Over the past several weeks, I have been inundated with inquiries about a variety of topics that I have discussed about the state of NASCAR and the sponsorship crisis. I feel compelled to address and clarify some of my previous statements and respond to a recurring theme of certain readers’ comments.
Many of the NASCAR faithful have repeatedly stated: “the sky is not falling NASCAR has a larger television audience today than in 2001”. While this may true – it has little to do with the enormous problems facing NASCAR today. The problem is one of economics that simply don’t add up.
As a former team owner, I can speak to the fact that there is an alarming disconnect between the highly profitable NASCAR Corporate; and the costs of operating a team and the corresponding costs to sponsor a team. It is NASCAR’s “disconnect” and perhaps even ignorance to the fact that NASCAR teams are facing a sponsorship depression that is the fundamental problem – and it is this blindness that will ultimately cripple NASCAR if they continue down this same pathway.
On Sunday, Brian France, Chief Executive Officer of NASCAR was asked; Are you certain you’ll have 43 car fields next year?
We’re pretty confident about that. I said before to many of you, you know, we’re also criticized for having too many cars.
I don’t know if he is taking lessons from the former Iraq Information Minister – Baghdad Bob.
But unless he is counting on Dave Marcus and Morgan Sheppard – having 43 competitive cars is extremely unlikely.
Just like the global financial crisis, the problems were not created overnight and may require the governing body to stimulate the NASCAR economy. But NASCAR needs far more sweeping changes than just the teams receiving a larger share of the television revenues. A variety of topics that must be addressed include; dramatic cost savings for the teams, incentives which drive fan interest – larger focus on winning - less on consistency, and greater shares in revenues so teams can sell sponsorship packages for considerably less - increasing the value proposition for corporate sponsors.
The basic message which seems to be lost in the entire dialogue over the sponsorship crisis – is not that companies haven’t wanted to become involved in NASCAR marketing – it is just cost prohibitive; too much risk and the ROI is difficult to measure. If we withdraw ourselves from the current economic crisis and rewind the clock to 2007; and if teams could have marketed Sprint Cup primary sponsorships for $10 million – do you think we would have the dramatic sponsor shortage of today? I don’t think so – the problem is primarily the price not the product.
Now I want to be clear – the product needs innovation and a fresh approach to bring die-hards back into the fold and make the sport more interesting to all sports’ enthusiasts. However, Brian France has only focused on the latter; and subsequently, by attempting to reach out to non-core fans he not only failed to grow the fan base, but he alienated many loyalists which has diluted the value proposition for many NASCAR sponsors.
On Sunday Morning, Bruton Smith conducted an interview with ESPN. After questioned about the challenging times that is facing NASCAR; Smith reaffirmed his desire to acquire NASCAR and said, “And it’s getting closer”, referring to the possibility of the France Family looking to sell NASCAR. Is Smith just stirring the pot? Or perhaps, is the France Family finally considering ending their strangle-hold on the sport?
Hypothetically, let us assume Smith’s statements are backed by an element of fact and that the France Family is looking to sell NASCAR. It is my opinion that a change in ownership from the France Family to Smith would not bring about the change needed to put NASCAR back on the track for growth. As discussed in my most recent blog entry, The Failing NASCAR Economy: A Time for Action! - NASCAR must act to bring forth changes to support its lifeblood - the race teams. A Smith regime would only continue the same old policies of providing the race tracks a disproportionate share of the television revenues as compared to the racing teams. These policies need to change – NASCAR Sprint Cup Teams must receive a greater portion of the television revenues earned by the sport – because without Teams there is no NASCAR. Yes, tracks are valuable, but as Formula 1 has proven, track owners and promoters are willing to host events without large subsidies from the governing body.
The best avenue to save our sport and put it back on track, allowing it to grow into the next decade, is for an entrepreneurial executive; who understands the sport, new media and the market trends to lead a leveraged buyout - partially funded by a team franchise model - where 43 Sprint Cup Teams would receive a minority ownership and participate in profit sharing to ensure the stability of the premiere NASCAR series – the Sprint Cup.
