I believe it’s time for NASCAR to hire a Chief Digital Officer to lead the development and implementation of a marketing strategy and business model to engage fans across digital platforms. And equally as important, work in concert with broadcast partners, corporate sponsors, teams, drivers and digital media entrepreneurs to maximize the potential of the digital medium.

For the sake of all stakeholders, let’s hope Brian France is listening and takes intelligent action that is currently available to quickly reverse the downward trends before ratings, attendance and corporate sponsorships are permanently in reverse.

What most fans don’t realize is an insider’s little known secret – nearly ALL NASCAR teams are financial failures. Even the most successful teams, such as Hendrick Motorsports or Penske Racing – are dreadful businesses – and would be unsustainable if not for their wealthy owners. Unlike nearly every other sport, where the most successful and popular teams are profitable and have long term shareholder value, the on-track success or even popularity of a NASCAR team has little impact on the financial results of the team. It is shocking to learn that the operating budget cannot even be met for a team that wins every single race, when the race winnings are barely 40% of the operating budget. How can teams survive – and even more so, how can this sport survive?

Some may argue an antiquated assessment – successful on-track performance will translate into more sponsorship dollars. However, in today environment the annual NASCAR team budget (each car) exceeds $20 million dollars.

With that being said, NASCAR has the potential to unlock opportunities to revive the financial outlook of the sport. But it must begin with reacquiring all the digital rights that have been irresponsibly divided and parsed between Turner Sports and Sprint. NASCAR needs to stop licensing and giving up rights for short term financial gains of the sanctioning body and recognize that the digital channel may be the last and best hope for teams to survive. This begins with a cohesive digital strategy that works across all broadcast partners – instead of isolating TNN (Turner) from Fox, ESPN, and NBC. If NASCAR.com is going to offer a live simulcast of races during TNN broadcasted races, which I support, NASCAR needs to find an acceptable business model to extend this platform to all broadcast partners. While this would be a good foundation, the real opportunity is to unlock real-time data from the on-board black boxes (telemetry) and team communications to a broader set of partners and participate with revenue sharing agreements to monetize these underutilized assets. (NASCAR Must Embrace New Media: Proposal Attached).

This decade begins as NASCAR tail spins in the wrong direction it’s a sharp contrast to the beginning of the last decade when NASCAR viewership, attendance and corporate interest were all surging. Today, all of those trends are in reverse, and this decade will truly define whether NASCAR remains as a mainstream sport or becomes another fledgling motorsport series.

I believe the major stories and events that will affect NASCAR in the coming years will have little or nothing to do with on track racing. So let me begin with a few predictions before we take our first green flag of 2010.

The Car of Tomorrow (COT)

By any account other than driver safety, the COT has been a miserable failure, and many point to the introduction of the COT as a defining moment in the accelerated decrease in fan interest. Since making its debut, the COT has been one of the most controversial rule changes to be introduced in NASCAR. There is no question that NASCAR will eventually make changes to their ill advised COT design, but the question is how dramatic and rapid will changes be introduced. I believe this decision will define the sport in the coming decade, because unless on-track racing significantly improves, NASCAR is doomed to become a second-rate sport with limited commercial exposure.

The Fall of Brian France

Mayfield vs. NASCAR is a fight NASCAR wishes it never fought. First, let me provide a bit of background information. In 2008 NASCAR implemented a clandestine drug testing policy where they refused to provide competitors a list of banned substances. And in 2009, long time driver Jeremy Mayfield, was the first driver to face a suspension for use of a banned substance. The drug was later identified as Methamphetamine, or more commonly known as Meth. (See my blog post in the summer of 2009 for more information – NASCAR in Peril: Victory for Jeremy Mayfield in Drug Testing Legal Battle). What NASCAR didn’t anticipate was Mayfield fighting back and filing a lawsuit to reinstate his license to drive in NASCAR. Both sides have won important decisions, but the court fight continues. However, just recently this soap opera is becoming even juicier, the U.S. District Court has ruled in favor of Mayfield to require sensitive documents about Brian France’s third (or fourth but who’s counting) marriage to be unsealed. Many insiders believe evidence will come forward further tarnishing Brian France’s ability to continue to lead NASCAR into the next decade.

