Tuesday, January 22, 2008

Is NASCAR losing their way?

If NASCAR’s glass remains half filled --- great news Tuesday. Tuesday Sprint NASCAR’s lead sponsor announced that despite significant financial losses the company wouldn’t be leaving NASCAR, instead they’ve decided to rebrand what for the past four seasons has been known as the Nextel Cup tour. There's a new name for the all-star exhibition (the Sprint All-Star Race), a Daytona 500 pre-race show featuring musical acts from Brooks and Dunn to Chubby Checker, new features for wireless telephone customers and new commercials featuring snarling racecars.

If NASCAR’s glass is half empty remarks Monday from NASCAR chairman Brian France Jr. suggest not only might NASCAR be losing its way but it needs to reach back to its roots. With the 50th Daytona 500 to be run on February 17 – the next month promises to be interesting, informative and maybe even enlightening when it comes to the business of NASCAR. And as France made it clear Monday NASCAR is going to put its focus back on its fans.

“What's important to what we talk about going forward is making sure we're not missing anything. This whole change item that I spoke about in my earlier remarks, we're fans, too. It's hard to keep up with all the moving parts and different things that are going on. So we want to just focus on -- it's one of the reasons we sped up rolling out the Car of Tomorrow, Car of Today, the car, for now, for every event, so we didn't have more gradual this, that and the other things to keep up with. It's one car, it's the car.

“I think you're just going to hear us when there are initiatives. I think the 50th anniversary of Daytona, the 500, all those champions are going to be back at the Speedway, so we're going to be able to go back and recognize our history a little bit. That's important to our core fan. They like to reminisce and hear about that. We'll get an opportunity to do that.

“And we're going to minimize change and we're going to zero in on the best racing in the world. That's what we're going to do.”

While it may be difficult for France to suggest NASCAR is losing its way, former NASCAR champion and current TV broadcaster Rusty Wallace went right to believe what he feels is the heart of the matter in an interview with online racing publication scenedaily.com.

"I really think it was a mistake, personally, reaching out to the complete new crowd," he said Tuesday. "I personally felt like the sport alienated the original fan, the country and western fan, and I could see the day that that changed, and maybe it was a coincidence, but it all appears to me that when we lost Dale [Earnhardt] Sr., it's like somebody flipped a big switch in the sky, and all the sudden the sport changed. We went after that new fan, but we forgot the old fan, and that's a mistake."

Wallace thinks that NASCAR might have tried to turn the sport into something that it wasn't as it attempted to lure a new audience.

"When Dale Sr. passed away, instead of having country music for our music, we were listening to, we went to rock and roll. Then we went to a lot of acid rock and roll. Then we went to California. We went to people that, quite frankly, I didn't even know," he said. "And it all changed. We couldn't figure out how to do both. We just did one and really screwed up the other part, and NASCAR realizes that now."

The death of Dale Earnhardt Sr. on February 18, 2001 during the last lap of the Daytona 500 was arguably the most significant event in NASCAR history and one of the more important days in sports history, which resulted in the press calling this day a Black Sunday. The weeklong national media coverage inadvertently created tremendous brand awareness for NASCAR.

Wallace thinks that stance is necessary to allow personality back into NASCAR.

"I'll be quite frank with this," he said. "I think all that stuff has hurt the sport also. I think we need to see a lot softer side of NASCAR. Every time anybody does anything, everybody is getting penalties. We're getting penalized for everything in the world, and people are cooped up and camped out and afraid to do anything right now. And so the controversy and excitement that we've seen in the past is not there because drivers are scared of fines and points and monies. So NASCAR, I don't know if they've told you, but they've told me they're going to back off all these fines. They're going to be more lenient and stuff right now because they realize that all these fines are going to really hurt the sport."

Still, Wallace thinks things can be turned around and that the traditional fan can be recaptured. It's just going to take some time.

"They're making mistakes and learning from their mistakes, and I think they're going to come out of this no problem, I really do," he said.

Four years after sports sizmatic event (Earnhardt’s death) NASCAR signed a series of eight year television agreements worth an estimated $550 million annually, a 40 percent increase over their previous broadcast agreements. The broadcast agreements followed Nextel’s $700 million (annual) title sponsorship agreement signed in 2003.Nextel signed a 10-year agreement with NASCAR. Nextel stepped up to the plate replace longstanding NASCAR lead sponsor R.J. Nabisco (the Winston Cup).

According to a 2003 Forbes Magazine report: as NASCAR's value to both broadcasters and advertisers grows, it loses the very characteristic that originally made the sport so appealing to them: relative affordability. For years, the media saw NASCAR as an inexpensive way to land the valuable but elusive young male demographic, while the cost of broadcasting rights to other sports continue to spiral upward.

NBC and TNT told Forbes that NASCAR's ratings jumped 59% over the 2000-2002 period, and that the numbers continue to grow over the next few years leading to the multi-year agreement that again saw NASCAR’s rights increase by more than 40 percent to an estimated $550 million annually.

According to a report in The Tennessean: season-long TV ratings for the Sunday cup races, the most important in the sport, dropped 18 percent in 2007 from their record-high year of 2005, according to the Fox network, which shares the 10-month season of NASCAR broadcasts with ABC/ESPN and TNT.

"It is in a lull, and clearly the sexiness of the sport from a marketer's standpoint is not as great as it has been," said Brian Evans, director of client relations for Atlanta-based Verve Sponsorship Group, which matches corporate sponsors with racing teams.

