July 3, 2011
By Kim Roberson
What happens when the sponsorship dollars needed to support a multi-million dollar racing effort are no longer there?
It was a question that seemed almost unimaginable in the 90’s and early 2000’s. You had companies like DuPont and Lowe's, Home Depot and DeWalt signing on to be the ONLY sponsor on the car for long term contracts.
DuPont and Jeff Gordon had a lifetime partnership with Hendrick Motorsports: So long as Jeff races the No. 24 in NASCAR, then DuPont will be there. The Wood Brothers No. 21 car seemed to always have Ford providing Motorcraft to decorate the hood of their red and white car. DeWalt’s yellow and black logo was a staple on the no. 17 of Matt Kenseth -- so much so his pit crew took on the nick name “the Killer Bees.”
Now, we have major teams losing major sponsors, and former Champions looking desperately for enough cash to fund their race efforts -- even on a shoestring budget.
Yes, the economy has been hurting. We see it by the number of fans in the stands -- people can no longer afford to take a long weekend and pack the family in the car and head to the race track -- pay for gas, the hotel or camping spot, and the race tickets. It is easier, and cheaper, to sit at home and watch it on TV.
As the ability of companies and fans to afford NASCAR has dropped, the cost to actually run in NASCAR continues to rise. Sprint Cup teams just spent millions to re-vamp a car that they had just spent millions to build from scratch only five years ago. Next year, they will need to re-work the engines as they go from carburetors to fuel injection. The Nationwide Series just completely revamped their cars to more resemble so-called “Pony Cars” -- Ford Mustangs, Dodge Challengers from Fusions and Chargers.
All three major series have undergone changes in their primary sponsors in the last decade, with long time sponsors Winston, Busch and Craftsman leaving and being replaced by Nextel/Sprint, Nationwide, and Camping World.
Tracks are closing down portions of their grandstands so as to fill the areas that are more visible on TV. Other tracks, such as California and Atlanta, have lost entire races because of their inability to put enough fans in the seats.
Sure, the race next weekend in Kentucky has proudly announced that is has sold out all 107,000 of their grandstand seats -- but it is the first ever Sprint Cup race there, and you would hope that fans would want to attend a first ever NASCAR event. The question is -- will they be able to repeat the sell out next year, and in years beyond, when the newness wears off?
Back when NASCAR first started, the drivers barely made enough to pay for the gas to get to and from the track. Then drivers learned that if they wanted some extra money to help with repairs or to build a better car, they could ask a local garage or car dealership to give them money in exchange for putting their name someplace on the race car. In the late 1960’s and early 1970’s, teams started enticing larger sponsors like STP, Hardees, and Mountain Dew to help provide money to the race teams.
Thanks to the ingenuity of the Wood Brothers, pit crew members went from being a bunch of guys recruited off the street to put in a few hours a day to a full-time group of men who trained to change pit stops from something that took several minutes to something that took less than 20 seconds. Teams went from having the owner and driver (often they might even be the same person) and maybe a few buddies working for free (or maybe a few beers) on the car late at night after completing their day job to a group of men and women fully dedicated to the design and development of the best race car possible. That meant more money was needed to pay full-time.
In 1972, NASCAR decided the way to make tracks more appealing to fans and races more appealing to drivers was to bring in someone to help them foot the bill, and R.J. Reynolds became NASCAR’s first title sponsor with Winston. Tracks improved seating, bathrooms, and other amenities that made going to the races appealing to more fans. More fans meant building even nicer facilities and better amenities. In some cases, that meant increasing ticket prices, but not so much as to be unaffordable.
As the sponsorship dollars got larger, so did the team’s development budgets. “Strictly Stock” cars went out the door in exchange for streamlined, custom designed cars bearing the manufacturer’s logo. By the mid-1990’s, technology was as much a part of NASCAR as the car and driver, and sponsorship dollars grew larger and larger as teams looked to find that special edge that would make them better than the next team.
Somehow, over the last 20 or so years, NASCAR went from businesses needing a million dollars or so to operate to virtual bottomless pits where there never seemed to be enough money. Big teams found a way to become even bigger by finding big businesses to provide them with contracts worth more money than it took to run all aspects of the first 20 years of the sport, from the teams to the tracks. Tracks built even bigger and better facilities, with new big screens and scoring pylons to keep fans informed of where their drivers were on the track, and nice seats for fans to sit on as they ate their variety of food items and drank their sodas or beer or mixed drinks.