The impending fluctuations expected in the number of competitors in the second most watched sport in country – the Sprint Cup Series, is completely unacceptable. A new ownership structure must include policies and an agreement to secure the future of the Sprint Cup Series by enabling Team Owners to purchase Franchises and receive votes in the future of the sport that they have all built. This new structure would eliminate the sanctioning body from competing with teams for sponsors and create a more healthy sport to ensure its long term future.
2008 has been the year of “change” – Americans want “change”, NASCAR Fans want “change”, NASCAR Teams want “change”. If the France Family provides the opportunity for “change” in the leadership of NASCAR - let us all hope that it is the “right change” that comes to Daytona Beach.
I typically do not publish press releases but I believe Robby Gordon Motorsports (RGM) and Jim Beam should be commended for their efforts to support our troops and their families. Starting tomorrow – on Election Day, RGM and Jim Beam will launch an online charity auction giving racing fans and all Americans the opportunity to show their patriotism, and to bid on a rare racing collectible - with 100% of the proceeds going to support our troops.
Deerfield, Ill. - November 3, 2008 – As Veterans Day approaches, racing enthusiasts and philanthropists will have a chance to bid on a unique racing collectible while supporting America’s service members and their families. Robby Gordon Motorsports (RGM), in combined efforts with Jim Beam® Bourbon, has kindly donated the special edition Jim Beam/Operation Homefront race car hood to Operation Homefront for auction.
RGM and Jim Beam created a special Operation Homefront paint scheme for the Richmond and New Hampshire NASCAR® Sprint Cup Series™ events in order to increase awareness of Operation Homefront, a nonprofit organization dedicated to providing emergency assistance and morale to U.S. troops and their families. To celebrate Veterans Day, they will run this paint scheme once more in Phoenix and will increase their commitment by auctioning off the hood to help raise funds for the organization.
“When Jim Beam asked me about running the paint scheme again and donating the hood, I was 100 percent in,” said Robby Gordon driver of the No. 7 Jim Beam Dodge. “Veterans Day is a time to remember the commitments made by the men and women who have served this country, and I’m proud to join Jim Beam in supporting Operation Homefront and our nation’s military families.”
Amy Palmer, founder and vice president of operations for Operation Homefront®, expressed her appreciation for Jim Beam’s and Gordon’s ongoing support. “Robby and Jim Beam have done so much for the families we serve,” she said. “We know we can count on them as well as NASCAR fans to be there for the military community.”
Jim Beam, the world’s No. 1-selling bourbon, formed an association with Operation Homefront earlier this year when it recognized the organization had the same commitment and values as the Jim Beam brand - true character, integrity and doing the right thing.
“This donation is aimed at helping the people who risk their lives to protect our freedom, our troops and their families,” said Brian Gallagher, manager, Jim Beam Racing. “We’re so proud of Operation Homefront and all that they do.”
The hood, autographed by Robby Gordon, will be auctioned off on eBay starting November 4 with the auction closing Veterans Day, November 11, just in time for holiday gift giving. All proceeds will go to Operation Homefront through eBay’s charitable arm, eBay® Giving Works, a fundraising platform for nonprofits that offers buyers and sellers the opportunity to support their favorite causes through trading on eBay.
To access this auction directly, view additional pictures and place bids go to www.ebay.com/operationhomefront
Most will agree that the current economic recession will have a significant financial impact on NASCAR teams and the sport as a whole – but does it really need to be this way? In 2009, there will be significantly less Sprint Cup teams competing on a weekly basis – and yet, in economic downturns other sports such as the NFL or NBA do not have reductions in teams. Why is this so? The answer is rather simple – other sports operate as a democracy with all teams participating in the economic benefits of the television contracts; while NASCAR on the other hand, is structured much closer to a dictatorship – with the profits being retained by NASCAR Corporate which is owned solely by the France Family.