Sprint as the Title Sponsor of the Cup Series

The elephant in the room is the pending expiration of the sport’s lucrative sponsorship agreement with Sprint as title sponsor of the NASCAR Cup Series. Back in the summer of 2003, when Sprint (f/k/a NEXTEL) agreed to a 10 year agreement with NASCAR, no one expected the rapid decline of fan interest and corporate sponsorship within just a couple of years. Ironically, Sprint too has blood on their hands for the sponsorship troubles of racing teams, which contribute to the overall problems in the sport. Sprint pushed out and prevented several companies from sponsoring racing teams, including AT&T Wireless who was prepared to enter NASCAR in 2004 as a primary sponsor, but Sprint through their exclusivity agreement with NASCAR, prevented AT&T from entering the sport. And then, after AT&T Wireless merged with Cingular Wireless (who was grandfathered into sport through their existing sponsorship agreement with RCR), Sprint pushed AT&T Wireless out once again. This was basically the same story for Verizon Wireless and Alltel. But I digress, we are discussing the future, and following the expiration of the current agreement with Sprint there is little doubt NASCAR will be left without a title sponsor of the Cup Series. And with the falling value of the title sponsorship rights, I expect NASCAR to be forced to sell the rights for a deep discount. But like everything else in NASCAR, the teams will bear the brunt of the negative financial consequences.

New Television Contracts

Not unlike, the situation with Sprint as the title sponsor, agreements with the existing television partners expire in a couple of years. And, with the enhanced competition from the NFL, all signs point to a significantly lower value being attributed to the NASCAR contract. The reduction in the sport’s revenues will further hamper smaller NASCAR teams from competing and consequently continue the most alarming trends of decreased fan viewership, attendance and corporate sponsorship.

The Retirement of Today’s Superstars

It’s no secret that Jeff Gordon has been suffering from significant back pain stemming from an on track accident. So the question begs, when will one of the greatest and most popular drivers hang up his racing helmet? Could the dominance of Jimmie Johnson accelerate Jeff Gordon’s retirement? And more so, Jeff Gordon isn’t the only NASCAR star that could retire in the next decade from full-time racing. Is it possible, if Dale Earnhardt Jr.’s performance doesn’t dramatically improve that he might head towards an early retirement? These questions will surely plague NASCAR in the forthcoming decade and could have far reaching effects on the entire sport. Even though in the past several years neither Gordon nor Earnhardt have been top performers on the track, they still remain the top two fan and sponsor favorites. And during a time when NASCAR is desperately trying to stop the hemorrhage of fan and corporate interest, the retirement of one or both iconic names could be devastating.

My negativity is an attempt to bring forth positive change to NASCAR. It is horrifying to watch a sport I have watched most of my life be destroyed. But without question, NASCAR, under the leadership of Bill France Sr. and Bill France Jr. made many wise decisions which helped to elevate the sport to the peaks in 2004. Unfortunately, the management decisions of NASCAR in the last half of the past decade have grossly undermined the sport. Even though the previous generations of the France Family were successful shepherds of NASCAR, under the faltering management of Brian France – NASCAR has failed its competitors, fans and sponsors. If the France Family truly loves NASCAR – then they must consider selling NASCAR to a new ownership group, who is prepared to rebuild the sport before all remains is a storied past.

Another alarming business trend, is that now, most sponsors want single-year deals. These days, a six-race package for $3 million qualifies as a “big deal” in Sprint Cup circles. The marquee free agent among sponsors is Ask.com, which spent about $4 million on its team deal with Hall of Fame Racing for the 2009 season and likely won’t spend more than that on the next deal, if indeed, the search engine decides to stay in the sport. Big name sponsors Allstate, DeWalt, Jack Daniel’s and Jim Beam will leave after this year, choosing to save that money or spend it elsewhere.

And of course, we are all aware of the market forces pushing the automakers to reduce their financial exposure to NASCAR – so I will ask the same simple question I have been asking for two years.

Why isn’t NASCAR doing anything to help the teams to ensure the long term viability of the sport?

