The 2012 Nascar season started with great optimism in the garages after a thrilling 2011 Chase and a TV ratings increase for the first time since 2005. Yet, for each step forward, the sport seemed to take a step back last year. The season's first and biggest race, the Daytona 500, was rained out and pushed back to Monday night. Then the old problems cropped up during the year: sponsorship departures, dwindling attendance and another drop in TV ratings. But now three races into 2013, the optimism is back thanks to a new car, a rich TV contract and a jolt from a Sprint Cup rookie. This time, Nascar might keep the momentum going.
Much of the good vibes revolve around TV. Yes, network ratings fell 4% last year (down 6% on cable), but Nascar extended its rights agreement with Fox in October for the first 13 races of each season. The new eight-year agreement is worth $2.4 billion, a 36% increase over Fox's previous deal. Some Nascar insiders speculated that the sport might have to take a haircut in the new deal after the ratings declines, but they got a solid increase instead. "Television is arguably the most critical piece of Nascar because TV is where it gets its reach," says Zak Brown, founder and head of JMI, which sells and manages motorsports sponsorships. "It is very encouraging that indicator is so strong."
The other half of the Sprint Cup package will come up for bid this summer and a deal is expected to be completed by early fall. TNT and ESPN currently pay $2.7 billion and Nascar chief marketing officer Steve Phelps says there is interest from the incumbents, NBC and others. He expects a "significant" increase. "Live sports is still a great place to be," says Phelps. "We deliver week in, week out strong, consistent ratings."
The NFL might be the king on TV in the fall and January, but no sport can match Nascar's 10-month schedule with nearly six million people watching each Sprint Cup race on average.
This year got off to a strong start on TV with ratings for the Daytona 500 up 24% and their highest since 2008. Partial credit goes to crossover star and Sprint Cup rookie of the year candidate Danica Patrick. Her Daytona pole victory attracted casual viewers to the race telecast. Phelps expects ratings for the year to finish up.
Fans also tuned in to Daytona to see the new Gen-6 cars, which replace the widely panned Cars of Tomorrow. The jury is still out on the Gen-6 car, but the sport's manufacturers like them since they more closely resemble the cars they sell in the showroom. Nascar was built on the motto of "Race on Sunday, sell on Monday." Chevy, Ford and Toyota Motor have increased their support of Nascar teams with the "stock" once again back in stock cars.
The sponsorship picture in Nascar remains uneven. Office Depot and Dodge left the sport last year, while PepsiCo’s Mountain Dew brand reduced its sponsorship from 20 to five races for 2013 on the No. 88 car driven by Dale Earnhardt Jr. But more than two dozen new companies joined Nascar as sponsors in 2012 and others, including Hertz and Textron, signed on this year.
There are sponsorships openings for 2013 on the cars of high-profile and highly-paid drivers like Earnhardt (13 races) and Stewart (6 races). Both teams are holding out for premium prices, as these cars carry some of Nascar's priciest real estate. "I don’t think it is so hard to fill races (with sponsors). What is difficult is to sell races at the dollar value that we want to sell them at. That is a distinct difference," says 2012 Sprint Cup champion Brad Keselowski, who drives for Penske Racing.
The sale of Nascar teams, including minority stakes, has been quiet in recent years after a flurry of activity in the second half of the 2000s. The flow of sponsorship dictates the rise and fall in the value of Nascar teams, as sponsor money represents 75% of team revenues.
Hendrick Motorsports is Nascar's most valuable team with a value of $357 million, up 2%. Hendrick is worth twice as much as second-ranked Joe Gibbs Racing. Hendrick is the only four car Sprint Cup team left and brings in $125 million in sponsor revenue a year. Lowe's extended its deal last month through 2015 as the primary sponsor of Jimmie Johnson's No. 48 car.
Earnhardt Ganassi (ranked No. 8 with a value of $72 million) announced it would switch engine suppliers from Earnhardt Childress Racing to Hendrick starting in 2013. This will add to Hendrick's coffers, which are already full as Nascar's most profitable team with an estimated operating income of $16.6 million in 2012.
