval track racing.

USAC co-promotes midget races with STARS. ALMS co-promotes with the SCCA. Texas plans to open its doors to the V8 Supercars series in 2013.

Take a look at PRI. This monthly magazine of 25 years now allows you to link up to www.performanceracing.com to get today’s industry news. Over 5000 members of the racing industry have downloaded apps or linked up to read digital versions of PRI magazine on their iPad or view the Trade Show floor plan on their mobile device (they’re not even called cell phones any more). This editor Facebooks, Tweets and blogs throughout the week.

In 2012, a radical new race car, the Delta Wing, that resembles a rocket ship or a landspeed vehicle will run in the 24 Hours of Le Mans. It was designed by a former Lola Cars designer, and built by Dan Gurney’s All-American Racers.

The winged pavement sprint car series, Must See Racing, posted $10,000 to win for its Bristol event. This is a series that didn’t exist in 2007, and its races will be available on television this year to over 100 million homes. The POWRi sanctioning body agreed to pay $10,000 to win for a micro sprint race. They got over 100 entries.

LA Racing, the driving school based at Toyota Speedway at Irwindale, experimented with a new way to find students, and sent its message out on Groupon and LivingSocial (coupon Internet sites). They signed up 3000 in three days.

So, with all due respect to the very real pain this economy has caused, we might also suggest that this is indeed a very exciting time in racing. Racing entrepreneurs are at their best, and racers being racers, barriers to change are simply not acknowledged.

Meeting with Success

The dynamism of the racing industry right now is meeting with success in several areas. In the January issue, Mel Roth told PRI that the Pacific Street Car Association’s drag racing series had car counts hit by the economy, and that it was still keeping a lid on prices. “We haven’t raised prices to compensate for fewer cars and hope that will pay off in the long run when folks realize we didn’t try to gouge them to make up for lost revenue.”

By the time we caught up with Roth for an article in the October issue, he said, “We’re up this year, which is incredible.” Roth noted, “We normally have just over 200 cars for a Vegas race, and we were at 235 this year. At Fontana, we were between 250 to 275 cars for 2010, and we were at 300 for both races so far this year.”

The ALMS began to ‘batten down the hatches’ with some tough decisions in 2008, that have paid off for the series. In his Industry Insight interview in the January issue, Scott Atherton, said, “There are many businesses and many industries over the last two years that have made radical changes in order to remain viable and to continue growing and not just survive, but thrive, and that’s exactly what we did.”

“The 600 mini-sprints have exploded all around the country!” noted Keith Wagoner, of Saldana Racing Products, in Brownsburg, Indiana.
In his Industry Insights interview in March, NASA’s Ryan Flaherty (NASA is in its 20th year), said he’s content with NASA’s recent success, but still looks forward to continued growth. “I’d like to see NASA grow at the same rate we have in the last five years.” He believes NASA is the fastest growing amateur racing organization in the country, with more than 10,000 members.

It’s widely acknowledged by race promoters that tough choices, and new approaches are the order of the day.

Kevin Ramsell, ASA, said the tracks that are succeeding in these times “are thinking out of the box about promotion—while encouraging their competitors to be positive promoters of their tracks, series and sanctioning bodies.” He said, “At ASA, we are creating open lines of communication among our promoters to share ideas—which ideas work and which don’t. Our best resource for success is each other.”

“Racing is a lot like other businesses—it needs excitement,” said Kerry Bodenhamer, of the UARA Stars series. “We are going to have to change our show to attract new fans and build back fan consistency.”

“The tracks, series, and teams that got out and marketed themselves last year—and did more than just put on a race—remained successful without much decline,” said R. Stan Lester, of the FASTRAK Racing series. He noted, “We have a different customer today than we did 20 years ago.”

“The entertainment dollars race fans have to spend are simply less than ever,” said Ritchie Lewis, of the Lucas Oil Late Model Dirt Series. “But people still love good ol’ dirt track racing and will spend the dollars it takes to enjoy great racing.”

