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Dec 13, 2001

Why Is The Supercross Series Breaking Apart?

From a press release issued by Clear Channel Entertainment's Motor Sports Division:<BR><BR>10 Questions and Answers About Supercross<BR><BR>Steve Bruhn's Interview with Clear Channel Entertainment <BR><BR>AURORA, Ill. (December 13, 2001) - Steve Bruhn dubs himself the 'Factory Spectator' and is a leading photographer and reporter of hundreds of motocross happenings each year. Bruhn caught up with Ken Hudgens, vice president of marketing for Clear Channel Entertainment's motor sports division and asked ten questions about the state of change in supercross news. <BR><BR>The following is a transcript from<BR><BR>Motonews brings you news from all over...<BR>10 Questions with Clear Channel Entertainment<BR><BR>Answers by: Ken Hudgens, Vice President of Marketing, Clear Channel<BR><BR>SB: Supercross seems to be moving toward two competing series. Why did this happen, is it a good thing, and if not what would be the ideal way to organize supercross in 2003?<BR><BR>KH: It happened because Paradama/AMA Pro Racing decided that they wanted to seize control of rights and revenue associated with the supercross events produced by CCE for 27 years, which rights and revenue belong to CCE and its predecessors (SFX and Pace). It has belonged to CCE for the following reasons: For the past 27 years CCE has invested all of the capital required to produce and present the supercross events each year. We have taken 100% of the risk to produce and market these races, arrange for the events to be broadcast on ESPN2 and ABC television, and attract sponsors. To the best of our knowledge Paradama/AMA Pro Racing has not invested any capital in the sport of supercross during the past 27 years. The creation of another supercross series will happen because the Paradama Board of Directors has chosen to make it happen. I want to be clear; our financial proposal to Paradama/AMA Pro Racing was more than three times the amount of money we will pay them in 2002. This was guaranteed money for the sanction services provided by the AMA. In other words, the sanction fees that we offered to pay were not based on the continued success of our program with respect to gate receipts or any other revenue stream, or affected in any way by increases in expenses that we might incur during the next seven years. It was a guaranteed stream of income to Paradama/AMA Pro Racing without any risk to that organization. Remember, this fee is over and above Paradama's actual cost to officiate at the events which we currently pay and would continue to pay. <BR><BR>In addition to the money, our offer also contained tremendous promotional and marketing exposure through all divisions and assets of Clear Channel Worldwide. The value attributable to the extraordinary marketing aspect of our proposal would have greatly benefited the AMA and its membership. Clear Channel Worldwide is composed of over 1200 radio stations, 750,000 outdoor advertising units and a live entertainment company that reaches over 65 million consumers each year. This component of our proposal unquestionably offered a unique opportunity to Paradama/AMA Pro Racing that it rejected. Jam Sports is in no position to remotely match the promotional marketing opportunity that we presented to Paradama for the benefit of the AMA. The combined value of our proposal is extraordinary when you factor in the money and the promotional elements that were contained in our offer. Believe me, CCE would welcome a logical explanation from the leaders within Paradama as to why this decision was reached, and we would think that the AMA members would be equally interested in knowing why this decision was made. It is our understanding that the rank and file membership (including the AMA Board of Trustees) never had an opportunity to review and consider the CCE proposal before a handful of Paradama officers and directors made this decision. <BR><BR>We also agreed that Paradama would continue to retain all entry revenues, rider license fees, and mechanics fees. Our offer was more than triple the existing fee payments for no additional services or obligations from Paradama whatsoever. We also agreed that all of our arenacross, dirt track and road racing events would be AMA sanctioned, and agreed to pay extra consideration to the AMA for this service.<BR><BR>Why did this happen? This happened because Paradama wants rights and revenues that we have spent millions of dollars developing and acquiring. Our company is legitimately entitled to retain the fruits of labor and investment. Additionally, as the CCE supercross program succeeded each year, we have continued to increase the purses and points fund in order to share our success with the riders and teams. Ironically, while we were working and negotiating in good faith with the Paradama representative that they asked us to negotiate with, it now appears that Paradama was making other plans, and for some inexplicable reason, never carefully considered our proposal. This happened because the Paradama/AMA Pro Racing Board of Directors allowed it to happen. Our goal and mission has always been to continue our relationship with the AMA because that is what we believe is best for the sport and the industry.