Prices of tickets skyrocketed to cover the costs of the upgrades and increased race purses. Hotels saw an opportunity to make money and jacked up their rates to, in some cases, triple and quadruple their normal “rack rates”. Parking near the track went from being free to, in many cases, costing almost as much as the cheapest race ticket.
Two years ago, Jeff Gordon became the first driver to earn more than $100-million in winnings. Possibly more than it took to run the entire sport for the first quarter century of its existence. Both International Speedway Corporation (ISC) and Speedway Motorsports Incorporated (SMI) have annual revenues of over $100-million a year (although ISC went from a net loss of income of almost $411-million dollars in 2002 to a net plus of income of $105-million, an increase of over half a billion dollars.) the winner of the Daytona 500 makes more than $1-million dollars for just that race. Many drivers make more than $2-million dollars a year between their portion of race winnings and race purses.
And yet, just this week, Crown Royal, the new sponsor for Matt Kenseth’s No. 17 Ford (and which replaced the DeWalt sponsorship after that company left the sport a year ago) announced that they are also pulling out of the sport at years end.
Red Bull, whose ownership group has poured many millions of dollars into getting their two NASCAR Sprint Cup teams running with only moderate success, announced this week that they were no longer going to own those two teams at years end, and were still unsure of how much sponsorship money they would invest in future seasons.
Jeff Gordon’s iconic DuPont paint scheme has been replaced for more than half the season with a sponsorship from AARP because DuPont announced last year they could no longer afford to invest the money needed to finance their logo on the hood of the car for the full season.
Geoff Bodine, the NASCAR Camping World Truck Series champion, has been fighting to get his truck sponsored so he can just run races this year -- forget running to compete for this year’s Championship.
Two long-time participants in the NASCAR Busch/Nationwide Series, the No. 99 of Michael Waltrip Racing and the No. 20 of Joe Gibbs Racing, have had to cut back their schedules considerably due to lack of sponsorship funding. The No’s 6 and 16 of Roush Fenway racing have been running almost completely out of the company’s bank account because they can’t find anyone to pay to be on the hood of their cars. Kenny Wallace, driver of the No. 09 in the Nationwide Series, makes a point of saying that he has had to go knocking on doors and making cold calls to companies just to ensure his race car has a sponsor, even for just a few races, each weekend.
Over and over again, I have heard race fans that used to go to several races a year say they can now barely afford to go to one because they have lost their job, had a cut in their finances, or just can’t afford to pay for the gas, hotel, and race tickets.
But what can be done about this? How do we break the cycle of too high of a cost versus too little money to pay for it?
Where do you cut costs to save money without losing the quality of racing we fans have come to expect when we watch a race, either in person or on TV?
Sure, we can point to the economy needing to turn around as part of the solution, but the cost of sponsoring a race team will continue to go up because the cost of building a car and paying for the team will continue to rise so long as there is technology to be used and bright engineers to work on faster designs.
That means race purses will continue to need to be high to cover the expense of not only paying the winner but keeping facilities in the condition that fans have come to expect and to keep the drivers on the track safe as the run the races. And that means tickets will need to still be more than just a few bucks.
Somehow, something needs to be done. I am not an accountant or a business major -- I have a hard time balancing my checkbook-- and so I know it will require people with more business sense and financial acumen than I have to find the answer to this problem. But so long as this sport continues to bleed money, I see things getting a whole lot worse for fans and teams before it gets better again. I am afraid we may soon find ourselves with a handful of big teams who have found a way to cobble together a good amount of cash to finance their teams -- and no one else, because the little guys just can’t afford to play anymore.
We shall wait and see. But unless the financial status of not only the country, but the people and companies who work and live here, get better, I have a feeling NASCAR has a bumpy few years ahead in its future.
Follow Kim on Twitter: @ksrgatorfn
The thoughts and ideas expressed by this writer or any other writer on Insider Racing News, are not necessarily the views of the staff and/or management of IRN.