Many short tracks are finding that destruction derbies and other such events are important right now in paying the bills. Michigan’s Kalamazoo Speedway reported that it gets up to 5500 people for its two Night of Destruction events.

In his July Industry Insights interview, Jeff Nuckles, Columbus Motor Speedway promoter, said, “We have our special ‘Crashorama’ events, trailer races, school bus figure eights and enduros. I always felt you have to give your customer a little bit of everything, and it really has worked for us here at Columbus.

“We’re in uncharted waters at times like this, where the economy and gasoline prices are affecting everyone combined with a record rainfall in central Ohio to start the season and lots of bad weather elsewhere, too,” he said. And as the race season went on, track promoters in the Midwest had to battle the heat, including Columbus Motor Speedway.

It’s important to stress in any article on the racing industry in 2011 that the weather this year got in the way over and over again.

Many racing promoters tell the same story, that they are trying to keep ticket prices for a night of local short track racing comparable to a night at the movies, with their faith in a great night of racing action beating the merits of just about anything Hollywood is producing these days.

“Local stock car racing appeals to many senses that humans can’t get enough of…speed, drama, excitement, risk and, of course, danger,” said Brad Allen from Ace Speedway, in Altamahaw, North Carolina.

Warren Hardy, of the National Championship Racing Association, with over 80 teams participating, said, “We try to keep costs down for spectators. Although we can’t dictate what the promoters do, we ask them to keep a $25 maximum pit pass for an NCRA event. At 81 Speedway, we’re still charging only $9 for adults, and last year’s highest gate admission for any NCRA event was $15.

For racers, Hardy said they’ve extended the payout for racers 15 on down in the finishing order to help them get from event to event. “$50 doesn’t sound like a lot, but when you’ve got to spend $100 on fuel to get to the next event, and the last track already gave you $50, it makes a bit of a difference.”

The Distribution Pipeline

When it comes to the business of selling racing parts and services, entrepreneurs said they were most hopeful for 2011 in the January issue’s Retailer Survey Results. Thirty-nine percent had reported a decrease in sales in 2010, but only 12 percent expected sales to fall in 2011. More than half predicted growth this year. There were definite signs of confidence creeping back into the system in 2011, after a couple of confidence-busting years.

John Card, Dynapack Chassis Dynamometers, Fresno, California, described his experience in selling dyno equipment to race engine builders in the March issue, and the positive changes he’s seen recently. “We had a lot of customers who were on the fence and afraid to invest any money in their businesses just because they were taking a wait-and-see attitude towards the economy,” he said. “Now, there are people who have decided it doesn’t look like it’s going to get worse and realize they can’t wait on this forever, so we’re starting to see people who have been interested for a while starting to pop back up, ready to get things started.”

In the same article, Will Fong, Dynojet, North Las Vegas, Nevada, noted, “We’ve seen a trend that the performance shops that survived the difficult economic downturn are now positioned extremely well, with reduced competition.”

Customer service is better now than ever, and racing businesses are keeping costs down. Today’s racers are getting more for their money, because “value” is the key word in keeping a racing business successful. And racers still want their parts lighter, more durable and better performing—a real challenge to suppliers.

Corey Schultz, of Five Star RaceCar Bodies, Twin Lakes, Wisconsin, said, “Price is becoming more of a factor. Because of a down economy, people have less to spend on their racing. Customers demand superior quality, they want something that’s going to last longer but they also want to pay less price. So, it’s a struggle to meet the demands.”

Inventory Still Key

Immediate availability of specialized inventory in any local racing market remains the foundation of the whole structure of racing as a sport. Not only do local racing businesses have the parts on their shelves, but they serve as expert advisors in helping new racers to become more competitive and assisting veteran racers in stretching their budgets.

It’s the thousands of racing retailers, race engine builders, racing fabricators and others that make it convenient for grassroots racers to pursue their love of the sport.

