CART MEDIA CONFERENCE

September 30, 1997

Andrew Craig

ANDREW CRAIG: Thanks T.E., and good morning or good afternoon depending on where you are to everybody. Thank you for being on the line. I don't intend to spend a lot of time formally wrapping up the season. I don't need to tell you things you already know, but rather leave the time open to you so you can ask questions that are important to you. Just by way of brief summary, of course, Alex Zanardi is our champion with 195 points. We're delighted to have Alex as a champion. We think he's going to be terrific for the series. He's an individual who creates strong feelings. The vast majority of people like him. Some don't. That's not all bad. And we think he'll be a good champion for us. Mercedes-Benz of course came out as the winner of our manufacturer's championship. The winner of this championship has changed each year since it was introduced, with Ford winning it the first time out, then Honda last year and now Mercedes-Benz. Actually, it was a close round, with just 26 points separating Mercedes and Honda at the end of it. Reynard of course dominates at the Constructor's Championship by a huge margin, almost 200 points. Our Nation's Cup -- actually, the Nation's Cup is far closer than it's been in previous years. At one stage, it looked like Canada was going to run away with if, but in the end Team U.S.A. prevailed ahead of Brazil and Italy, with Canada in fourth place. And finally our rookie of the year is Patrick Carpentier, who I think everybody would agree was spectacular on occasions and in particular at St. Louis. So let's open it up for questions.

ANDREW CRAIG: Yes, I do believe that, Joe. I think it was a successful event. We didn't particularly like the way the race started, but we liked the way it finished, and we liked the fact that we had a crowd of 100,000 people there for our first oval race in California. The reasons why it was so successful, I think was good solid marketing at a local level, and also an excellent race facility that people wanted to come out and spend their leisure time at. Looking at the next year, we certainly do have some thoughts. Frankly, not particularly well developed to the States, but we're going to discuss those with Greg Penske because I certainly would like to see that event become the grand finale, if you like, and to be the marquis event.

ANDREW CRAIG: Yeah, I think we've reached that point. Your question is timely. Each year, CART sits down and it tries very hard working with chassis manufacturers, engine manufacturers and tire manufacturers to slow the cars down. And each year we are very successful in containing speeds at the beginning of the season, by the beginning of testing, but by the end of the season, the teams are right back where they were the year before, which I guess underscores how competitive the series is. But certainly -- and I don't think it's anybody -- any driver who would dispute me when I say we think that 240 miles an hour or one mile -- four miles a minute, we think that's enough. We think at that speed, you can certainly feel the speed, and our intentions from here on in is to try and get some speed out of the car. Now, we did hold meetings with relevant parties over the weekend and also had an impromptu board meeting just to discuss the direction on some issues we had already reviewed at our previous board meeting, and we had some further discussion with the various manufacturers involved, but we had to come back with an announcement of some changes shortly.

ANDREW CRAIG: It would, yes.

ANDREW CRAIG: Well, there are really three things that come into play. One of course is the engine, which when you think about it is in the end what creates the speed. Secondly, obviously the aerodynamics, and thirdly tires. We're looking at all three, actually. Now, we do have a very, very good engine formula which we're very happy with, and as you probably know, there's some talk we may change that in the future, and that may well indeed be the case. But although we are in active discussion with the engine manufacturers about reducing the capacity, I mean, that can't happen in the short-term because quite clearly that needs new engines and there's a long development cycle involved there, so we're looking at some other issues in particular of possible further reduction in boost, but by no means is that fixed. We are looking at changing the aerodynamic package on super speedways, and also we're looking at some possible changes with the tire regulations. But none of these things are finalized yet, but they're very, very high on our list of priorities to work on.

ANDREW CRAIG: I would say within the next few weeks, there will be an announcement forthcoming. I don't want to get into confirming or denying who it may or may not be, but we're very close to an announcement. That's all I really want to say at this stage.

ANDREW CRAIG: PPG is going to continue to have a very important role in our series. That's certainly not in any way going away. They're very anxious we should emphasize that. But really when you think about it, PPG is a large industrial corporation, and many of the rights they have been acquiring under the sponsorship package are rights they don't really need. They're more consumer-orientated. So with that in mind, we've structured something that works just great for PPG and obviously frees up some sponsorship inventory that can be sold to another.