Gibbs, worth $168 million, leapfrogs Roush Fenway Racing. Gibbs got a huge boost in 2013 with the addition of 2003 Sprint Cup champ Matt Kenseth, who replaced Joey Logano in the No. 20 car. Gibbs has been one of the most consistent teams when it comes to selling sponsorships will all paint schemes sold ahead of the season start in 2012 and 2013. JGR signed a 30-race renewal with FedEx last year on the No. 11 car. Gibbs plans to run a fourth Nationwide team in 2013.
The value of Roush is down 10% to $166 million. The team has struggled to sell sponsorships in recent years and lost Kenseth to Gibbs. After a miserable 2012 where he missed the Chase, Carl Edwards ended his 70-race winless streak in February with a victory at the Subway Fresh Fit 500 in Phoenix.
Richard Childress Racing ranks No. 4 with a value of $139 million, down 6%. Childress is at a crossroad as it prepares to lose its top driver, Kevin Harvick, who signed a deal to race for Stewart-Haas Racing starting in 2014. Harvick was the only Childress driver to qualify for the Chase or win a race last year. Still to be determined is if long-time sponsor, Budweiser, will follow Harvick out the door.
The value of Stewart-Haas is up 14% to $123 million and ranks fifth. Tony Stewart and Gene Haas are building one of the top teams in Nascar. Stewart-Haas debuted in 2009, but already has a Sprint Cup title to its credit and next year plans to run four Sprint cars with Harvick on board. Office Depot and U.S. Army ended their sponsorships last year, but Stewart-Haas added Bass Pro Shops and doubled the race commitment from Quicken Loans to help fill the sponsor void. Stewart and Patrick are a formidable one-two punch when it comes to driver star power.
Nascar's top nine teams are worth $143 million on average, up 1% over last year. Each of these teams are profitable by our count (some just barely) with team's cutting budgets in cases where sponsor shortfalls arise. Earnings are down 10% overall compared to 2011.
Nascar teams are cultivating relationships with companies and inking smaller sponsor agreements in hopes they develop into expanded deals in some cases. Likewise, companies are dipping their toe into the sport to see if it is a good fit. Childress Racing signed a deal with door lock maker, Kwikset, this year to serve as an associate sponsor throughout the season, as well as the primary paint scheme at Daytona in July. "The Nascar audience represents a large number of consumers who use our products everyday and it is a great way to connect with those fans," says Greg Gluchowski, who heads Kwikset, a division of Spectrum Brands.
The Nascar audience is still massive with nearly 70 million unique television viewers and 3.5 million fans at the track last year. It just isn't as massive as it used to be. Nascar averaged roughly 98,000 fans at races last year, which was the lowest attendance since Nascar started announcing attendance in 2003. The peak was 2005 with 130,000 fans per race. Revenues at Nascar's two publicly traded track operators, International Speedway Corp. and Speedway Motorsports, are down 23% and 20% since 2008, due to dwindling attendance. Nascar drew snickers when it announced that it would no longer release attendance figures starting in 2013. "Our feeling was it wasn’t our place to do that. They were estimates we were making and it was not beneficial to do that," says Phelps.
Despite the sponsor and attendance troubles, the sport still resonates extremely well with the sport's passionate fans. The difference between Nascar and others sports is fans recognize the importance of sponsorships. Fans rail against teams in stick and ball sports when they sign venue naming rights deals. Nascar fans know that sponsorships make the sport work and they are more loyal to those products than the fan-sponsor relationship in other sports. Companies are still finding Nascar a good place to do business. Mars said it receives a 4-to-1 return on investment for its Nascar sponsorship. Great Clips got a 3-to-1 return in media value over dollars invested, according to Sports Business Journal. The glory days of Nascar are certainly not back, but the sport looks like it has turned the corner.
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