As for racers, they’re careful about travel expenses and definitely taking advantage of any way to stretch the budget. However, they remain among the most active consumers in any industry due to their ultimate objectives of winning races and championships. There remain hundreds of thousands of people who compete in an auto race at least once a year, and they’ll do whatever it takes to win.

Racers have evolved over the decades to have less and less technical abilities, relying more and more on parts that fit perfectly with little machining and racing businesses to provide such services as engine and fabricating work.

The result of all this buying activity is a dynamic industry, with new products introduced at a dizzying pace, all on view at the PRI Trade Show, which requires 700,000 square feet to house all the displays by 1100 companies.

Any potential investor in the racing industry can find the kind of bright spots that are far less common in other industries right now without such passionate consumers as racers.

Many racing entrepreneurs told PRI over and over again in 2011 that the concept of a comprehensive inventory of racing parts at the ready for their customers remains a key to success. And they also believe that bricks-and-mortar racing businesses are required for this sport to remain popular, versus all business shifting to Internet sales.

“Our theory is you gotta have it to sell it,” said Mike Leary, Leary Racing Products, Denver, Colorado, featured this year in PRI magazine in a Retailer Profile. “People used to call to ask if we had what they wanted. Now, they call and ask us to set it aside.”

Inventory and expertise have made Leary Racing Products a racing business classic success story. He started the business in late 1999 in a 1500-square foot space. “We started with $40,000 and now we have about three quarters of a million dollars in inventory,” said Leary. “We have 5000 square feet now and we’re bursting at the seams.” Leary sells into the Late Model, modified and Legends markets. “Right now, the business is growing by itself and it’s getting closer to where it was before the recession,” said Leary.

A suspension specialist, Leary’s description of his approach to sales serves as an insight to the value of what race retailers bring to the sport. “A lot of times, people will come in and ask for something, and we’ll tell them, ‘We’ll sell it to you but can you tell me why you want it?’ Then we can usually figure out if that’s the direction they need to go or if they need to in a different direction.”

Leary added, “We want to make sure that the customer gets the right thing. We would much rather sell them the right part the first time; it makes for a happier customer and a return customer.”

Another business profiled in PRI magazine this year was Bruce’s Speed Shop, in Rockaway, New Jersey. Bruce Kindberg put his philosophy of retailing racing parts this way: “We don’t want to be an Internet store. We want to be a come-and-get-it store.” The main store is 5000 square feet, jammed with parts. Another 5000-square-foot facility serves as a warehouse. “I like it when people say we have everything.”

Also, the economy has change how racers purchase parts, according to John Godfrey, Spike Chassis, Brownsburg, Indiana. “Before, people would plan their racing a little bit more and buy spare parts in the winter and things like that. But when money is tight, they don’t do that; they just get it when they need it, and when they need it, they need it right now, so it’s important ever to have it on the shelf. When they have to have it, they will go to the person who has it.”

Baker Performance Parts, Stow, Ohio, was also profiled in PRI, and Scott Baker related his experience selling racing products on Ebay. “We did a lot of business on Ebay for three years. It brought in a lot of revenue, especially in winter.” Eventually, increases in fees ate into profits. “The volume was good, but the profit, not so much.

“I think there is a need for specialty shops specifically for performance parts. People still want to come in and handle a part before they buy it or can come back and return it if it’s not what they wanted. A lot of people also don’t want to wait for parts. In this type of racing, they want to work on a car tonight and race tomorrow.”

John Towle, executive director of the Performance Warehouse Association, said in his Industry Insight interview this year, “The industry will not survive unless we have three-step distribution…if we don’t have this proper three-step sales transaction, we lose all of the display counters where people can touch and feel the parts that they end up buying at some point. This is where the excitement of the part is.”
Towle continued, “A photo on the Internet ‘ain’t never gonna get it.’”

The big demands on racing business owners remain. “I open the shop at 8 a.m., and often don’t get out of here until midnight,” said Baker. Still, he says he doesn’t mind. “My problem is that my hobby and my business are in the same place, so the doors are always open.”

