A Wild Ride

Over the past decade, Nascar has raced to the top of the sports world. Is it finally beginning to slow down?

Speed. It’s about speed. That may seem ridiculously obvious — like saying the sun is a tad on the warm side. But to witness up close how cars accelerate out of a turn, their 800-HP engines thundering, the g-forces pinning drivers to their seats as they streak past the grandstand, is to understand the visceral appeal of stock-car racing.

It’s also about heroes, and villains, and rivalries. The original good ol’ boys of the 1940s might have been ex-moonshiners, but today’s stock-car racers are media-savvy celebrities — Jeff Gordon, Dale Earnhardt Jr., Tony Stewart. Their bumper-to-bumper duels are broadcast 10 months of the year, and their off-track lives are fodder for People magazine.

And, of course, it’s about the cars themselves — Ford, Chevy, Dodge, and the new gunslinger in town, Toyota. And then there are the other corporate sponsors, whose colorful logos adorn practically every inch of cars and drivers alike.

No one understands all this better than the people who run the National Association for Stock Car Auto Racing (Nascar). Over the past decade, they have been growing the family-run sanctioning body, and the sport, at a blistering pace. Races have been added, TV coverage expanded, big-hitting sponsors signed up. Stock-car fans now number 75 million worldwide, and total industry revenues from racing — estimated to have increased at a 14 percent compounded annual clip during the past decade — reportedly top $3.4 billion (outpacing the National Basketball Association, among others).

Now, however, for the first time in memory, the money coming into the sport is leveling off. Nascar-licensed retail sales have hovered around $2 billion since 2004, following years of double-digit increases. Track attendance is down, as are TV ratings.

Racetrack operators like Speedway Motorsports Inc. (SMI) and the Nascar-connected International Speedway Corp. (ISC) are already feeling the pinch. So are racing teams, which are suddenly finding it harder to line up sponsorship money to fund an increasingly expensive pursuit. Last year, PPI Motorsports failed to attract sufficient sponsorship and closed its doors.

Even marquee teams like Roush Fenway Racing and Joe Gibbs Racing are starting to worry. Forbes magazine estimates that 4 out of the top 15 racing operations in Nascar lost money last year, while several others barely eked out an operating profit.

The very success of Nascar may now be working against it. Its decline in popularity “could be due to overexposure in some markets,” says Michael Pitts, an associate professor at Virginia Commonwealth University’s School of Business. “It could be that there are so many other choices. Or it could be that Nascar is becoming passé.”

Running Wide Open

Critics suggest that teams should simply spend less. But as Scott Lampe, CFO at racing heavyweight Hendrick Motorsports, points out, throttling down on expenses is difficult in a business where operating units are measured by pole positions, not cash positions. “The frustrating thing about being a CFO in this business,” says Lampe, “is that it’s not like I can go to a crew chief and say, ‘Hey, what does your P&L look like this year?’”

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