With a new TV contract on the horizon, NASCAR must sift through the positives and negatives of its landmark deal of 2001
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The following feature was originally published in the 2004 Athlon Sports Racing annual:
With a new TV contract on the horizon, NASCAR must sift through the positives and negatives of its landmark deal of 2001.
Now that the TV guys have three years under their collective belts, it’s time to look to the future of TV and the sport. It’s no secret that both FOX and NBC have lost money on the current big-dollar package. Advertising sales have not covered the rights fees. But while the networks are hurting, most local affiliate stations have seen racing as a financial bonanza.
Interesting questions are on the horizon. What if one or both networks refuse to sign at the same rights fees or even decline to sign up for another go-round? The sanctioning body has never been known to look into the future, and now the TV networks have the upper hand. NBC has a history of cutting losses and has dropped sports such as the NFL, NBA and Major League Baseball in recent years. Insiders say that NBC was close to dumping NASCAR early in 2003 because of the financial losses. What happens if the peacock passes on the next contract? Is ABC or CBS ready to sign on?
There are four networks that fight for golf, NCAA basketball and football, NBA, MLB and the NFL. The NASCAR season overlaps all other sports, making it difficult for the networks to schedule other sports. Business sense suggests that rights fees will not be as high for the next contract. If NASCAR refuses to accept lower fees, we could be back to cable and just a few network races.
Fox got off to a rocky start by not putting car sponsors on the car graphics at the 2001 Bud Shootout because said sponsors did not pony up with advertising dollars. Only the cars with sponsors that spend advertising dollars on FOX had their logos on the car graphics. Car and race sponsors were required to purchase advertising before they would get significant mentions or logo exposure. If the rights fees had not been so high, maybe that embarrassment would have been avoided. When people lose money, they tend to look after their own interests instead of the well-being of the sport.
Fox started off a lap down with sales; the week before their first Daytona 500 they had not sold all of the ad time. It was a fire sale to get advertisers on board. When advertisers backed off, the arm-twisting began. From the beginning, there was a Friends of Fox list for all camera operators and directors, and the teams on the list received extra exposure. Keep in mind, a primary reason to sponsor a racing team is the value of the TV exposure. When the new TV package was announced, primary sponsors were excited because the value of their marketing dollar grew with the added TV exposure.
Soon the sponsors found out the hard way that unless they spent additional dollars on TV network advertising, they were snubbed on the exposure. If you ever wonder why your favorite driver does not get much air time, see if his sponsor advertises on the networks. Would Michael Waltrip get the same amount of face time on TV if NAPA did not spend the big bucks on network advertising?
The irony lies with the value of the TV exposure. Sponsorships are sold based on the value of exposure during race coverage. That value exceeds the equal amount of commercial ad time. Given the amount of logo exposure during a race, it could be argued that purchasing advertising time during race coverage does not make sense.
The same arm-twisting tactics were used on the tracks and their race sponsors. This led to a lawsuit at Atlanta Motor Speedway, which had a contract with Cracker Barrel for its spring race. Cracker Barrel’s contract was based on the old TV package with logo exposure and title to the race. With the new package, Cracker Barrel had to pony up advertising dollars or the race would be known as the Atlanta 500 to the TV audience. Lawyers had to settle that one.
In the first year there were a significant number of commercials for NASCAR. The commercials were entertaining and ran instead of paid advertisements. Every time a NASCAR spot ran, you can bet the losing-money meter was running.
This is why you see races without sponsors. The networks required the race sponsors to purchase advertising to get mentions and exposures during the race. Losing race and title sponsors hurt tracks, but that was the cost of doing business with the new packages. Once again, the losses by the network created the unintended result of losing race sponsors.
There was an incident at Charlotte where promoter Humpy Wheeler was prepared to hook wreckers to the TV trucks and equipment because his race sponsor would not be mentioned during one of his races. The race sponsor did not purchase an advertising package, so its name would not be part of the network broadcast.
Soon, the new rights packages will be negotiated. Fox and NBC are smarter and know what is fair to offer. Since they’re loaded with knowledge they did not have before, it is reasonable to assume that the bids will be lower. This means the purse money is less, the track’s share will be less, and even the sanctioning body will get less money from the TV contracts.
A significant portion of the Nextel advertising cash will be spent with Fox and NBC. This will help, but is it enough to get the networks in the black? Winston money could not be put on TV, so NASCAR’s Nextel package is designed to offset network losses. When NASCAR and the networks sit down to negotiate, the Nextel money will be a large part of the package.
On a local basis, the Fox and NBC affiliates are finding success with advertising sales, but the cable guys are still kicking serious butt with the number of races on TNT, FX and the others. The cable guys are offering the same number of races at a lower spot rate.
Daytona has announced a marketing package with Disney for the Daytona 500. Disney owns ABC and ESPN, but the Daytona 500 will be televised on NBC in 2004 with the Disney promotion in full swing. You can bet NBC will go out of its way to avoid the Disney promotions whenever possible.
It has been said many times that money is the root of all evil. The TV decisions are all about the money. Disney is paying big bucks for a Daytona promotion, and the TV broadcast will all but snub the mouse by purposefully limiting exposure. NASCAR receives money from both NBC and Disney, so it will win either way.
The moral of this story: Be careful what you wish for. NASCAR was strutting around, bragging about its huge rights fees from the networks. But the trickle-down effect has hurt both car and race sponsorships significantly. The future might be bright, but someone has to pay the light bill.