Report: CC Buys Toronto

[indycool]

http://www.torontosun.com/Sports/Oth...87756-sun.html

[D.R.T.]

"The Molson Indy has been Toronto's most successful single sporting event -- averaging just over 160,000 fans in its 20-year run on the temporary street course that utilizes Lake Shore Blvd. and the Canadian National Exhibition grounds."

Smart move from Champ Car, I guess it was there only move with a race of such importance.

[BootsOntheSide]

Nice way of preventing the race being poached by another series, and of ensuring that a popular race survives, and something that becomes an option when you have multi-millionaires running the series. How long would the reported cost of $20m take to recoup at current rates?

It may be Toronto's biggest event, but it's still 'Other Sports' according to their Sun newspaper.

[macdaddy]

They really had no other option but to purchase this event.

[indycool]

Agree, macdaddy. The question now is, which is the next independent promoter to bail? Denver? Surfers? Montreal?

[paul-collins]

CC won't have the option of buying Montreal; Legault won't give that up. Denver?

I agree that they had no other option but to purchase it.

Interesting, CC isn't purchasing Molson Sports and Entertainment, but

...it is expected that the Molson Sports and Entertainment staff that have planned and produced the event over the past 20 years will move seamlessly over to the new promoters.

It also mentions a very high price - 20M - that would be expected to include the TV production team. (To me this is the most interesting part of the purchase, if true.)

The SARS thing is a joke, surely? CDC lifted their travel ban July 8, just a week before the race. I remember people still being wary leading up to the ALMS race in mid August.

[N I Tram]

According to the report the TV rights aren't included, which makes the price seem even higher. Indycool raises a fair point - for all the hype about ChampCar improving, it says a lot that this is the only way it can save one of its classic money-spinning races.

[paul-collins]

Originally Posted by N I Tram

According to the report the TV rights aren't included, which makes the price seem even higher.

No that's not quite correct. It says:

While a price tag of $20 million for the Molson assets has been reported, the source said that figure likely was high -- unless Champ Car also was planning to buy Molson's television production arm that produced the TV package for this season.

The source doesn't know one way or the other about the production arm, he/she is just positing that at $20M the sale had better include it.

[indycool]

I don't know why Molson would give up its TV arm and why CC would want it. Molson's TV arm is strong in Canadian sports and that's not really a focus of CC's seeming aspirations.

As for the price for the race, that's in the Toronto Sun and could well be Canadian dollars, which would equate to about what Aquarium Assets paid for Long Beach in U.S. dollars. And I think Molstar TV would be worth more than that combined with the race. Just IMO.

[Ac.]

Originally Posted by BootsOntheSide

Nice way of preventing the race being poached by another series, and of ensuring that a popular race survives, and something that becomes an option when you have multi-millionaires running the series. How long would the reported cost of $20m take to recoup at current rates?

Well, here are a few guesses, all in Canadian dollars.
$3,000,000 - the rumored sanction fee that CC will not have to pay to itself.
$9,000,000 - estimated gate revenue (70,000 @ $130 average weekend ticket)
$?,???,??? - unknown sponsorship, TV rights, and advertising revenue for the event.

It would be fair to say that the revenues for the event would be in the range of twelve to fifteen million in local currency, all of which is available for CC to use for expenses related to the race. The unknown is what it costs to put the event on, and market it.

A typical business acquisition values the business on average at six times earnings. Other considerations are made to address the state of the market, future costs, etc. In a typical transaction that would mean that the event should turn a profit of about $3,000,000 per year, but only the amigos know what the numbers really look like.

[Snrub]

Excellent info AC. Keeping in mind that revenue isn't the same as profit, but the info brings into context the overall value of the event.

[indycool]

Pretty good analysis, Ac. One element, though, remains a mystery. Between the predicted $3,000,000 event profit and the non-existence of a $3 million sanction fee in that scenario, it's a "wash" which pocket the $3 million goes out of and into. It also doesn't address the element of leverage Molson -- like Dover -- held of considering a move to IRL, which may have elicited a premium, like Dover did with Long Beach.

