But with Nascar’s television numbers dipping — down 12 percent from 2005 — sponsors are getting less mileage out of their investments. (TV ratings for other pro sports are falling, too.) Not surprisingly, sponsors are becoming more selective. “There’s a lot of competition for sponsors right now,” says Larry DeGaris, president of sports-marketing firm Sponsorship Research & Strategy. “Teams are going to be selling against each other.”
That will be hard on smaller racing outfits, particularly one-car teams. Once the dominant force in the sport, these small shops are finding it increasingly difficult to attract corporate funding. Of the nearly 50 drivers currently on the Nextel Cup series drivers list, only 7 are employed by single-car operators.
A Host of Suitors
At Nascar’s Daytona Beach, Florida, headquarters, CFO Todd Wilson says the sanctioning body works on cost control “every day and for a long time. It’s one of the real obligations we have in terms of managing the sport.” One of the latest and most ambitious cost-control measures is a new standard car design, the so-called Car of Tomorrow (see “The Cost of Tomorrow” at the end of this article).
Another obligation is to divvy up the revenues flowing into the sport “so that everybody is happy,” says Wilson. That’s no small feat. The racing teams in Nascar are independent contractors, not franchises. Racetracks, too, are owned not by teams or municipalities, but by promoters. Given the number of parties involved in stock-car racing, as well as the phalanx of sponsors, rights deals can get complicated.
Take the media-rights contract signed by Nascar in 2005. The agreement, which took effect this year, runs through 2015 and is worth an estimated $4.5 billion. Of that sum, track operators purportedly receive 65 percent, racing teams get 25 percent (in the form of prize money), and Nascar gets 10 percent. Straightforward enough. But negotiating the multinetwork deal with a host of suitors — including NBC, Fox, ABC, ESPN, TNT, and Speed — took the better part of a year, says Wilson, who joined Nascar from Arthur Andersen in 1999.
“In a TV deal, rights packages are constantly being rejiggered,” explains Wilson. “Somebody wants a particular race, or somebody wants a particular date. And just when you get it right, some small change happens.”
Or some big one. Before the deal closed, NBC dropped out of the bidding when it landed the rights to “Sunday Night Football.” Further complicating matters, ESPN was apparently keen to gain wireless rights for the ESPN Mobile service it was helping to launch. But wireless provider Nextel happens to be one of the three main sponsors of Nascar’s signature circuit. Obliging ESPN while keeping Nextel content was no minor accomplishment. “We went to the nth degree to accommodate ESPN’s request,” recalls Wilson.
Then, just months after the deal was signed, ESPN announced it was closing down ESPN Mobile. Still, Wilson says getting ESPN back into the fold (the cable network used Nascar broadcasts as late-night filler in the 1980s) was worth the effort. “We’re trying to convert the general sports fan to a Nascar fan,” he explains. “ESPN is good at that.”