Let’s examine the recent history and evolution of NASCAR: during the global economic expansion following the tragic events of 2001 – 9/11 & the death of Dale Earnhardt Sr., NASCAR experienced unprecedented interest from corporate sponsors; and growth was fueled by new television contracts with Fox and NBC. Because of NASCAR’s unique business model, which is vastly different than other sports, the industry flourished from 2003 until recently, gathering new teams, with investors and manufacturers flocking to the industry.
As a point of reference, NASCAR is the ONLY major US sport without a franchise model including profit sharing agreements. NASCAR Teams operate in a free market where teams must survive without much financial assistance from NASCAR Corporate; and where new teams can easily compete if they have the financial backing. I was a personal beneficiary of this policy – and at 23 years of age secured an agreement to led Toyota Motorsports into the NASCAR Craftsman Truck Series and went on to build their competitive platform for their NASCAR operation.
I am very fortunate to have realized my lifelong dream of owning and operating a top tier NASCAR team; and even more rewarding to have brought Toyota Motor Sales their first two NASCAR victories. However, this so-called free market is a complete farce! The teams must secure over 90% of their operating budgets from corporate sponsors – a/k/a advertisers. What is more infuriating, and what is not common knowledge, is that NASCAR and its sister company ISC retain the vast majority of the sport’s healthy television contract revenues, and even compete against the teams for corporate sponsors - the lifeblood of the race teams. As many know, AT&T was forced to leave Richard Childress Racing (RCR) as a primary sponsor because NASCAR Corporate signed an agreement with Nextel (now Sprint) with an exclusivity provision precluding other wireless and telecommunication companies from sponsoring any racing team. So with teams on the verge of a depression – and with automotive manufactures and corporate sponsors reducing their involvement – NASCAR is busy lining their pockets at the expense of the teams.
The most fundamental precept is that without teams – there is no NASCAR; but somehow teams have failed to act on this most basic concept to leverage their position within the sport. Maybe in the past the very wealthy owners such as Rick Hendrick, Jack Roush and Roger Penske were complacent and satisfied with receiving a nominal share in the television revenues; but in today’s economic climate and the ultra competitive advertising marketplace – teams who want to keep standing on their feet, need to act now and demand a fairer share in revenues – not for personal profit; but simply to survive.
The management of NASCAR has a real opportunity to bring forth a “rescue plan” to save teams from closing their doors and fracturing the appeal of NASCAR; which could have irreversible effects on future television contracts and ultimately the profits of the France Family. The beauty of the NASCAR “dictatorship” is that they don’t need to hold a vote or seek the opinions of others; instead, they can just swiftly act to provide an increase in the teams’ alterative revenues, which would enable teams to offer sponsors a lower cost of entry to advertise in NASCAR.
You can’t expect any company to spend $20M to sponsor a NASCAR Team – the ROI isn’t remotely competitive. NASCAR needs to think long term and be willing to sacrifice some of their short term earnings for long term stability and growth in the NASCAR economy.
Over the past several months, as the advertising market has become increasingly more challenging, I have written numerous posts about the need for NASCAR and Sprint Cup teams to evolve and innovate to stay competitive in the corporate boardrooms. In my posts NASCAR 2.0 and NASCAR Sponsorship 2.0, I discussed opportunities to generate revenues and exposure through digital media.
My unique perspectives are a result of “one of kind” experiences which are vastly different than any other thought leader in the NASCAR industry: a web 1.0 entrepreneur, NASCAR Team Owner (Bang Racing), and today, an executive in the current social and digital media industry. While there are unlimited opportunities for NASCAR to leverage digital media technologies and corresponding social/digital business models; I have a specific proposal for NASCAR and specifically Paul Brooks, President of NASCAR Media Group.