[Snrub]

Was there some leverage? Perhaps, but if $20M doesn't seem like that much of a stretch. How much of a premium could Molson have possibly extracted? If maximum price was desired, why wouldn't Molson open it up to bids to force CC to outbid TG and the Frances? I would presume it was because they wanted to keep the race in CC's hands and thus probably didn't charge a large premium.

If the TO race was making only a small amount of money, in CC's hands the race's position improves by $3M. In other words CC can run the race in a more cost effective manner than anyone else. That doesn't mean it's a free $3M, the event would still have to not lose money relative to the way it has performed of late.

[paul-collins]

True from an event standpoint, but the sanction loses out that $3M. From an ownership perspective it's a wash.

[Ac.]

Originally Posted by Snrub

If the TO race was making only a small amount of money, in CC's hands the race's position improves by $3M. In other words CC can run the race in a more cost effective manner than anyone else. That doesn't mean it's a free $3M, the event would still have to not lose money relative to the way it has performed of late.

Correct Snrub. CC probably structured their analysis of the deal in a way that they still pay themselves a sanctioning fee in same ballpark that Molson did, and planned for a profit from the event to recoup their investment. My guess is that they are expecting that profit amount to be about $3,000,000 if the purchase price of $20,000,000 is accurate.

[BootsOntheSide]

If it will take them anythign up to 6 years to recoup what they spent on the event in profit (remember to factor in that they could've done quite a bit else with that $20m, and that they're potentially losing getting a $3m sanctioning fee from someone else), it seems like a gamble, but a positive one and a sign that everyone in the ChampCar scene is confident.

[Ac.]

Here are some additional figures from the Edmonton Race this year that may help put this deal into perspective.

Race Budget $15,000,000
One Time Expenses $3,500,000 - paving, concrete barriers, etc.
Sponsorship 2005 $1,800,000
Sponsorship budget 2006 $5,000,000

Grandstand cost $40 per seat x 43,200 = $1,728,000
It sounds like these are yearly rental costs?

The promoter anticipated recouping about 90% of their costs this year, or a loss of about $1,500,000. Considering an anticipated increase in revenue of $3,000,000, and a decrease in one time expenses of $3,500,000, the promoter would be in a better position by $6,500,000 in 2006, for a profit of $5,000,000. Not bad for year two.

This is as close an insight as we will likely get to the finances of a race promoter, and given the similarity to Toronto we can make the presumption that the numbers would be similar.

Here is the URL to the article.
http://www.canoe.ca/Slam/Columnists/...f-1138170.html

[indycool]

It's anyone's guess how much profit Molson has generated from the race. A Molson exec a couple years ago said the race itself actually lost money, but as both sponsor and promoter, the exposure gain made it viable in the advertising area. CC doesn't have that dual advantage of exposure and some revenue.

As far as leverage goes, CC was most probably the only bidder. As in the case of Long Beach, it was "buy it or lose it" because the race owner/promoter could merely hold the threat of offering the sanction to the IRL and keep it to extract a purchase price. Internally, Dover valued Long Beach at $10 million.It got $15 million, a $5 million "premium" because CC needed the race more than anyone else did. TG offered to SANCTION Long Beach, not buy it. It's anyone's guess if the IRL was in play in Toronto, but it didn't even hafta be for the card to be played.

As I posted earlier, IMO, who is the next independent CC promoter to look at Long Beach and Toronto and say to themselves, "let's see what OUR event is worth to 'em?"

[macdaddy]

Some excellent posts, Ac.

Back to "Molstar"...
I doubt very much if it was included in the sale. A thread a few weeks ago made reference to a report that it was not. And Molstar is distinctly-Canadian, the Tres Hombres would have no use for it unless it was a money-making venture.

I've found the two other threads regarding this topic.
(I'll close them and we'll continue from here)
"Molson to Dump Toronto and Montreal?" and "Goodbye Molson?".

[indycool]

http://www.torontosun.com/Sports/Oth...90726-sun.html

[indycool]

Strange. The Toronto Star broke the initial story about it, then has had nothing since. The Globe and Mail has had nothing at all. McNulty has followed it in The Sun and has the only story today that it's a done deal and the name "Indy" is no more.

http://www.torontosun.com/Sports/Oth...92381-sun.html