Nascar’s Sponsors, Hit by Sticker Shock
By SUSANNA HAMNER
The New York Times
Published: December 14, 2008
At the Indianapolis Motor Speedway last July, the parking lot was filled with excited Nascar fans chugging beer, roasting pigs and exchanging drivers’ statistics.
But in an office inside the racetrack, the scene was far from celebratory. Executives of the Big Three Detroit automakers told Brian France, the Nascar chief executive and chairman, that they planned to cut their investments in the sport sharply in the 2009 racing season.
Since then, Chevrolet has said it is cutting back on advertising and sponsorship deals with 12 tracks. Ford is trimming Nascar spending by 20 percent, and Chrysler by 30 percent.
The economic crisis is hitting industries around the globe, and the pain is beginning to filter down into
professional sports. Many sports may face smaller crowds and shrinking player salaries, with, of course, exceptions for stars like the Yankees pitcher C. C. Sabathia.
General Motors said in September that it wouldn’t buy any advertising time for the Super Bowl in February; earlier this year, it withdrew Cadillac’s sponsorship of the Masters golf tournament. It has also terminated its $7 million-a-year endorsement deal with Tiger Woods.
The National Basketball Association and the National Football League recently announced staff layoffs, and the Dallas Cowboys and the New York Giants and Jets of the N.F.L. are still trying to find companies willing to pay to put their names on stadiums under construction. Honda said recently that it was dropping out of Formula One and selling its team.
“The economic crisis is going to hit all sports. Every team should operate under the worst-case-scenario assumption,” says Michael E. Rapkoch, founder of Sports Value Consulting, based in Dallas. “Many sponsors’ contracts that are up for renewal this year or next probably won’t be renewed. For the long-term contracts, I won’t be surprised if they try to get out of them through bankruptcy or some other way.”
Nascar, which relies on corporate sponsorships more than other sports, is particularly vulnerable. In the 2008 racing season, 400 companies put up more than $1.5 billion to sponsor races, cars and drivers. About a third of that was provided by auto companies, which are now struggling with the economic downturn, if not possible bankruptcy.
Automakers aren’t the only ones pulling out. Longtime sponsors including Kodak, Texaco and Domino’s Pizza – are abandoning Nascar. Even Craftsman, the Sears brand that has been the title sponsor of the truck series sinceit started in 1995, is cutting its ties to the truck series, though it remains Nascar’s official tools brand.
And this summer, Chip Ganassi Racing shut down the team of Dario Franchitti, the 2007 winner of the Indianapolis 500, after being unable to find a sponsor for his car following his switch to Nascar. “Many of the major sponsors pulling back have been involved in our sport for decades,” Mr. France says. “They’re making cuts, and we’re affected.”
It’s a big comedown for Nascar, which has had sizzling growth over the past decade. A multibillion-dollar TV
deal in 2001 helped propel it from a regional sport that drew most of its revenue from sales of tickets and
merchandise into a popular franchise with a national following.
Its top-level Sprint Cup series of 36 races draws an average of 7.8 million television viewers a race, making Nascar the second-most-watched sport, behind professional football. It can attract crowds — more than
200,000 for the Daytona 500 and Talladega — that exceed those for a Super Bowl, a World Series game and an N.B.A. finals game combined. Over all, Nascar sanctions more than 1,200 races at 100 tracks in the United States and abroad.
This year, revenue was approximately $3 billion, a 50 percent increase from 2001. That’s better than the N.F.L., the N.B.A. and the National Hockey League in the same period. Only Major League Baseball grew faster. “If you go back to 1998, there is no question Nascar has shown the biggest growth,” says David Broughton, research director of SportsBusiness Journal.
But the sport will not see those kinds of impressive numbers next season.
TV viewership has slipped in the past year or so, and so has attendance. The truck series’ official sponsor is now Camping World, the largest retailer of recreational vehicle equipment. Nascar gave the retailer a substantial discount: Camping World will pay approximately $2 million a year, half of what Craftsman is estimated to have paid. While it is gaining as well as losing sponsors, Nascar expects its take from title sponsorships to drop 20 percent next year, to about $150 million.
“We told them what we could afford,” says Marcus Lemonis, chief executive of Camping World. “They were very sensitive to us and offered an appropriate price for the market conditions.”
This kind of cost-cutting has forced Nascar teams and racetracks to lay off about 600 employees. Storied teams with revered family names like Dale Earnhardt Inc. and Petty Enterprises have no choice but to merge with other teams. Some teams unable to land a season’s worth of sponsors, like Doug Yates and the Wood Brothers, can afford to participate in only a handful of races.
The boom years made drivers a little spoiled, with many flying in private planes and riding in luxury motor
coaches, says the longtime racer Jeff Burton. But, he added, “this is our wake-up call.”
BRIAN FRANCE, the Nascar chairman, was not born in a car, but he might as well have been. His grandfather,
Bill France Sr., known as Big Bill, founded Nascar in 1948. His father, Bill Jr., who took over in 1972, built the sport into a behemoth.
Bill Jr. took Brian to races when he was still in diapers. At 14, Brian shocked fans when he marched down the stairs of a race control tower to announce to the press that the driver Donnie Allison was the winner of that day’s race, seconds after his father had flagged Richard Petty the champion. After poring over the scorecards for several hours, officials ruled the teenager correct.
When Brian France began his first season as chairman and chief executive in February 2004, he faced many doubters inside and outside the sport. Fans viewed him as a Hollywood elitist who couldn’t relate to them, the polar opposite of his father, a “good old boy” who would hang out with drivers on the track.