I think the answer is pretty simple – they don’t feel they need too. And instead, want to continue pocketing the vast majority of the sports’ lucrative television contracts. And why, you may ask, has NASCAR (France Family) been able to dominate teams? I believe it is because NASCAR teams haven’t united into an association or partnership demanding the right changes to the sport. Just look across the pond to Formula 1 – while they face their own unique challenges, they do have a much more fair and logical business model. The teams are part of an association (Formula One Teams Association – FOTA), that collectively negotiates on financial matters and the adoption of rules affecting competition in their sport.

Whereas, when you look at NASCAR, you have a dictatorship run by Brian France, who I believe most will agree has single handedly undone many of the incredible accomplishments of his late father and grandfather. But as a former NASCAR team owner, I know the teams feel powerless. But it the truth be known, NASCAR is nothing without the teams. Now is the time for the teams to stand up and make a stand – the team owners are the only hope to save NASCAR. Teams must unite on common principles:

• Increased competiveness: major changes are required to the Car of Tomorrow to ignite fan interest
• Reduced operating expenses: less personnel at the track and NASCAR needs to follow the lead of Formula 1 and require race engines to be used at more than one event
• Modern technology: embrace fuel injection and alternative fuels/energy sources to make NASCAR an R&D platform for the automakers.
• Greater Revenue Sharing: Demand an equal share of the television revenues split between NASCAR, Race Tracks and Teams.

These 4 basic principles could reduce annual corporate sponsorship prices from $20 million down to $10 million – a marketing budget that could be justified to corporate executives. Plus, these changes would reignite the automakers interest in investing in the sport and most importantly, bring back the on-track excitement that race fans expect.

If teams do not take a united stand, but rather chose instead to continue to run around in circles spinning their wheels – they are facing certain annihilation.

On the flipside to NASCAR’s continued problems with retaining the support of the automakers, IndyCar Racing is poised for a significant rebound in sponsorship demand and automotive support in the coming years. There is widespread speculation that Volkswagen/Audi, and possibly Toyota, BMW and Mercedes-Benz may join the IndyCar series in 2012. This is the result of IndyCar’s long-term vision and planning to strategically position itself as a “green” marketing platform for the automakers. A few of years ago, a move to NASCAR may have been considered a “step up” – but one most wonder if that still holds true today. Two of the most prolific IndyCar racers in this past decade struggled (and I am being kind) in their attempt to cross over to NASCAR. Dario Franchitti, the 2007 Indy 500 and IndyCar Champion failed miserably in his 2008 NASCAR foray and Sam Hornish continues to struggle. I don’t mean to be disrespectful to Danica – but she couldn’t remotely keep pace with Sam Hornish or Dario Franchitti in IndyCar, so I don’t expect her to be any more successful than Dario or Sam in NASCAR (Note: Dario and Danica were teammates 2006-2007). The odds are clearly against her if she makes the move.

My sources indicate that NASCAR, led by Brian France is offering significant guarantees to lure Danica to NASCAR. So if her primary motivation is money – we should expect her to make a debut later this year in preparation for the 2010 NASCAR season. A more intriguing question remains – why is NASCAR focused on attracting one driver, when the entire sport, (namely race teams), are facing financial annihilation? This not only is short sighted, but outrageously blind to the real problems facing the sport.

Many believe Danica is NASCAR’s bandage to stop hemorrhaging sponsors, fans and other commercial interest. I remain skeptical. While I agree she would drive a short term bump in ratings- the fundamentals of NASCAR racing is spiraling out of control – and no amount of estrogen is going to stop the bleeding. NASCAR needs to focus on fixing the business model challenges for teams and improving the COT – so the on-track racing can return to what fans deserve and expect.

Treating NASCAR like an amusement park and adding a new “attraction” may seem like a good idea – but in the end, it will only disguise the fundamental challenges that may devastate the sport that many still love. And Danica, well, she may be just another bump in the road for NASCAR – and at the end of the day, regret

“We’re trying to do more with less. That’s the difficult part of this economy,” France said following his state-of-the-sport address to media at NASCAR’s Research and Development Center. Just back in December, NASCAR issued a statement stating that NASCAR heading into 2009 was “strong”.

This outlook is a rather quick reversal, but perhaps the gravity of the current economic climate and mass sponsor deflections is making an impact.