<BR><BR>Is this a good thing? We do not believe that an AMA/Jam Series will be good for the riders, factory teams, independent teams, sponsors, television viewers, fans, the AMA and CCE. People should know that this decision falls squarely on the shoulders of the Paradama Board of Directors and is not the result of a lack of effort, commitment or monetary offer from CCE. <BR><BR><BR>SB:. Supercross is regarded as the top motorcycle series. Who brought it to the top and how?<BR><BR>KH: Everyone involved in supercross over the last 27 years has played a role in establishing the sport. The loyal fans, the world-class athletes that raced over the years, Jeremy McGrath in particular, ESPN and more recently, ABC, the sponsors, the AMA, and Clear Channel have all contributed to the growth and current status of supercross. Quite a collective team effort. The sport has never been better. Our company will do everything to maintain, and improve upon, the high standards that we have established. We will make every effort to do so while extending significant benefits to the teams, riders, sponsors, motorcycle industry and the loyal fans that make all of this possible. <BR><BR>CCE played a pivotal role in this tremendous growth, and we are proud of our contributions. Live event attendance, total rider payout, efficient routing, worldwide television exposure, sponsorship growth and the ever increasing entertainment value of our events, these things have never been better. We don't operate in a vacuum. We are an engaged and responsible member of the motorcycle community.<BR><BR><BR>SB: Did the AMA ever explain why they are changing to a different promoter for supercross or give your company a chance to make an agreement? Do you know why they say their decision was in the best interests of AMA Pro Racing?<BR><BR>KH: Paradama/AMA Pro Racing has never explained to us why this decision was made. Scott Hollingsworth notified us in a letter over the fax machine on November 5th. We never even received the courtesy of a phone call. CCE was negotiating in good faith. We were responsive to each concern that was being raised by Paradama (through the one representative that they appointed to speak with us) during the course of our negotiations. We were told that we would have the opportunity to meet with the board of Paradama/AMA Pro Racing to discuss our proposal and that meeting never occurred. Throughout our negotiations, we have been willing to pay substantially more for the same services that we receive from the AMA. Throughout our negotiations - and this is important - we were willing to sanction all of our arenacross, dirt track and road racing events with the AMA. We can honestly say that we did everything possible to make this deal happen. This decision was made by the management of the Paradama/AMA Pro Racing, and Clear Channel was not aware of it until November 5th of 2001.<BR><BR>I am unsure why they say that their decision was in the best interests of the Paradama/AMA Pro Racing. We don't believe that's in the best interests of anyone associated with the sport of supercross. The only explanation is that Paradama/AMA Pro Racing never intended to make a deal with us, and had every intention of attempting to take the rights and associated revenue that Clear Channel and its predecessors have spent the last 27 years investing in and developing.<BR><BR><BR>SB: Will Clear Channel be able to attract enough top riders to maintain attendance like it has in the last few seasons?<BR><BR>KH: The race teams invest millions of dollars to promote and market their products, sponsors and aftermarket products. We deliver marketing solutions to meet their goals.<BR><BR>We believe the race teams, riders, sponsors and everyone involved acknowledge that we deliver the ability to maximize the sale of their products now and in the future. We will do everything in our power, including utilizing all of the Clear Channel Worldwide media assets to motivate the top riders and teams to continue to race with us. If the AMA refuses to sanction our 2003 events I can assure you that our events will be sanctioned by another credible sanctioning organization. The only difference with our events during the 2003 series will be an alternative sanctioning body. Our events will continue to be held at terrific venues, with the responsible routing, requested years ago by the teams, and will be produced, promoted and presented by our highly skilled and experienced staff. Additionally, we will always maintain our desire to improve our events each<BR>year for the benefit of everyone who loves this sport. <BR><BR>We understand that the factory race teams primarily invest their money in these teams as a part of a marketing strategy to sell their products. We have demonstrated in the past and will in the future, that we offer the best solution and opportunity for them to accomplish that goal. We believe that Clear Channel Worldwide is uniquely capable of assisting the teams with this important business objective.