Friday, February 24, 2012

NASCAR – business and racing

Imagine the Super Bowl starting the National Football League season. NASCAR gets their 2012 racing season Sunday with the Daytona 500, the biggest event on their calendar, NASCAR’s version of the Super Bowl.

As their 2012 racing calendar begins, the lofty heights that NASCAR reached in the last decade are a distant memory. In a business fueled by sponsorship revenues, 21-year old Trevor Bayne, the youngest winner of the Daytona 500 when he won last year’s 500, hasn’t been able to secure enough sponsorship dollars to drive full-time.

A year after winning the 500 in his second Sprint Cup series start, Bayne has the same sponsors and the same part-time schedule he had last year. According to a USA Today report, Bayne might run fewer events in the Nationwide Series (NASCAR’s B race series) than the full schedule he had last year.

"I definitely thought we'd be full-time Nationwide and Cup this year right after (last year's win)," he said in a USA Today report. "But as the season wore on and nothing was happening, this is what I figured. You would hope you could accumulate some kind of funding or some kind of sponsorship after the year we had last year. It's just tough for us and every team."

Bayne races for Roush Fenway Racing. According to a USA Today report, two of the team's largest sponsor contracts expired after 2011. In a difficult economic climate, the group is still looking for sponsors for the No. 17 car of Matt Kenseth and had to go from four to three cars.

"The climate has just been tough," Roush Fenway President Steve Newmark said. "I think Trevor is an incredible talent, but look at the number of drivers looking for sponsors. That's really impacted a lot of younger drivers.

"It's the toughest time in the history of NASCAR to be a young developmental driver, because a lot of these guys, if they don't bring sponsorship, they're not getting a seat."

Eleven years ago at the Daytona Motor Speedway, on the last lap of the 2001 Daytona, 500 Dale Earnhardt crashed his car and died on the last lap of the race. Nicknamed "The Intimidator," Earnhardt’s death created a national media firestorm.

Earnhardt was featured in the following weeks’ Time magazine cover, and video from the race was played on nearly every major United States televised newscast. Earnhardt's funeral was telecast live on multiple television networks including CNN and ESPN.

While NASCAR didn’t leverage Earnhardt’s death, brand awareness increased dramatically. Media organizations which hadn’t paid a great deal of attention to NASCAR started taking notice. Earnhardt’s death coincided with a tremendous period of growth for the sport.

On December 15, 1999, Fox Sports, FX, NBC and TBS agreed to pay $2.4 billion for a new six-year package, covering the Winston/Nextel Cup Series and Busch Series schedules. Late in 2005, NBC announced that they no longer wanted to carry NASCAR races on their schedule. ABC/ESPN took the opportunity to regain the series. On December 12, 2005, NASCAR announced its next TV contract: eight years, $4.5 billion with Fox/Speed Channel, ABC/ESPN, and TNT.

NASCAR nearly doubling their rights fees in 2005 didn’t come as a big surprise to the sports industry. The Sprint Cup series ratings peaked that year at an average of 8.5 million viewers for each race. Over the six years since, ratings have fallen every year, leveling out to an average of 6.5 million viewers in 2011, the same average as 2009.

With the current broadcast agreements expiring after the 2014 season, NASCAR will begin renegotiating with their current partners this year. Many industries insiders suggested given the ratings drop, NASCAR could expect to receive less from their television rights. That might be true, but for the most part (the NFL, MLB and NHL) television rights fees continue to grow.

Sponsorship is very important to NASCAR, accounting for 75% of overall revenues. Crown Royal and Red Bull are no longer NASCAR sponsors and brands like Caterpillar, Home Depot and UPS are each investing less in NASCAR. There are new sponsors including Detroit-based Quicken Loans and 5-Hour ­Energy. Farmers Insurance is the biggest new NASCAR sponsor, committing $800,000 per race for 22 races to Kasey Kahne’s No. 5 car, part of the Hendrick stable.

“We’re seeing more sponsor activity than we have in three years,” Zak Brown, founder and head of JMI, which sells and manages motorsports sponsorships told Forbes.