Doing more with less? Working with teams to develop new business models? I apologize, but in my humble opinion, it’s a little too late for a half-baked plan. But even worse and what is frustrating is NASCAR’s continued unwillingness to restructure the distribution of television revenues to rightly supplement teams’ operating budgets.

What NASCAR needs is a business model which more closely replicates Formula 1 or a franchise structure like every other major sport. As a fervent advocate for team rights, I have repeatedly voiced the need to develop a franchise model that would enable teams to weather macroeconomic difficulties; and subsequently, become less cyclical and more stable during recessions and economic turmoil. The time for leadership, sacrifice and decisive action on behalf of the France Family is NOW. But to the contrary, the Brian France plan is nothing more than reinforcing their past strategies of working with teams to help locate and secure sponsors. While his intentions may be honorable; they are nevertheless naïve when considering there is a global economic recession; and specifically, when the NASCAR industry is in a depression of historic proportions. At this moment, I don’t believe there is a single corporation that is considering spending $15-$30 million required to fund a primary sponsorship program for a NASCAR Sprint Cup team. So I am rather befuddled with Brian France’s simplistic strategy to save the sport, which unfortunately in its current form will contribute to the sport’s certain collapse.

Is it possible that the past success of NASCAR is blinding Brian France from seeing the light? Reflecting back to 60 years ago to the earlier days of NASCAR, Bill France Sr. (Brian France’s grandfather) executed a flawless business plan to convince the then stock car racers and event promoters to become part of his newly formed organization and sanctioning body (NASCAR), whereby he gained complete control over stock car racing. The foundation of NASCAR’s “business model” problems ironically stem from the grand success of Bill Sr. and his unilateral control of a racing empire, including control over the majority of racing venues (International Speedway Corp) and the stock car sanctioning body. Over the past half-century, teams competing in NASCAR relied almost exclusively on corporate sponsors to fund their operations – enabling the France Family to retain a majority of the sports revenues and amass a large network of racing venues, and establishing NASCAR Holdings, an incredibly profitable wholly owned private company.

Those times have dramatically changed and for too long, NASCAR teams have tolerated the exploitation and willingly bore the total burden to exclusively fund their operations through advertising and sponsorship. The rapid increases in costs of racing and teams’ operating expenses of the past 5 years, combined with the minimal increase in sponsorship value – have brought the teams’ very existence into question.

One must wonder, how long can the France Family continue their racing monopoly? Historically, race teams have avoided conflict with the France Family; and the only entities to challenge the France Family’s monopoly have been race track owners, such as Burton Smith and Speedway Motorsports. Even through the France Family has weathered many possible anti-trust challenges with settling most disputes outside the judicial system; I believe the current financial crisis and advertising recession is about to test the resolve of the France Family and their prehistoric business model.

In a stark contrast to the past decade, NASCAR is falsely promoting an image of growth and strength by stating that 15 new organizations have applied for licensing to compete in the Sprint Cup Series. What they fail to mention and what many novices are unaware – almost all of those “new” teams are merely opportunistic racers attempting to profit by a method called: “start and park”, which allows them to collect sizable race winnings (in comparison to their expenses) with a team and car specifically built to just run one or two laps, enabling them to collect profits – all without adding ANY value to the sport. What a sad day it is for the diehard NASCAR fan.

As many of you know, I was the founder of Bang Racing which was NASCAR’s most successful first year team in history. At the young age of 23, I built and operated this highly successful team and we made history finishing 2nd in our first race (Daytona) and winning our 13th race (Michigan International Speedway), which was the first win for Toyota in NASCAR history. While all this is now historical facts found in the archives of NASCAR history, what is typically not understood is that even as a very competitive team, our business model was fundamentally flawed because generating a profit was nearly impossible. Simply put; the cost of running a NASCAR team far exceeds its sponsorship/advertising revenue potential and without significant “business model” changes by the France Family, teams are doomed for failure.

