The slumping economy slowing even the fastest
Race teams, tracks, related businesses - and even NASCAR itself - expected to cut back, press search for 'efficiencies'
DAVID POOLE
dpoole@charlotteobserver.com
Saturday, Nov. 01, 2008
While these terms have become strikingly familiar in business news reports, they're leaking over onto the sports pages, too. Professional sports are business, too, and they exist in an increasingly financially challenging real world.
NASCAR has enjoyed an era of explosive growth suckling on the teat of corporate sponsorship. But what happens now that many companies - including some at the very core of NASCAR's corporate relationships - are at the very least having to take a long look at every dollar being spent and are at the worst fighting for their own survival?
"The sky is not falling," said David M. Carter, executive director of the Sports Business Institute at the University of Southern California. "It's getting lower, but I don't think it's falling."
Brian France, NASCAR's chairman and chief executive officer, would likely agree.
"We've had various other times where the economy has been very difficult," France said. "This probably to everybody is more significant, at least on the surface. So there is a big uncertainty about people's ability to do all the things that they want to do financially, given the backdrop of the credit crisis and all the rest.
"You have to look at it over a long period of time. We're off ... but we tend to fare much better than other industries, thankfully. That's because sports are so culturally ingrained to fans. ... We're fortunate, but we are nervous like everybody else."
France said that "close to between $80 million and $100 million of new money ... is predicted to flow into NASCAR from team sponsorships in 2009." While Camping World did sign on as the new title sponsor for the Truck series, it's hard to locate that level of additional backing simply by looking at next year's potential team lineups.
In the Sprint Cup Series, Dale Earnhardt Inc. currently has one sponsor signed for four teams. Petty Enterprises has not yet announced a 2009 sponsor for its iconic No. 43 Dodges. Michael Waltrip Racing has one full-season sponsorship and one half-season deal done in what was a three-car operation this year.
Bill Davis Racing lost sponsorship of its No. 22 Toyotas to Richard Childress Racing, which will buck the trend by growing from three to four full-time teams in 2009. Juan Pablo Montoya's No. 42 Dodges also have a sponsorship deal for only half of next season, at least so far. So, too, do Ryan Newman's cars at the two-team operation driver Tony Stewart will own in 2009.
Ticket sales have been flat at some tracks, down at others, and with corporate clients having to watch their bottom lines there could be fewer big blocks of tickets and hospitality packages that go with them moving out of the inventory for Cup, Nationwide and Truck Series events.
"Hospitality is where we've seen more of a downward trend than anything else," said Bruton Smith, chairman of Speedway Motorsports Inc. "Companies can easily say, 'Not this time.' Some have stepped up and renewed, but it is a terrible economy, and all of us are going to have to live with it."
The scariest piece of racing's economic puzzle might be with the auto industry itself, which has buttressed NASCAR with millions of marketing dollars as well as a similar amount of engineering and technical support.
The three American manufacturers, at least, are fighting for their very survival in the global marketplace.
General Motors and Chrysler - the companies behind Chevrolet and Dodge, respectively - have been discussing a merger that certainly could have major NASCAR consequences.
Ford recently signed a new contract to continue its support of Roush Fenway Racing and its affiliated Cup teams, but is cutting back on support in the Nationwide and Truck series.
"Ford's participation in racing ... is just vital," team owner Jack Roush said. "The automobile industry is absolutely essential. You could not compete with a NASCAR team without an affiliation like we enjoy with Ford and by the partnership we enjoy with Ford going forward."
While NASCAR has operated at times throughout its history without official support from the manufacturers, it has not done that during the period of growth and expansion it has enjoyed for nearly two decades.
Mike Delahanty, the senior manager for Dodge Motorsports, this week reiterated that current contracts with Cup teams would all be honored by Chrysler no matter what happens with any merger with GM.
"What we are seeing across is what I would call a series of corrections," Delahanty said. "But the sport has seen times like this before and the sport will get through it. There are some very astute people running NASCAR and racing is too good of a thing to just go away. There are a lot of opportunities for efficiencies to be gained, but NASCAR still puts on a great show."
These "efficiencies" could involve a reduction in the work force for NASCAR's top race teams, which would have a direct impact on the economy of Charlotte and surrounding areas.
One published report this week said as many as 750 people in the industry could lose their jobs when the current season ends in three weeks. It's hard to know how accurate that number could be, but Smith believes even the sport's biggest teams, as well as tracks and the sanctioning body itself, are likely to trim staff.
"I am sure at this point that NASCAR is having meetings about cutting expenses," Smith said. "All businesses today do that. We have a meeting every month hammering away at expenses. You'd go to the carnival and there would be this machine where this thing would stick its head up and you'd whack it. Business is that way. You have to whack away at expenses all of the time.
"The first thing you always look at is two-legged overhead. NASCAR has too many people. They've got people they don't even know. Teams have people who're employed to check on other people. You don't need that many people."
France said that NASCAR will keep doing what he said it always tries to do, trying to keep rules in place that don't encourage teams to equate being more competitive with spending more money. That always has been a challenging balance for the sport to strike, however, and in the current era of dominance by multicar teams the plight of an owner trying to field just one team seems dire.
While things have been bad before in racing, it has been long enough that not everyone remembers those times.
"When times get tough this industry has proved it can get tough," said Jim Hunter, NASCAR's vice president of corporate communications who is a former president of Darlington Raceway and a longtime veteran in the sport. "Some of the best car owners in the garage area today know what a good baloney sandwich tastes like."
Carter, who monitors the business of sports and also teaches at Southern Cal, said NASCAR could be helped in the immediate and long-term future by the way it's dealt with sponsors and fans in the past.
"NASCAR has for so long worked with its corporate partners to protect both of their interests," Carter said. "I think the sport would be in worse shape if they didn't have that history with those partners.
"What's going to have to happen is that a corporation needs to quickly and precisely let its stockholders know why they are doing any kind of spending. In racing, it needs to be able to say 'Last year we got four clients out of what we did a this race and that led to this much in sales.' It will have to get to that point.
"You can't just say, 'Well, it's good for business.' You have to show it's not something that's frivolous, that it's an integral part of how you do business."
Carter believes that in most cases NASCAR still delivers good value to sponsors in relation to how a company might otherwise spend its marketing dollars. Delahanty shares that belief.
"You have 120,000 to 150,000 people who're there, at least in part, because they are enthusiastic about the automobile," Delahanty said. "It's a receptive audience."
Smith said he believes the key is in that audience.
"We have to constantly make the sport better for the fans," he said. "If we do that, then it's better for everybody. It's better for me, it's better for the sponsors and it's better for NASCAR.
"That's what we ought to do. Make the product better and the fans will beat a path to your door."
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