Brown’s views aside – when the winner of the 2011 Daytona 500 continues facing challenges in finding sponsors, times are tough. Roush racing agreed to a partnership with Wood Brothers team, which has a Ford Motorcraft/Quicklane sponsorship for at least a dozen Cup races for Bayne to race in one of their cars.

While there has been interest in Trevor Bayne, Wood Brothers co-owner Len Wood, told USA Today none of the companies they have talked to about Bayne are interested in the big money sponsorship agreements that fuel NASCAR agreements.

"We got e-mail after e-mail and phone calls wanting to sponsor our car, Wood said. “But it would be like $5,000, $10,000 deals. There was no deal to go run your race car. There was a lot of interest, but nothing panned out."

Bayne made it clear in the USA Today that he understands the current sponsorship marketplace and he’s willing to do what he has to make corporate partnerships work.

"We're actually going out and trying to find them. So it's not a great climate, but it's just like our fans. Once you get them to the track and see how great our sport is, then they want to be a part of it. The hardest part is getting in the door and bringing them to the track and showing what you have to offer."

NASCAR supporters have a reputation for brand loyalty, standing by the sponsors supporting the company logos that adorn both the cars they drive and the racing suits they wear.

“You have very passionate fans that are not just involved in the race but the entire drama of Nascar,” says Mike Linton, chief marketing officer at Farmers in a Forbes Magazine report.

NASCAR president Brian France, whose grandfather Bill France created NASCAR, understands the how loss of sponsorship dollars has impacted the ability for racing teams to run cars (NASCAR has three racing series, Sprint, Nationwide and a Truck racing series).

“The economy will do that. It will have an effect on the sponsorship model, the funding of the teams, and various reasons teams also move around or get smaller. I don't anticipate short fields, but obviously a very difficult economy that's lasted so long has had an effect, and that will continue at some level.”

During his pre-season media conference, France acknowledged the importance of media rights and NASCAR’s upcoming rights fee negotiations for network TV rights.

“We're excited with our current — we really like our current partners. My expectation is they want to renew their involvement with NASCAR, and my hope is at the right time we'll figure that out together. The sports landscape in general, as you know, has heated up quite a bit, so we will be in a good position at the right time. I don't know when that will happen. If it happens early, it's possible, or it might not. We're having conversations,” he said.

“And on digital, it's very important to us. Very important for us to manage those rights carefully in the future. Obviously between digital and social media, it's the new medium to develop that deep relationship with our fans and communicate with them. So we will be taking a very, very active role, already are, and not just us but the rest of the industry. This is one of these things where the industry has come together on many things, but this is an important one where the industry is working together, the teams, the tracks, NASCAR and so on, to formulate the right social media strategy, the right digital media strategy for the future. And we're quite confident that we will manage those rights in a way that takes the most benefit forward on behalf of the industry.”

The issue remains – has NASCAR reached its peak? Brand awareness grew in the 90’s and Earnhardt’s death was one of the biggest national sports media stories in recent memory. Are NASCAR’s best days behind for the organization?

“I can tell you that the industry has never been more united to growing the sport of NASCAR on everyone's behalf. And that's going to be our job,” France said.

“Obviously you've heard a lot about digital and social media as an enormously important place. We've reformed our communications efforts to reach more fans. So you're going to see us and the entire industry get more aggressive. You're going to see youth initiatives. You're seeing the fruits of diversity start to be right around the corner. That will really advance us if we can get a breakthrough, which I'm very confident we will, at a national level. So there are a lot of things out there that are all going to point to us being able to either grow our audience with a new demographic, whether it be a younger demographic or more diverse. We're doing the things that we think you have to do to put yourself in a position to grow in the future, even though when I say grow in the future; it is a very, very difficult landscape for any sports property to build on. It's just very competitive.

“So we're having to be at the top of our game to make sure that we're delivering what the fans want, what our partners need, and what new fans will get excited about.”

For Brian France and NASCAR, it all starts this Sunday with the Daytona 500.

For Sports Business News this is Howard Bloom

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