by Mike Neff
NASCAR is an expensive proposition. Building cars, wrapping the exteriors, getting every ounce of horsepower out of engines, transporting equipment and teams all over the country and employing the necessary individuals to run an organization takes millions of dollars. While there is some money to be had from being successful on the racetrack, most of the money used to run teams comes from sponsors, and the slowly recovering economy has made it increasingly difficult for teams to get the necessary funding from sponsors to run a race team on a week-to-week basis.
Once a thriving enterprise that had companies lining up to put their names on the hoods of race cars and sponsors willing to part with millions of dollars, the sport’s popularity began to wane over the last few years, and the appeal to sponsors slid with it. As a result, there have been numerous consolidations in the sport while the remaining teams are cutting back on payrolls and capital expenditures. In just the last three seasons, Dale Earnhardt, Inc., Petty Motorsports, Hall of Fame Racing and Ginn Racing have all closed down operations and been absorbed by other teams. The number of cars that are coming to the track on a week-in, week-out basis are getting fewer and fewer as the number of fans in the stands and watching on TV dwindles.
Major corporations have scaled back advertising budgets at the same time, and are being far more discerning about where those precious marketing dollars are being spent. The uber-loyal fan base that used to trek around the country following the NASCAR circus has been greatly reduced by the sanctioning body’s focus on attracting a “casual,” more mainstream, fan. In the past, the fans that followed the NASCAR road show bought only the products that were on the hood of their favorite drivers’ cars. Companies could recoup far more than their investment in a sponsorship of any car on the track. Now that many of the loyal fans have been driven from the sport, sponsors realize that they no longer receive the return on investment from spending several million dollars to be represented on a piece of sheet metal.
The sport is working hard to bring those fans back, and ultimately, the value in having a car painted with the colors of a company’s product may again return. However, for now it has become a hard sell for teams to convince a company to make a multi-million dollar commitment. And the search for sponsorship is not only affecting the small teams in the garage area, but the larger organizations as well.
DuPont, the only primary sponsor that Jeff Gordon has had since his Cup debut in 1992, announced that it is scaling back its support next year. Hendrick Motorsports has been searching for a replacement for the four-time series champion, but has yet to sign a backer. After extensive negotiations, Wal-Mart, the largest retailer — heck, the largest company — in the world, decided that it did not see the value in spending the $20-30 million it takes to be Gordon’s primary sponsor. When the top organization in the sport is having trouble finding a company to be the main name on the car of one of the most popular and successful drivers in the sport, you know times are hard.
Hendrick Motorsports isn’t the only top-flight organization having trouble. Penske Racing announced this week that Verizon, the primary sponsor on Justin Allgaier’s Nationwide Series ride, will not return next season. Unfortunately for Verizon, it was a difficult relationship to endure, as Sprint has exclusivity rights in the Cup Series due to its title sponsorship of the circuit. With a lack of activation and on-site promotional opportunities, Verizon decided its best option would be to transfer the bulk of its dollars to Penske’s IndyCar effort.
This news comes on the heels of word that Mobil 1, the primary sponsor on Penske’s No. 77 Cup Machine, will vacate the spot after a lengthy relationship. With Shell-Pennzoil coming over to sponsor Kurt Busch next season, Mobil 1 was the odd motor oil out, and Hornish is now looking at an uncertain future in the Cup Series due to a lack of funding.
For the smaller teams in NASCAR, it is even tougher to secure sponsorship. Front Row Motorsports filed suit against Biotab Nutraceuticals and its ExtenZe brand when the driver, Kevin Conway, and sponsor abruptly left, forcing FRM to cut back on the budgets for its other two cars. The search is now on to fill the financial void, as budgets and salaries are slashed. FRM will most likely reduce its stable from three cars to two next season, which not only makes things tougher on Front Row, but it also means NASCAR will be one step closer to less-than-full fields.
The erosion of the NASCAR brand has not only impacted racing, it’s also impacted the sport’s influence in the business world. The NASCAR Plaza, attached to the NASCAR Hall of Fame in downtown Charlotte is currently 60 percent vacant, struggling mightily to fill empty space. As a result, the mortgage holders are pressuring the company that manages the building to live up to its obligations for the loans that were utilized to build the structure. The company noted in a recent story that many of the potential tenants for the building are balking at the idea of having their name associated with the NASCAR brand, when just 10 years ago companies were begging to be married to the NASCAR name. These same businesses are now worried that being associated with the top sanctioning body in the country might, in some way, be a hindrance to the success of their own organizations.
The slipping popularity of NASCAR is affecting merchandise sales, as well. The number of t-shirts, hats, diecast cars and other paraphernalia sold at the track and in retail stores around the country is declining. Companies that sponsor race teams have always been able to count on the secondary advertising received by their logo being plastered on NASCAR merchandise. That additional incentive is no longer there for potential sponsors, or is at least diminished over what it used to be, and that is another difficulty that teams are facing when selling the benefits of sponsorship to companies.
There are certainly some benefits to sponsoring race teams. Every year the value of sponsorship is calculated, and the top running teams generate millions of dollars of exposure just by the car being shown on television during races. However, that value is not what it used to be, and teams are being forced to learn to live on a much tighter budget until the sport is able to figure out how to return its popularity levels or develop another angle to provide more value to corporations that are interested in maximizing their advertising dollars.