<BR><BR>We have recently announced a 2003 points fund that provides a minimum of $500,000. We will bring our entire array of Clear Channel assets to the table to ensure that the sport will continue to grow and is not affected by this decision that has apparently been made by the Paradama/AMA Pro Racing Board.<BR><BR>We will work hard to ensure that the riders, race teams, sponsors, and other critical players will continue to be involved, and will continue to benefit from our experience and efforts.<BR><BR><BR>SB: What investments has PACE/SFX/Clear Channel made in supercross?<BR><BR>KH: Tens of millions of dollars. First, the money to acquire all of the events (besides Daytona) was a massive financial undertaking, but that is what we risked and invested to bring the series under one roof, which we accomplished in 1996. It was vital to make those investments for many reasons. For example, now we can guarantee consistent well-thought-out event routing, consistent event presentation, consistent sponsor presentations and involvement, consistent TV exposure and marketing of the series, teams and riders. These were crucial elements to take this series and supercross in general to the next level. The investments to get the series to a point where it was consistently operated managed and marketed was crucial. Let the fans be the judge. Since 1996, when we invested millions of dollars and brought the entire series under one roof again, with the exception of Daytona, which is independently produced, has supercross gotten better? The answer that we have heard from the motorcycle industry, the teams, the riders, the sponsors and the fans has been a resounding yes.<BR><BR>Also, we have made huge investments in television. This was a risk that we took from the very first time supercross appeared on television. We take all of the monetary risk to put supercross on ESPN2, Pay-Per-View, and ABC. This year we will have supercross on ABC four times; that is a milestone for supercross, maximizing the exposure of supercross like never before. The ABC network has 103 million household viewers and ESPN2 has 81 million household viewers, which means that more people will see supercross just on ABC than the combined 15 races on the network that Paradama/AMA Pro Racing is said to be going to use. It will cost at least 1.5 to 2 million dollars to produce the races live as Paradama/AMA Pro Racing has announced.....where does that capital come from?<BR><BR>The investment in dirt alone has been millions of dollars. Moreover, the costs that are involved in obtaining and storing the proper soil to conduct supercross racing is staggering. <BR><BR>Finally, analyze the 'look' of the event since 1996. The events have not gotten better on their own. It takes time, money, a highly experienced staff comprised of over 200 persons, dedicated leadership and commitment. The series has evolved and has added enhancements each year, such as the tuff blocks, the stage, the finish-line structure, and transponder system - I could go on and on. <BR><BR><BR>SB: What will happen to series sponsors if there are two series?<BR><BR>KH: Companies have made a huge investment with Clear Channel to deliver maximum exposure through supercross, and we are completely confident they will continue to do just that. These sponsors could potentially suffer from the actions by the Paradama/AMA Pro Racing Board, as will the sport and the industry in the minds of corporate America. In other words, this could not only cause damage to the Clear Channel Entertainment sponsors but to the sponsors of the teams and riders. Let me be clear, because of what Paradama/AMA Pro Racing has done, sponsors of teams and riders, both current sponsors and potential sponsors, will be negatively impacted. However, in order to offset any negative impact to our sponsors, we have met with each of the divisions within Clear Channel Worldwide in order to provide our sponsors with unequalled marketing and promotional opportunities that we believe are without parallel. Our radio, outdoor media and live entertainment assets provide the Clear Channel Motor Sports division with the power to provide incredible promotional value to our sponsors. <BR><BR>Sponsors are interested in what is good for their businesses. They want a cohesive intelligent marketing plan that will assist with the sale and promotion of their brands and products. Clear Channel has such a plan. Our sponsors will benefit from our efforts. We have an undisputed track record in delivering all of that and more to our sponsors. Sponsors will do what is in the best interest of their businesses. Clear Channel Entertainment has been right for their business and delivered the goods in the past. That will not change, but rather, will improve and grow because of the assets that we bring to the table for their benefit.<BR><BR><BR>SB: There is a bit of debate over the role of the AMA, one side says the promoter runs the series and the AMA is a sanctioning body, the other side says the series is an AMA property and the promoter just a producer. A recent poll on asked the question and 76% said the best option for supercross was "Clear Channel as 'caretaker' and AMA sanctioning." With that kind of public opinion on your side, how can the AMA continue such sweeping changes in supercross?