I know from my personal experiences in working with Paul Brooks at NASCAR, he is one of the most forward thinking executives at NASCAR and I hope he embraces the following proposal. For those unfamiliar with NASCAR’s approach to partnerships and licensing; NASCAR has historically required substantial licensing fees to pursue any type of business relationship, which in all fairness has generated significant profits in the past decade. However, moving forward in the dynamic digital economy and facing the challenges to continue to grow their audience and fan base, NASCAR must now look to tap into emerging technologies and unlock entrepreneurial ingenuity to develop innovative business models to increase fan exposure and create new revenue sources.
The first initiative I believe NASCAR should pursue is to open up access to the racing data acquired through the on-board computer/black box. Just to be clear, I am not suggesting that NASCAR should allow live telemetry for the racing teams, but I am proposing an online database which could be accessed for technology entrepreneurs, game developers, media, and entrepreneurs and racing teams. By enabling open access to the racing data that could be parsed and leveraged, businesses and entrepreneurs could bring forth innovation to drive new revenue sources and digital media exposure for NASCAR and its teams.
Technically speaking – NASCAR needs to publish a set of Application Programming Interfaces (APIs) which could be available for commercial and non-commercial use that could create the opportunity to unlock the creativity of technology and digital media entrepreneurs and leverage the private equity markets to develop business models to reignite the excitement and consumer interest in NASCAR.
Even though my current business focus has little to do with NASCAR or motorsports, I strongly believe that NASCAR must embrace new media business models and techniques. Paul, if you are interested to speak regarding these ideas -you know how to reach me. Best, Alex Meshkin.
The global credit crisis may be slowing the M&A markets of Corporate America, however, mergers and acquisitions remain all the buzz in NASCAR. Back in July, I wrote Team Consolidation on the Horizon and it appears more likely than ever that Michael Waltrip Racing (MWR) led by Robert Kauffman will acquire Chip Ganassi Racing.
Additionally, speculation is running rampant - Gillette Evernham Motorsports (GEM) will acquire Bill Davis Racing (BDR). With BDR having yet to secure a replacement for Caterpillar for the #22 Toyota Camry, the value proposition of the proposed acquisition appears to be strictly around the coveted partnership with Toyota Motorsports and BDR’s ownership in Triad Racing Development. So it appears that if both transactions are completed; and Gillette changes from Dodge to Toyota – Dodge Motorsports will be left with just Penske Racing and Richard Petty Racing. Furthermore, I suspect at the root of Gillette’s motivation to acquire BDR is the reality that Dodge is looking to leave NASCAR all together. As my readers know, earlier this month Dodge announced their plans to leave the NASCAR Truck Series and with the founding Dodge Sprint Cup Team (Evernham) possibly joining the Toyota camp through the BDR acquisition – I think this will be most definitive indication that Dodge is saying “bye bye” to NASCAR.
It’s rather apparent, that in 2009 the pit lane of the NASCAR Sprint Cup series will be dominated and owned by just a few organizations. One must wonder – will NASCAR reverse their policy to limit teams to just 4 cars? - Because in 2010, Roush Fenway Racing will be required to “sell” one of their teams which is expected to be transferred to Yates Racing. However, NASCAR may reverse or postpone plans to prevent any additional sponsorship deflections.
With primary sponsors becoming increasingly elusive and operating costs continuing to soar, the benefits of team consolidation may be the only way for the NASCAR teams to have a fighting chance of survival. The fact is clear: The economies of scale and integrated marketing advantages are vital to remaining competitive on the track and attractive to the few remaining potential sponsors.
Is there any hope for NASCAR’s future? Yes, but not without some major changes and “redistribution of wealth”. NASCAR’s unfair revenue model and overall lack of innovation are the primary contributing causes to the sponsorship crisis for race teams. NASCAR needs to immediately revise the distribution of TV revenues to fairly compensate the race teams - or face the reality that the life expectancy of many NASCAR race teams are limited at best and more teams will continue to close their doors.
The first domino has fallen in the shakeup with the Big 3 automotive manufacturers’ involvement in NASCAR. The exit announcement by Dodge is the latest blow to the NASCAR Craftsman Truck Series which