ANDREW CRAIG: That would be the latest. I think logically that would be the next big opportunity to do it, but we might do it beforehand, depending on the -- obviously the sponsor concern. If they want to go earlier, we'll go earlier.

ANDREW CRAIG: Well, I believe actually that the -- I could be wrong about this -- but I believe the dual-banking system -- actually, I believe it has now been eliminated. I was certainly led to believe that the kinks that have now been taken out of the surface, but I could be wrong about that. Do we have an interest in the Dallas marketplace, yes, absolutely. It's a very important part of the world we want to keep under review.

ANDREW CRAIG: I could be wrong about that in that case. That was my impression. Well, you know, the dual banking concerning which our chief steward did get a good look at and he had some concerns about it. I think that the bigger issue, though, is for us is getting some speed out of the cars themselves right now.

ANDREW CRAIG: Well, there are two questions there.

ANDREW CRAIG: Let me take them one by one. First of all, I'm not an engineer, but my understanding is that possibly, possibly boost can be dropped as far as 35 to 36 inches of boost. Now, bear in mind currently we're at 40, but that is a very uneducated comment on my part. But that is what I'm told that they are. The engineering side would be horrified to hear that. But directionally, if we put it that way, there's some strokes reduce the boost further. On the issue of dropping turbo chargers, it's an interesting question, and actually we use turbo charging in a curious way. We actually have used it over the years when you think about it to control path rather than create path. In other words, as engine power has increased, we have reduced boost, thus reducing power. So for us, it's been a very valuable control mechanism. Now, I stress -- and I stress that we've not decided to do this -- but if at some point in the future we did go to a smaller engine, well, it obviously boosts the ride, then we would be in a position again to use a turbo charger to control power over time which is far less radical way of completely redesigning your engine every few years. Bear in mind that we've had the same engine formula now for 19 years, which is terrific. I mean, that's how you can control costs is by not changing things, and it's simply with any change that we make to the boost over the years, I think it's been very much to our benefit. So the turbo charger seems to work well for us, and I think it's going to continue for the foreseeable future.

ANDREW CRAIG: Well, we're looking at a number of things. Actually, well, first of all, yes, we still plan to go to 20 races at some point. We are looking at a track in Germany, although I have to stress at this stage their track is a very large green field right now. And of course there are many other exciting opportunities, both in the U.S.A. and internationally. Right now, you know, we've got proposals for a race in Mexico. There's proposals for races at four or five U.S. venues. And, I mean, I'm looking at them all. I would like to have a race in Europe at some stage, however.

ANDREW CRAIG: We certainly don't want to lose the balance we currently have. The drivers may talk, they don't want to drive an all-oval series. They like the mix we have. They sense that in the last couple years, we've tended to have added more ovals than road courses, but they sense that might indicate a change in direction by us, but it really doesn't. And if anything right now, I'm more interested in road courses for the U.S. events than I would be in ovals.

ANDREW CRAIG: Well, in a perfect world, you would not run races when the NFL are playing.

ANDREW CRAIG: That applies -- actually, to pretty well most sports, not just to ourselves. In a perfect world, you try to avoid a conflict with the NFL. That just makes good sense. So, therefore, when we were running 16 races or so every year, that was achievable and we did. However, if you give us a choice between running 16, 17 races or running 19, 20 races, I would rather run 19 or 20 races and get the benefit of the extra races, from the point of view of the fans and from the point of view of the sponsors, what extra races bring and accept the down side of having to move into football season. So I think there's more up side for us in having more races than there is down side for us in running in the autumn.

ANDREW CRAIG: Well, we're very lucky and we have a really good group of promoters, and actually CART for its part always run a public relations advance at every single event. All those things will continue, and starting this year, to be increased next year, we're spending more money on marketing than the company has ever spent before. That sounds like a proud boast, but frankly the sums of money in the past have been too small. We are committing significant funds now to the promotion of the sport both nationally and locally. And I think you'll see a lot more combined promotional activity in the individual race markets to make sure our promoters continue to sell out, while at the same time advertising and promoting the telecast the races to make sure we can improve our TV ratings. But sufficed to say, we've taken on a lot of stuff and created a lot of new budgets with the specific objective of growing the sport, and we fully intend to do that.

