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JUNE 18, 2003

The American Grand Prix Series

The plans announced by CART to take the company private again with new owners is no great surprise and has been expected for some time. But the most important question is who the new owner will be. There has been much speculation that Bernie Ecclestone could be that man, probably in partnership with Gerry Forsythe, who is currently the biggest CART shareholder. There have been suggestions that former F1 team boss Craig Pollock could be the man to run it, as he is well known to both Ecclestone and Forsythe.

Pollock told reporters in Canada that in its current form the CART Champ Car series is "confusing" and that it needs to switch to racing only on road tracks and street circuits and change its name to the American Grand Prix Series to differentiate itself from the Indy Racing League, which races only on ovals.

"We've got to build our own brand and our own future," said Pollock.

CART's announcement said that "historically CART generated revenue from three main sources; sanction fees, sponsorship and sales of our television rights. The revenue streams were based predominately on contracts and were fairly predictable. However due to various economic factors, this financial model changed significantly beginning in 2001, most importantly in a shift from sanction fees to promotion and from a fixed fee sale of television rights to production of our own television programming."

The problem is that promoters are making less money and so demanding lower sanctioning fees. Because of the economic downturn sponsorship income has declined and at the same time TV revenues have dried up and CART is now paying for its coverage and doing its own advertising sales. This has not been a success. CART has taken over the promotion of six of the events, raising costs and lowering sanctioning fees, but the company believes that this is the way to go in the long term as money can be raised from the sale of tickets, sponsorship, hospitality, signage and all other commercial rights associated with the events. The result of all this, and the program to support teams to ensure that there are enough cars running, means that CART is fast using up its cash reserves and needs more money to operate next year and so the aim is to look at a new investor with deep enough pockets to turn the series around.

A deal with Bernie Ecclestone is an obvious way to go and such a move makes some sense for Ecclestone who has long wanted to build up interest in F1 in the United States. The CART rules are moving towards those of F1 in 2005 and if CART can be positioned as a feeder series for the World Championship it will benefit everyone. In the longer term some of the bigger CART events and teams will inevitably be absorbed into the World Championship and in the process US interest in and knowledge of the World Championship will increase.