<BR><BR><BR>KH: I don't know how - or why - Paradama/AMA Pro Racing is attempting to make such sweeping changes in the way they are doing business. That is something you would have to ask the members of the Paradama/AMA Pro Racing Board, and I would encourage you to do so.<BR><BR>We believe we are one of the caretakers of the sport; we are involved and have a role as part of the motorcycle industry, just like you, just like the fans, just like the AMA, just like the riders and everyone else that's involved. If the opportunity still exist, we are prepared to continue our relationship with Paradama and the AMA It's the Paradama/AMA Pro Racing Board that has made the decision to do something different. <BR><BR>Paradama/AMA Pro Racing is, to-date, pursuing an agreement with a promoter that has never produced motocross or supercross, a promoter with no expertise or experience in this field. Paradama/AMA Pro Racing is giving up rock solid guaranteed income from Clear Channel for income for a "new model" that may or may not work. Someone on the Paradama/AMA Pro Racing Board of Directors sooner or later has to do the simple math and realize the incredible risk that Paradama/AMA Pro Racing is taking. The current business model between Clear Channel and Paradama/AMA Pro Racing, as proposed by Clear Channel, is guaranteed and has no risk to Paradama/AMA Pro Racing - or to the AMA.<BR><BR><BR><BR>SB: What questions should the media be asking that you have not seen yet?<BR><BR>KH: Why have Scott Hollingsworth and the members of Paradama/AMA Pro Racing decided to disrupt what is recognized today as the most successful motorcycle series in the world?<BR><BR>Where will they get the money to produce the events and television in the manner that supercross fans have become accustomed to?<BR><BR><BR><BR>SB: One issue keeps coming up on Internet message boards, and that is if Clear Channel has its way with a series, the racing will become compromised and just entertainment. Has this ever happened to a series you run, AMA or Formula USA sanctioned?<BR><BR>KH: No, and that will never happen. You can have an entertaining event without compromising the racing. Take a look at the 45 arenacross events we do as a real life example. We create an ambiance at the events that we produce that offers more than a green and checkered flag. The entertainment that surrounds supercross and for that matter all of our racing events is meant to enhance the racing experience, not compromise it. Most fans, in addition to great racing, come to an event to be entertained. It is for this reason that we invest heavily in event enhancements and creative ways to present the most talented athletes on the planet riding the most highly technical motorcycles available.<BR><BR>There are several sanctioning options that we are considering if the Paradama/AMA Pro Racing Board continues to do what they are doing. So far, everything we have done has been done in a way to leave the door open to Paradama/AMA Pro Racing. We will continue to do this as long as possible. We disagree with their actions but we are not short sighted and have not closed the door. I can promise you that the sanctioning body for the 2003 CCE Supercross Series will be every bit of good as our current one. Whether it is the Paradama/AMA Pro Racing or another one, the sanctioning body will move in without a noticeable difference. <BR><BR>Again, let me say that THIS SHOULD NOT BE AN ISSUE. We offered to pay Paradama/AMA Pro Racing a significant amount of additional money. We offered to sanction our arenacross, dirt track and road racing events with the AMA. It now appears that they have never had any intention of making a deal with CCE.<BR><BR><BR><BR>SB: If you continue doing supercross without AMA sanctioning, will you schedule races that conflict with outdoor nationals? Is there a "hands-off" approach to those dates?<BR><BR>KH: We will not do anything to conflict with the NPG (National Promoters Group) or the Outdoor Nationals. In fact, we have put that in writing in our proposals with the AMA.<BR><BR>Yes, there is a "hands-off" approach to the outdoor nationals.<BR><BR>We don't schedule races that conflict with the outdoor nationals. Period. In fact, take a look at what we have done to avoid conflicts of scheduling with the Outdoor Nationals. The now defunct Gainesville National no longer runs in the middle of the supercross season. We did that. We bought that event for a substantial amount of money to eliminate it from the middle of the supercross series. The supercross season ends the first week of May, not June like it used to. We did that. Our commitment to keep the integrity of the outdoor national schedule intact is second to none and should be clear for all to see. In addition, we have worked with the NPG in order to promote their events at supercross to give their events more exposure.<BR><BR>Finally, let there be no misunderstanding --- we ARE doing our TRADITIONAL supercross events with or with the Paradama/AMA Pro Racing sanction. And<BR>remember - they made that decision - not Clear Channel.<BR><BR>Thank you for this opportunity for me to respond to your questions.