Those close to NASCAR acknowledge the problems, but told The Tennessean it wouldn't be an easy fix.

"I think it might be in a little more than a lull," said Darrell Waltrip, a three-time Winston Cup champion and current NASCAR analyst for Fox television who lives in Franklin.

"Declining TV ratings in any sport is not a good sign. It's not a good sign for the sport, or the sponsor of the team. That is something, if I were in charge of NASCAR, I'd be saying, 'What do we got to do to stop this and fix this?' "

Fox Network, which airs the first 10 Sprint (formerly Nextel) Cup races of the season, says it's happy with its part of the schedule.

"Our ratings dipped from a 6.0 in 2005 to 5.6 in 2006, but we were back up to 5.9 last year," said Dan Bell, a Fox spokesman. The ratings indicate the percentage of U.S. households tuned in.

That's not the case for the rest of the season, though. In the last 16 races of the 2007 season, carried by ABC/ESPN, ratings dropped to 3.9 percent from 4.7 percent in 2006 and 5.2 percent in 2005.

Which brought a worried Brian France Jr. NASCAR’s chairman and just as important the protector of his families NASCAR legacy to the conclusion NASCAR had better start doing a better job of pleasing its core fans.

“Our initiatives, you saw our diversity initiative, which is very important to expanding our fan base, we're doing more not less in those areas. We always need to reach out and be as aggressive as we can.

“What I'm saying to you is this change issue, all the different things from the name of series to the format, different rules, the Car of Tomorrow, now the new car, whatever, all those things to our core fan, that's a lot to digest in a very short period of time. We know that.

“As I mentioned earlier, a lot of those things were on a track from many years ago. Some of those things were out of our control. It doesn't matter. They all happen. That's not helpful. Change is good to a certain point. We've got all the change we think the sport can stand and needs. Now we want to build on that.

“When I say "get back to the basics," it means we want to zero in on making sure that we kickoff the Daytona 500, it's the best 500 that we've ever had, that our new car continues to do the three things that we want it to do. First is safety, but we certainly want the competition to be better. We've got some work to do. We're working on our tests now to make sure we accomplish that.

“The verdict is in regarding cost. Cost is coming down for the teams. They're going to need less cars. They're already telling us they worked a lot less in the off-season than they ever have because they don't have to. We're pretty comfortable with the costs and we're going to be working on the other two.”

A fair issue to bring up with France if he’s starting to realize there are issues with how NASCAR is or isn’t reaching their fan base – further on down the road, just where does France see the Nextel Cup series and NASCAR in five years?

“Listen, those kind of things are necessary to run the business side of the sport. What we want to focus on, what we want to talk about, most of our race fans, most of them could care less about any of the management moves or moves that we made. They may care in the end when we manage things correctly.

“It's like I said, we want the story lines of the sport to be the focus, not changes, not management issues that we will always have one way or the other. If we do that, we'll be successful.”

France’s message – all isn’t doom and gloom, despite falling attendance, terrible ratings, at the end of the day Brian France Jr. does see his NASCAR glass as being half full.

“Look, we would love every single aspect of our business to be on the upswing and be perfect. There are business cycles that occur. You talk about ratings. Every sport is down significantly in ratings. Almost everything in television is down in ratings. American Idol is down in ratings. There's a reason for that. There's lots of new ways to get rich content either over the Internet, now over the phones. I think Paul Brooks quoted me the amount of video clips that were accessed on NASCAR were 25 million, maybe not that many, some large number.

“The point is, people are getting their information from lots of different places. Does that have an impact on all ratings? Sure. Was NASCAR online way up? It was. So there's things that cycle around. The economy is the economy. We are not immune from the economy. Every sport, and ours is no different, has some impact. If people have more money to spend on discretionary income, of course that's helpful when the economy's better.

“For all the things that are quoted, I think most -- I know about every auto racing series or league would like to have NASCAR's problems, I can tell you that. I can tell you that we're very pleased with where the sport is on balance.”

And yes, Tuesday the news that Sprint is staying right where they are as the lead sponsor had to bring a smile to Brian France Jr.’s face.

"Certainly there are some challenges with the business, and Dan Hesse, who has been our CEO for about four weeks, is working on those things, and making the decisions that need to be made," Dean Kessel, Sprint's director of NASCAR marketing, said Tuesday during the Lowe's Motor Speedway preseason media tour. "As it relates to what we're doing inside the Sprint Cup Series, we're singularly focused on Daytona and executing the things we talked about doing [Tuesday]. Our team is ready to go, and we have the resources to do what we need to do, and we're going to do it."

Sprint has six years remaining on its deal with NASCAR, worth a reported $750 million. The third-largest mobile telephone company in the United States, Sprint's rate of "churn" -- subscribers leaving the company -- was 630,000 in the fourth quarter of last year, markedly higher than the expected 500,000.

But those numbers, Kessel said, will not affect the NASCAR program. The series lost longtime title sponsor R.J. Winston after the 2003 season partly because of declining revenues within the tobacco industry.

"This program works," Kessel said "It works for us from a business standpoint, it works for us across a number of key platforms. ... Our customers, our database, who have said, 'Hey, I'm a NASCAR fan and I'm using your product because you support my lifestyle,' they churn less. They use more data. Our acquisition numbers are higher. The business case is still extremely solid for us remaining in this sport, and that's why we're not going anywhere."

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: NASCAR.com. Forbes and The Tennessean

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