NASCAR must be the only sport where the most profitable teams are the biggest losers’ and where finishing dead-last or not even attempting to win makes more money than being a top competitor. Something is dreadfully wrong when the most competitive teams with great on track performance cannot survive because the costs of running their teams far exceed their revenue potential. The problem is clear: without teams receiving a larger share of the sports’ multi-billion dollar television contracts – there will be no strategy that can make viable a long-term solution for the sport – that is the simple reality.

However, being the “optimist”, I hope Brian France and will realize quickly that his family has the unilateral ability to deliver the change in business model the teams and sport require to survive.

NASCAR today must be more than just a marketing platform. It needs to become a technical platform and support R&D objectives for the automakers. Evaluating NASCAR in the most cynical viewpoint, one could argue that the archaic technology, i.e. the use of carburetors, instead of fuel injection, is continuing the public persona that the Big 3’s product portfolio is less than innovative. It’s time for NASCAR’s leadership to make the necessary changes in the best interests of their lifeblood – their teams and automakers.

I want to enforce my statements in my post on July 21st:

NASCAR has a real opportunity for leadership – and can provide automotive manufacturers a real marketing platform that demonstrates alternative energy as performance cars – that are viable, affordable and energy efficient – and return NASCAR to its roots as “stock car” racing at its best.

NASCAR is standing at the crossroads, where the wrong decision could be the final nail in the coffin. Their choice may be a future of IROC style racing or one of a balance of innovative technology with the proper cost controls in place to secure the long term stability of all stakeholders. Unfortunately, if NASCAR becomes the next IROC, I am afraid their future will most likely be rather bleak.

Looking to catch a NASCAR wreck? Here’s one: The racing association’s sponsors are pulling out, NASCAR CEO Brian France told a Reuters summit. France insists he’s talking to potential new sponsors, but wouldn’t name names.

NASCAR saw a $150 million gain in sponsorship revenue in 2008, a gain France says won’t be repeated. “The question is, are we going to back up,” he said.

We all agree that NASCAR has a lot of problems. Simply but, this may be an example of the “chicken or the egg” syndrome. The fundamental metric which must improve is fan viewership. While this is not the end all solution – it would significantly improve teams’ ability to attract more corporate sponsors. At the same time, increasing fan viewership alone will not fix the sponsorship depression and teams’ ability to finance their operations. NASCAR needs resurgence – and if fan viewership is a MUST to reverse the current trend to drive more sponsor interest – then HOW do they make it happen?

Unlike any other major American sport – NASCAR rewards consistency over victory. So basically, under the current points system – you could finish second in every race and pretty much be guaranteed the Championship in the Sprint Cup Series. I don’t know about you but I have never celebrated my favorite driver’s runner-up finish. The famous philosopher Ricky Bobby once said, “If you ain’t first, you’re last”. Or, as legendary driver Dale Earnhardt put it, “Second place is just the first loser”. It’s time for NASCAR to incentivize and reward winning! Fans celebrate winning drivers and sponsors reward winning teams – the Championship and monetary system needs to reward “winning” and not “staying out of trouble”.

I’m curious – is there anyone else out there wondering why a driver can win the Sprint Cup Championship without a single race victory? It doesn’t make sense to me! And furthermore 4 of the 12 that qualified for the 2008 Chase for the Cup didn’t even win in the regular season. Sorry guys, while I have the greatest respect for Jeff Gordon and Kevin Harvick – honestly, you didn’t win in the regular season (or the Chase for that matter) – so you shouldn’t have the opportunity to be the Sprint Cup Champion.

So here are the basics of my proposal to increase on-track excitement and create more fan interest:

• You must win a race during the regular season to be a part of the Chase for the Cup and the Chase should be limited to a maximum of 10 drivers.

• The Chase Contenders should have a completely different points system which makes the championship more competitive and puts an emphasis on race victories.

• Redistribute the championship fund year-end bonuses to individual race victories. For example, if you were to take $20M from the year-end points fund and add $550K to each race victory – that would increase the average race winnings for 1st place to about $1 million per race. This would encourage drivers to take risks and forgo their “points racing” mindset which is ruining the sport.

NASCAR’s failure to act and evolve – if continued down this slippery slope – will result in further sponsor deflections, which could cause an irreversible contraction in all aspects of the sport we all love.

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.

http://www.youtube.com/watch?v=TrXhxmQJSS0

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.