Tough times

TV deal was a coup, but even NASCAR feels the pinch

With Kmart bankrupt, what happens to Joe Nemechek's ride? Jonathan Ferrey/Getty Images

By Mike Fish, CNNSI.com

DAYTONA BEACH, Fla. -- The stock-car business gurus benefit from wonderful timing as well as hawking a growth sport. Who would have thought two years ago when the bull market was at its peak that the economy would go in the tank? Who thought NASCAR would nail a TV deal that would prove the envy of some other sports leagues.

That’s the way it has played out.

Not that the sport hasn’t felt the economic downturn. Certainly, its less-established Winston Cup race teams have hit bumps in the sponsorship game. Upwards of a half-dozen Cup teams and perhaps twice as many second-tier Busch Grand National series teams are scrambling to find primary sponsors. A slew of races are currently shy title sponsors -- including 12 Busch, 11 Winston Cup and four Craftsman Truck series races.

But after the belt tightening and hand wringing, NASCAR can wrap itself in the security of a $2.6 billion television contract, an eight-year deal that is entering its second season.

If the deal were being negotiated today, you could expect the networks to squeeze the payout by at least 10 percent, according to industry experts.

"Oh, you wouldn’t even want to think about trying to negotiate that thing with the networks in this terribly declined market," said H.A. "Humpy" Wheeler, president of Lowe’s Motor Speedway in Charlotte. "At the same time, we’re blessed to be in a growth phase that NFL, NBA and Major League Baseball were in at one time themselves. How much longer can we hang on to that? Can we compete with the NFL, go against them on a Sunday afternoon and get close to the same ratings they get on a consistent basis? Those are the challenges."

Only they’ll have to wait for another day.

Now, NASCAR and its race teams must first maneuver through an economy that isn’t kind. No sport is more tied to corporate America than stock-car racing, with every entry on the Winston Cup circuit bankrolled by millions in sponsor dollars. Cars are 180-mph billboards. And it often seems that every other word out of a driver’s mouth is a thank-you to sponsors plastered on his uniform and car.

The saving grace is that many of the major sponsorship deals are multi-year agreements, so the affects of an economic downturn aren’t immediate.

Still, it hits home when Kmart Corp., in the midst of bankruptcy proceedings, bails out as sponsor of the Michigan 400. The discount retailer is also pulling support of Travis Carter Racing after next week’s North Carolina 400, leaving in limbo the No. 26 Kmart School Spirit Ford driven by Joe Nemechek and the No. 66 Kmart Ford driven by Todd Bodine.

"I am quite careful about making sure we do business with people who are credit worthy," said Geoff Smith, president of Roush Racing. "Kmart would have taken me by surprise. Understand, I’m at a NASCAR conference in Boca Raton last April when [Kmart chief executive] Charles Conaway gets up and gives a speech about the Blue Light Special, all the marketing they are doing and the operational problems they fixed. I wouldn’t have expected it to unravel as quickly as it did."

The sport, however, saw the early signs of a downturn two years ago when some dot.com companies abandoned sponsorship deals. Major players like McDonald’s, Oakwood Homes and John Deere have since backed away. And there’s been fallout because of the sharp rise in the cost of sponsorship, which is largely tied to the additional exposure of the new TV deal.

A trend, Smith said, has been for primary sponsors to leave less-competitive teams and become associate sponsor with more successful teams or even with NASCAR itself.

"In our case, we have remained unaffected in 2001 and now 2002 in Winston Cup," Smith said. "There’s actually been as much sponsorship interest in the primary level in our programs as we’ve ever had for this time of year. Now at the truck series, that is as hard as it has ever been."

But if the sport is suffering, it is generally thought to be most at the team level and not within NASCAR corporate offices.

Veteran driver Kevin Lepage is among those hurting. A year ago, his Matrix Motorsports team built a garage in North Carolina after signing a three-year sponsorship deal, but by the end of the Busch season, State Fair Corndogs and Ballpark Franks had fallen victim to a corporate merger and exercised an escape clause in the contract.

So, Lepage put up $150,000 to bring the yellow sponsorless No. 71 Ford here for Saturday’s EAS/GNC Live Well 300.

"We will shut it down next week if we don’t get sponsorship," Lepage said. "We took everything we had in our little kitty to come down here. If we can’t get help from somebody we are done."

Nor is he alone.

Next week for the Busch race at Rockingham, LePage said talk in the garage area is only 34 cars are likely to show for what is supposed to be a 43-car field.

Sponsorship turnover has been particularly volatile this offseason, and some Winston Cup team owners have been willing to sell sponsorship for a single race or a partial year rather than full slate of 38 races. So, some teams figure to bail out before the season ends in November.

"Everybody we talk to is being very careful with their spending and certainly not looking to do a lot of new things," said Jim Andrews, executive vice president of the IEG Sponsorship Report. "So if you have long term sponsors you are pretty safe. But if it case where you have somebody that has dropped you, and there is more turn over with race teams than with other properties, they are in a tough situation. Companies aren’t looking to do anything new. So the toughest thing right now is to go out and find new money."

And even major players in the sport haven’t escaped the hit. Speedway Motors, the parent company of the Charlotte track and five other racing facilities, has reduced its staff by 18 percent and cut spending by close to $12 million since last season.

"When you look at the rocket ship that we have been on in the last 10 years, with unprecedented growth and huge sponsor dollars coming in and record TV ratings, we’re going through this economy pretty well," said Wheeler, the Charlotte track official. "But there are fewer sponsorships. We’re not selling the corporate tickets that we did. When you get 2.5 million people out of work, with no money coming in, that is bound to affect about everything people do in America."

 

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