ANDREW CRAIG: It depends I guess how successful the engineers are in combating whatever we do. So far, they've done a pretty good job of that, I have to admit, and it is sort of like a game of cat and mouse. That's why sometimes we don't want to get into too much detail too early on what our plans are. But sufficed to say, I think we have to get some speed out of the cars. I think most people would like to see us running below 230 miles an hour at the super speedways, for example.

ANDREW CRAIG: Well, I think certainly at the end of the year, when we're running, as we just said earlier on, running head to head with football, it makes a lot of sense to run those races late in the day, particularly actually bear in mind that most of our races are out on the West Coast. So I think you're going to see that continue. In fact, it is going to continue. We think it makes sense to minimize the head-to-head competition with football, and to run the races in the evening on a delayed basis.

ANDREW CRAIG: Well, of course in the end, we're the sanctioning body, and we're the one that has to make a final determination on issues. We try and work with the drivers in two ways: First of all, with the Driver Safety Committee which we encourage and support. In fact, we even pay some of the costs of that in terms for travel and so forth. And the primary role of that committee is to work with our own people on track issues, you know, where barriers are, where sand traps are, and so forth, to continuously build a safer racetrack because nobody sees it better than the drivers. The driver's perspective -- literally their perspective -- which is 3 feet from the ground at 190 miles an hour or whatever is pretty valuable, and they certainly have an interest in these matters, and we really do work with them. And we want their input. We want them to tell us what's good and what's bad and what can be improved at every track on the circuit, so that's an on-going process. On issues relating to the race car itself, we do take driver inputs because obviously, again, they're the guys who are driving the cars. But also, you know, this really does become an engineering issue, and while we want to get the drivers' views, and obviously if there's a unanimous view that something doesn't work or is making the car unstable whatever, then we're going to respond to that. But otherwise in the end, it's really up to the sanctioning body to say, "Look, this is what we think is the best thing." Actually a good example is the blockers we used on the super speedways, which frankly if we hadn't had them, I don't know how fast we would have been going, but an awful lot faster than we went at both Michigan and Fontana. Now, the drivers were pretty divided on this issue. There's a lot of feeling that this wasn't the way to go, but I think if you ask the drivers today, the sanctioning body made absolutely the right decision, and that was something that would have to be our call. If you left that to a democratic process, it would have been very, very indecisive. Now, as far as the fans are concerned, I think the fans want to see -- they love the high speeds. They want to see high-speed racing, but they also want to see close racing. And none of this, whether fans or sanctioning body, want to see dangerous racing. So I think there's a common purpose here, and I don't think what we do in terms of controlling speed in any way undermines the enjoyment of the racing for the fans.

ANDREW CRAIG: Well, we would welcome a Grand Prix in the U.S.A. We take the view that more racing is good. The more racing that's out there, the more racing the people watch, the more likely you are to build fans. So we have absolutely not the slightest problem with the FIA bringing its series to the U.S.A. And quite frankly, where they choose to race is entirely up to them. So for us, it's not in any way a problem. I would characterize our relationship with the FIA as pretty good these days. It did go through a difficult phase. I think I've always made it very, very clear that at Championship Auto Racing Teams, we're not setting out to be an alternative world championship. We're an American race series. That's what we are, and what we intend to remain. And what we do is we export our style of racing to a few very important venues, like Brazil and next year Japan and so forth and of course export it by television around the world. But we actually recognize that it's the FIA that runs the world championship. We think we have a great series, we think fans like to see it. In the same way, I think actually it's good for racing if there was a Grand Prix in this country, in the same way I think it's good for racing if all fans can see it throughout the world. There's plenty of room for both us and F-One.