Doug McKleroy, McKleroy Motorsports, in Muscle Shoals, Alabama (profiled in the September issue), is a transmission expert who expanded his services to include rebuilding engines to make it through these tough times. “I’ve got to be diversified. It’s whatever it takes to make a dollar…or a dime.”

For oval track engine builders, the use of crate engines has encroached upon their livelihood, but at least one well-known race engine builder thinks the ‘pendulum’ has swung as far it’s going to go. Keith Dorton, Automotive Specialists, Concord, North Carolina, believes crate motors may have peaked in oval track racing. In the February profile of the stock car market, he said, “That has affected racing engine builders all over the country. In fact, it has put quite a few out of business, and it’s certainly not for the betterment of the sport in my opinion because it opens the doors to bypassing rules or cheating, so it has taken the ingenuity away from the engine part of the industry.”

Dorton continued, “Fortunately, we’ve seen them starting to fade in popularity, getting back to custom-built race engines.”

Media

We can’t report on 2011 without acknowledging that it was the year that the venerable publication National Speed Sport News, with the beloved Chris Economaki as editor, ceased publication. The Internet was credited as being a major source of damage for NSSN, as racing fans had easy access to race results right on their desktop, laptop or mobile phone.

However, print is by no means dead. Many racing publications are doing quite well, thank you, and some are thriving again. The magazine you’re reading, for example, is 386 pages, 80 pages larger than in 2010, carrying advertisements by roughly 400 racing companies. It’s a positive sign for any industry to have its trade magazine so robust.

Take a look at a recent issue of Grassroots Motorsports magazine. It’s regularly near or above 200 pages, packed with racing advertisements. The magazine serves as a terrific ‘dream book’ for road race fans thinking of getting behind the wheel of a race car. Grassroots Motorsports makes it look easy, wildly fun and fairly affordable. They also organize events, and have their readership carrying on very active conversations on a daily basis on message boards within the Grassroots Motorsports website.

Social media made its statement in 2011 as a new media that brings it share of results.

Kalamazoo Speedway’s Gary Howe said, “We’re playing with social media pretty big right now. I have two daughters, and they help me with that. I’m always on Twitter or Facebook. It seems strange to be doing that, but you’ve got to do what you’ve got to do.”

“For businesses to be successful selling to this market, the business needs to be active at the events and on social sites like Facebook and Internet message boards,” said Nicolas Malechikos, of the Red Line Time Attack series.

In his Industry Insight interview in April, IndyCar CEO Randy Bernard said, “If there is one thing I failed at last year, it was our social media. I know we can do a much better job, and we have to do a much better job.”

And Bernard is focused on getting the digital generation to the race track. “The 18–34 demographic is where we lost 20 million fans in the early to mid-1990s…and herein lies the secret of our success the next few years,” he said.

Whatever It Takes To Win

So, the racing industry is in flux. The rules are being rewritten. Change is here to stay, but it’s still difficult to predict how it will all shake out when the economy regains solid footing. Some racing companies are thriving. Some are still hard at work structuring their business for success in these times.

Just remember that the incredible energy, focus and creativity that it takes to win races is flowing through this industry like no other. The racer’s driving ethos is, whatever it takes to win. Whatever the economy does, racing is meeting the challenge of today.

At Pro Line, a drag race engine business in Woodstock, Georgia, profiled this year in PRI, their turbo business triggered a major purchase of a Superflow Black Widow Dynamometer. “We wanted something that we could put one of our best turbo engines on and run it full tilt and have the dyno be able to hold it,” said Doug Patton.

Aggressive and very effective promoters, the ultimate motivation for this major purchase hasn’t changed much since Smoky Yunick bought a dyno.

“We do not like to be in second place…at all,” said Patton. “I know nobody does, but we work really, really hard and will do whatever it takes to go out there and be in the front.”

About the Author
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John Kilroy is the Publisher of Performance Racing Industry magazine.
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