NASCAR adapts to the new normal
Two years ago, the abandoned $10 million Statesville headquarters of Richard Petty Motorsports stood as a beacon of how far, and how fast, NASCAR’s fortunes had fallen. Race teams have cut hundreds of jobs while major corporate backers left the sport entirely (Red Bull, Jack Daniel’s, Office Depot) or reduced spending (The Home Depot, Budweiser, UPS).
One of the major automakers, Dodge, dumped stock-car racing after an 11-year run that included partnerships with the former Evernham Motorsports and Penske Racing.
Yet optimism is returning to the sport. To be sure, sponsorship fees have, in many cases, fallen 30% or more since the peak years of the mid-2000s, and speedways continue to struggle to sell tickets. But with a new media contract and a sharpened business approach, NASCAR team executives feel bullish about the future.
One in four Fortune 500 companies participates in NASCAR, according to the sanctioning body, a modest increase since 2008. NASCAR cites several sponsors’ research showing healthy returns on race spending as evidence of the sport’s continued strength.
Forbes puts the value of NASCAR’s nine largest teams at $143 million each, on average, an increase of 1% from 2012. NFL franchises are worth an average of $1 billion each.
NASCAR’s teams rely on corporate sponsorship more than other sports. Up to 75% of team revenue for race teams comes from sponsors. That’s unlikely to shift much since race teams, unlike those in the NFL, NBA and Major League Baseball, never play home games and, thus, have no tickets to sell. The expense and benefit of hosting races fall to track owners, including locally based Speedway Motorsports Inc.
Executives in NASCAR say the sponsorship environment has improved in the past two years. Even so, negotiations take much longer to complete, sponsors expect more benefits than just a logo on a car, and team executives agree tangible results are required.
Hendrick Motorsports, the most valuable team in racing according to Forbes at $357 million, has, to cite a notable example, struggled to fill all of the sponsor slots on the hood of driver Dale Earnhardt Jr.’s car for 13 races.
Marshall Carlson, team president, says talks are going well to avoid unused sponsor inventory this season. Industry experts agree with Carlson’s assertion that Hendrick could have had a sponsor by now, but it chose to hold out for a top-tier price and a company willing to make a long-term commitment.
Still, the fact is Earnhardt Jr., the sport’s most popular driver, is being impacted by the new environment.
“It used to be that just running well was enough,” says J.D. Gibbs, president of Joe Gibbs Racing. “Now it’s running well and showing how you are going to help sell more products.” More at Charlotte Business Journal