ANDREW CRAIG: To your first question, yeah, we are very pleased with the barrier system. We call it the Russell Retainer because Kirk Russell, our VP of competition was its creator. We certainly do want to introduce the system into the U.S.A. We did it in Brazil first of all because of the nature of that track. The track with the sharp -- relatively sharp turns it had and, therefore, the angles between the way the cars headed and where the wall is were ideal for its introduction. We certainly do want to try it in other places. It tends to be more suitable on a more traditional level. It would tend to be more suitable if the oval's actually been designed for it. But we've had some discussions with some of our promoters. Whether you see it in 1998, I'm not sure, but certainly it's something we would like to see its use at other trucks. We looked very carefully at our rule book and nowhere in the rule book does it say that you must hit a concrete wall, so we're very anxious to get other people to try it. With regards to the Warner Brothers' deal, that was negotiated by our licensing company, which we're the majority shareholder. That's called Car License Products. That's an Atlanta-based company run by Bob Hollander. He's president of that company. And Bob actually came to us from the Atlanta Olympic Committee, where he was VP of licensing. And most of our licensing are from either the major leagues or from the Olympic Games. And the Warner Brothers' deal is what we call a cross-licensing agreement. They can use our logo; we can use their characters, and certainly you're going to see us being very active with Bugs Bunny and all of the Warner characters. We really do want to have a program that appeals to children and to young adults and bring some fresh values to the presentation of the series. We think it will be good fun, and we had the characters out at Fontana. Bugs Bunny was there in person being photographed with all of the drivers and so forth. So you're going to see a lot more presence of the characters. We think it will bring a bit more fun and make the whole thing a little more lighthearted for the fans.

ANDREW CRAIG: It could be implemented under direction by CART. We think these things are much better done on a consensus basis. There's a lot of interest in it, but I would hope to see it being used in other places very soon.

ANDREW CRAIG: Just to put this into its proper context, we achieve an average network clearance, off the top of my head -- I can certainly confirm these numbers to you later -- but our typical network clearance, it is about 95 percent. There are literally one or two affiliates, and I have to freely acknowledge that one of those is in the Northeast, where we do seem to have a problem where the station just plain well doesn't want to show motor sports, and not just us, but motor sports in general. So actually I don't think as a whole we have an affiliate clearance problem, except late in the year with football. That's why late in the year, we are on ESPN because frankly no network affiliate is going to run one of our races against football if they can avoid it. That's why we go to ESPN later in the year. I don't think we have a clearance problem in particular. I mean, I think, you know, I always hear these stories, but they tend to be based around this specific example of one or two stations. Is the time-by system nearing its end, certainly as television changes with more and more outlets becoming available and continuing fragmentation of the audience, then yes, perhaps it is nearing the end of its life. But, again, it's not in the rule books that we must have a time-by, so it's not saying that it has to remain with us forever.

ANDREW CRAIG: As of the current time, we have the TV rights. We'd certainly like to work more closely with our promoters in the value of those rights, but they are CART's rights.

ANDREW CRAIG: Well, I think we've always had a pretty good relationship with the FTCA. As always, with any weekend schedule, there are always issues of timing and so forth and so forth. I'm not foreseeing a significant change. The Trans Am does feature some of our races again. It's a great show, and we welcome them. I don't think you're going to see a huge expansion of that. Let me just emphasize, they're a very welcome part of what we do.

ANDREW CRAIG: It's a little too early to comment on that. We haven't really gotten into finalizing anything for next year. As you know, we have a very good relationship with the Atlantic series. They're a very important part of what we do. But at this stage, it would be a little early to comment on what we may or may not do.

ANDREW CRAIG: Without question, it's television. In fact, the attendance of the races is terrific. We're very, very happy with our audiences, our live audiences. First of all, they're large. Secondly, we tend to sell out. And thirdly, we're attracting a very, very high quality audience in terms of the people who come to our races. Basically, they're young. There's a 70 percent male component. They have high disposable income. They tend to be from professional or managerial positions. Now, the group I've just described to you is particularly difficult for advertisers to reach by traditional means. Younger males tend not to read a lot. They tend not to watch a lot of television because they tend to be out doing things. And because of that, it's one of the great attractions of our series is you can reach out at the track to people who you wouldn't normally be able to communicate with very effectively through more traditional communications methods. So we're very, very happy with what we see at the track. We just want to keep going and keep on filling the grandstands, and, you know, we're not looking to make any big changes there. Obviously on the television side, as I talked earlier on, TV is going through huge changes in the last 10 years, more and more stations, audiences tending to get smaller. It's no secret to anybody that sports in general are significantly down regardless of where they're being shown. Obviously, there are a few sports that buck the trend, and one of those is NASCAR. NASCAR has done extremely well in the last few years, and frankly, we along with other sports, have seen ours decline. And it's TV where we need to focus our attention to, first of all, make people aware of the opportunity to view our races, and then secondly communicate to them good solid reasons as to why they should give up their Sunday leisure time and devote it to watching one of our races.