But the number of skeptics dwindled after Mr. France, 46, transformed a sport once fueled by moonshine and
bravado into a technologically sophisticated entertainment juggernaut.
DirecTV and Sirius Satellite Radio have channels that allow fans to watch or hear a race from the vantage point of a single driver. Fans can follow a race on their computers through TrackPass RaceView on Nascar.com, using an advanced 3-D feature that lets them track a car or change the perspective. At the track, Sprint FanView is a next-generation scanner offering live audio and video, as well as real-time stats. And Sprint Cup Mobile lets fans listen to the radio broadcast over the phone.
In 2007, Mr. France persuaded Toyota to compete in the Nationwide Series and the Sprint Cup. The move to bring in a big-spending foreign competitor was controversial at the time, but it could help Nascar weather the economic storm now that the Detroit Big Three are pulling back so many dollars.
Perhaps Mr. France’s greatest achievement occurred, when, as executive vice president, he persuaded track
owners to consolidate their broadcast rights in 2001, striking a six-year, $2.4 billion deal with Fox and NBC. Viewers across the country could see the sport every week. In 2005, Mr. France reached a $4.48 billion, eightyear TV deal with ABC-ESPN, Fox, the Speed Channel and TNT.
Intent on keeping his sport blazing hot, he took a risk that may be contributing to the sport’s current woes. Determined to make Nascar mainstream, he promoted it in a way that may have alienated some of his core fans, industry experts say.
Rustic racetracks have been replaced with stadiums filled with skyboxes for the wealthy and corporate sponsors. The tough, good-old-boy personalities of the drivers Richard Petty and Dale Earnhardt have shifted to the cleancut, movie-star-handsome images of drivers like Jimmie Johnson and Carl Edwards. In 2003 the legendary Winston Cup Series title was bought out by Nextel, now Sprint Nextel, ending 32 years of the tobacco brand’s sponsorship.
“Brian comes across as somebody who wants to be known as a great C.E.O., like a Paul Tagliabue or a David Stern,” says David Poole, a journalist and co-author of “Nascar Essential: Everything You Need to Know to Be a Real Fan.” “He wants to talk about the sport’s marketing successes. The sport needs leadership in that area, but among those who live with grease under their fingernails, that goes over poorly.” Perhaps that’s why, this year, Nascar announced an effort to go back to its roots, including allowing drivers to express themselves.
Yet, to keep the sport growing, Mr. France needed to garner a wider audience in different demographic groups. More than half of Nascar fans earn less than $50,000 a year. As the economy worsens, many fans could have a hard time justifying plopping down $92, on average, each race weekend.
Mr. France’s most radical change to the sport — the “Car of Tomorrow” — has backfired. Concerned with safety, Mr. France in 2000 required all teams to start developing vehicles with such strict safety standards that drivers could survive crashes that would once have been fatal. He required that all teams drive such models exclusively by this year.
The move to create safer vehicles gained momentum when Dale Earnhardt, father of Dale Earnhardt Jr., was
bumped while rounding the final turn at the Daytona 500 in February, 2001; he slammed into a wall and was
The Car of Tomorrow was also intended to cut costs and level the playing field financially by requiring all teams to drive variations of the same car. But since its introduction last year, the car has pushed up costs just when revenue has been going down.
Tracks have different lengths, grades, shapes and layouts; in the past, large teams had about 20 cars that were used for varying conditions. But the gradual introduction of the new car forced teams to maintain old fleets and crews on top of new ones.
Mr. France acknowledges that costs have risen for some teams, but says that the new car should save teams
substantial money in the long run.
The worst problem, though, is that the Car of Tomorrow has made sponsors feel that their cars are indistinguishable. In the past, a Nascar Dodge did not look much like a Dodge on the street, but fans wouldn’t mistake it for a Ford Fusion. Now the cars look identical. Jimmie Johnson’s Chevy looks the same as Carl Edwards’s Ford, Kasey Kahne’s Dodge and Brian Vickers’s Toyota.
Car manufacturers say they are exploring ways to make their race cars look more like models in dealer showrooms.
WHEN the 2009 season starts in February, there are likely to be more empty seats in the stands, fewer cars on the tracks, blank spots on cars where logos used to flash, and smaller crews in the pits. Even Toyota is cutting its Nascar budget by 10 to 20 percent.
To avert a collapse of the sport, analysts say, Nascar must push through sweeping changes to its business model, like reducing sponsorship rates, cutting back the number of races and trimming the distances of some of them. For example, a handful of premier races would run the traditional 400 or 500 miles, but the rest would become 200- or 300-mile events.
Some analysts say Nascar should take cues from the N.F.L. and explore placing sponsor dollars in an official pool, with each team receiving an equal share. They also suggest a salary cap.
Mr. France has announced that there will be no preseason and in-season testing at its tracks next year, saving teams an estimated $1 million a car. He is also toying with the idea of cutting back the number of team members who can come to the races, which would save each team an additional $500,000.
In hindsight, Mr. France’s broadcast deal, which brings in about $500 million a year, may be the main thing
that saves Nascar from ruin.
“We’ve got to work hard and be willing to sacrifice,” says Jeff Burton, the driver. “We’re going to definitely struggle next year and the following.”
This article has been revised to reflect the following correction:
Correction: December 21, 2008
An article last Sunday about corporate sponsorships of Nascar racing misstated the role of Craftsman, the Sears brand. Although Craftsman is leaving Nascar’s truck series as a title sponsor in 2009, it remains Nascar’s official tools brand.
The article also referred incorrectly to layoffs in Nascar racing. Although teams and racetracks have laid off some employees, Nascar, the sanctioning body, has not.