Grand Prix loses $1M a year, but race is more than cash
Detroit — It has about $1 million more in liabilities than assets at end of every year, but organizers say that is OK.
he future is up in the air for Belle Isle’s Grand Prix, which needs approval from the Department of Natural Resources to continue beyond 2018 and routinely fails to turn a profit.
But the Chevrolet Grand Prix of Detroit presented by Lear, as it is known with the full bells and whistles of corporate sponsorship, is a success, the organizers say, because it draws money to the economy of the city, helps finance the improvement of Belle Isle, provides a postcard to the world for a rising Detroit, and it is quality racing.
“There is a lot of different ways to look at measuring the success for the Grand Prix, and certainly I wouldn’t say the financial outcome of our event is one of those,” said Bud Denker, race chairman.
“We would love to make a profit on an event like this, but that’s not our goal, frankly. And that’s not where we are.”
It is also a success, observers say, because of how motor sports, in this case the IndyCar Series, is financed.
Motor sports are not always about the direct profit. It is about sponsorship and marketing, customer relations and hospitality, product development and high-performance engineering.
Racing is also about the sort of passion that makes someone pour money into the pursuit of speed, even if it costs a lot.
ABC and NBC pay IndyCar to broadcast the series. IndyCar receives a sanction fee from the organizers in Detroit, but derives no other revenue.
As long as the organizers are willing to raise financing from sponsorship and ticket sales, cover any remaining costs to finance the staging and have permission, they will race.
The so-called bottom line is not really a bottom line.
“When you look at profit, loss and economic impact studies, they go pretty deep,” said Mark Dodds, a professor of sports law and marketing at the State University of New York at Cortland. “But there is also a large intrinsic value of Detroit hosting an international event such as this, when you think of the motor sport connection to Detroit.
“And only a million down financially? Even if it was much, much worse, you could see it being carried, because of its worth,” Dodds said.
“With 77 different (sponsorship) partners for the Detroit event, you’re looking at a huge growth on the business side, with sponsors wanting to get involved with it.”
Giving back to Belle Isle
Big sports events do not always make money. But it also is possible for organizers and their partners to recoup losses not covered by ticket sales or sponsorship in business-to-business relations and deals, said Larry DeGaris, a professor of marketing at the University of Indianapolis, who has studied hundreds of sports properties and sponsors.
“These events tend to be judged by consumer spending, and often don’t add up on that basis,” DeGaris said. “Even the Super Bowl tends to ‘lose’ money if the only revenue that’s counted comes from ticket sales, hotels, bars and restaurants.”
The Return of Organization Exempt from Income Tax, or Form 990, of the Internal Revenue Service, shows equal annual revenues and expenses for the Detroit Belle Isle Grand Prix Inc. from 2012 to 2014, ranging between about $12.9 million to $13.4 million.
However, liabilities exceed assets by $1.05 million in each year.
Denker said the nonprofit is showing similar results in recent years. But that is not the point.
“For me and Roger (Penske), number one, it’s the ongoing restoration of Belle Isle Park itself,” Denker said. “Over $13.5 million has been put into Belle Isle since we started coming here back in 2007.”
In addition, a Friday night gala has raised more than $2 million for the Belle Isle Conservancy, he said.
“Beyond Belle Isle, the second key piece for us is economic benefit,” Denker said, pointing to a study showing an economic impact of about $46 million to $47 million.
Denker, Penske and sponsors also like the network television exposure from the races broadcast on ABC on two days. No other IndyCar Series event features the format, and only three others are broadcast on network television rather than cable.
The Penske organization continues to build sponsorship. The 77 partners, a long list compared to other IndyCar races, is up about 10 percent over 2016, which was an increase over 2015.
Attendance, especially in good weather, is nearly ideal, Denker said. Too much more than the usual 110,000 or so would affect the delicate work of providing the fans with transportation from parking areas mostly off the island.
About 80 percent of the fans reside in Wayne, Oakland, Macomb and Washtenaw counties, Denker said, and the increase of residents in downtown Detroit, while welcome, is not important to the success of the race.
Race’s future in Detroit
Whether the two races continue beyond 2018, is up to the DNR, which continued a four-year permit approved by the City of Detroit. A public process is likely to begin within a few months.
Ron Olson, director of parks and recreation for DNR, said conversations with the organizers have already begun, and he hoped to make his decision before the 2018 race.
“Part of the issue is that we’re well aware of the impact that Grand Prix has on the park,” Olson said.
“There are some people in the community who would prefer it would just go away, and there are people who like the Grand Prix and think in brings vibrancy to the community and puts Detroit on the world stage and it’s an economic booster.
“One thing we are talking about in earnest is reducing the amount of time it takes for the build-up and the take-down.”
The $13.5 million contributed to the state’s work of renewing the Belle Isle Park is helping the state grapple with “some very challenging conditions,” Olson said.
“They have been a good partner on the island.”
For Michele Hodges, the president of Belle Isle Conservancy, the renewal process provides an opportunity.
“I think a success is a community that works together, for the mission to protect itself,” Hodges said. “And public-private partnerships are in important way to get there.
“For example, the aquarium wouldn’t be open if it wasn’t for the race.
“It’s an enabler. It empowers us to fulfill our mission.”
But, she said, the foundation of the DNR process will be “the impact of the race on the island and protecting all that we have out there.”
What: The Grand Prix features IndyCar races Saturday and Sunday (3:30 p.m. each day) and a number of support races.
Where: Belle Isle
Tickets: Friday is Free Prix Day; there is no charge for admission. Tickets for Saturday and Sunday start at $40. Tickets can be purchased at DetroitGP.com, by phone at 866-464-PRIX (7749), or by visiting the Grand Prix ticket office in the GM Renaissance Center, 300 Renaissance Center Drive, Suite 2311, Detroit.
Parking: There is no parking on Belle Isle. Fans can park in downtown Detroit and be picked up at the Cobo Center or the Renaissance Center by luxury buses that will deliver fans to the Grand Prix entrance. The shuttle is free with the purchase of a Grand Prix ticket. Shuttles will begin running at 7 a.m. on Friday and Saturday, and at 7:30 a.m. on Sunday, and they will run continuously until all fans are off the island.
Grand marshal: Detroit Lions guard T.J. Lang, a Michigan native, is grand marshal of the Saturday race.
7:45 a.m. and 12:15 p.m. — Trans Am practice
8:30 a.m. and 1 p.m. — SportsCar Championship practice
10:20 a.m. and 3:30 p.m. — IndyCar practice
11:25 a.m. — Super Truck practice and qualifying
2:45 p.m. — Trans Am qualifying
4:55 p.m. — SportsCar Championship qualifying
8:45 a.m. — Trans Am Race 1
10 a.m. — IndyCar Race 1 qualifying
10:55 a.m. — Super Truck Race 1
12:40 p.m. — SportsCar Championship race
3:30 p.m. — IndyCar Race 1
10:45 a.m. — IndyCar Race 2 qualifying
11:45 a.m. — Trans Am Race 2
2 p.m. — Super Truck Race 2
3:30 p.m. — IndyCar Race 2
For a complete list of events each day go to DetroitGP.com.