ANDREW CRAIG: We do do that. Actually, it's quite interesting. One of the things we toyed with a couple years back was instead of running 200-mile races, was to run 125s. And we researched that among our fans, and we got a very, very clear answer back they really didn't want to see that kind of change. We talked about the idea of whether or not a 500-mile race is that relevant in 1997, whether you really need to go 500 miles to prove the point, but we do feel that the 500-mile races are an important part of the tradition of what we do. It is not as if they are large in number. We have two of them, and we think they should continue. They are kind of anchors if you like the series. So don't expect any changes in that area. But I mean, certainly, we want to keep these races as interesting to fans as possible. As to your other point, on the telecast, we think there are areas where our telecasts can be improved. We certainly want to embrace the new technologies coming along in how racing can be presented, and we're very open to experimentation.

ANDREW CRAIG: The amazing amendments to the legislation that was agreed to by the Canadian government are due to be put in front of parliament very soon, and I'm sorry, I can't be more specific about that. That's about as specific as I can get. I know it's going to happen very soon, and certainly everything I've heard would suggest that we get the amendments that we need that would enable us to continue racing there after 1998. There's actually no question about the races in 1998. They're fine, and we already have an amendment that covers that point. It's after 1998 that we have an issue.

ANDREW CRAIG: Yeah, we think what's happening in Road Atlanta is very interesting. I've been down there, met with the people involved, met with Donald Panoz. Obviously a very, very impressive group with the business background and the financial strength to get the job done. And from the outline plans I looked at when I was down there, they've really got some exciting ideas. What I liked in particular was not only are they going to work on making that track as safe and as driver-friendly as possible, but they've really got some great ideas to improve the visibility for spectators and to really make it into a spectacular facility. So certainly it's a part of the world that would be of interest to us, and we like the people who are working on the project.

ANDREW CRAIG: Yes, we will. We believe strongly that a Super Touring series would be a good, strong series. Obviously it would provide great racing. We believe that at our road course events, we should give our fans more than just a series of single-seater races getting ever bigger and smaller. Obviously Trans Am on occasions where suitable venues and a sense with their schedule provides an alternative show, but in addition touring cars can provide a great show as well. In addition, I would love to see a situation arise where as some of our drivers come towards the end of their careers, rather than throwing away all of the equity that's been built in a great name over many, many years and that driver just goes and sits on the sidelines, I'd rather see somebody like that go on and move into Super Touring and keep a position with the fans and maybe even build more fans of the sport. So we're certainly supportive of it in every respect. Obviously it's no secret that they need more cars. That's very clear. And we're doing everything we can do work with Jerry Forsythe to talk with manufacturers and see if we can help. But they do need more cars. But I'd also have to say in the case of the British Touring Car series, I have actually no involvement in that, I'd like to stress, I know when they started up, they struggled with participation for a couple years. Now, of course that's a hugely successful series which attracts vast numbers of fans in its own right.

ANDREW CRAIG: Well, it's funny you raise it today, because we think that it's an important part for any race series. In fact, we were discussing this this morning. As you know, we have live timing and touring data that goes out on our web site, and actually we have pretty close to taking a decision and say, hey, let's make that available to any sponsor who wants to put it on their site and so forth. Let's make sure the Omega Timing and Touring system -- which is great, by the way. We are very, very pleased -- let's make sure that's available as widely as possible. But certainly I think for the future, enhancing the fan's experience through the Web is very, very important, and a lot of that can be done during the race either by providing timing and scoring data on a real-time basis, or I guess you could go further and actually start providing the series and whatever.