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NASCAR’S lack of governing body causes confusing business model

Sponsorships are a key driver of revenues in Sports so why does NASCAR fight with its teams and tracks for money?

(Photo Credit: Michael Colangelo)
(Photo Credit: Michael Colangelo, Sports Business Institute)

NASCAR is a major sport, covered by major media outlets, and set up with a nationally televised distribution deal. The theory would be that it is flush with cash like most other sports, however there are some issues it must address moving forward. The problem revolves around NASCAR’S lack of a true central governing body. Most American sports leagues are governed by a central body headed by a commissioner. The commissioner’s singular objective is to act and rule in the best interests of his stakeholders. In the NBA, NFL, MLB and NHL, those stakeholders are clearly defined: the franchise owners. In NASCAR, the lines are less clear. Sure, the France family owns some of the Sprint Cup tracks, but many races are held by owners not associated with NASCAR (see Bruton Smith).

The teams race under NASCAR’s rules and regulations, but there is no clear relationship between owners and the league similar to other pro leagues. There are larger teams and more influential owners, such as Roush/Fenway, Hendricks Racing, and Joe Gibbs Racing, but a lot of cars are owned by smaller single owners.

The winner's circle at Texas Motor Speedway where sponsors and teams want to end up. (Photo Credit: Michael Colangelo Sports Business Institute)
The winner’s circle at Texas Motor Speedway where sponsors and teams want to end up. (Photo Credit: Michael Colangelo, Sports Business Institute)

Confusing Business Model

Take the Duck Commander 500, which I attended earlier this year. NASCAR has its exclusive partners and sponsors. These include companies such as UPS, MillerCoors (specifically Coors Light) and Nationwide Insurance. Teams also sell sponsorships on cars. Sometimes there are no conflicts with NASCAR sponsors, such as Dale Earnhardt Jr.’s National Guard sponsorship deal, or Danica Patrick’s Go Daddy partnership. Then there are direct conflicts. Kevin Harvick races the Budweiser number 4 . . . and there is also a Miller Lite car driven by Brad Keselowski. A Coors Light Silver Bullet car does not exist. Denny Hamlin delivers his best effort on the race track every weekend for Joe Gibbs racing and the FedEx car, but brown does not deliver for a UPS car (or at least not at the Duck Commander 500).

Ready to be more confused? As mentioned, the France family owns and runs NASCAR. The family also owns many tracks under the parent company International Speedway Corporation that host NASCAR races. However, the Duck Commander 500 isn’t owned by the France’s track ownership company. That means the track also needs to sell sponsorship and partnership inventory that probably conflicts with sponsors of NASCAR and the teams.

Tracks host a maximum of two NASCAR races a year, and if they are lucky an Indy car race and/or a truck race. They need to sell track signage to cover costs and create revenue. Especially when the weather contributes to lower attendance and the track can’t generate revenue on concessions.

This leads to the loosely defined league,  teams and tracks competing for revenue dollars instead of working together to grow the proverbial pie. If a company can become an official sponsor of NASCAR, it won’t sponsor a car. It works the other way as well, especially if a company can sponsor a star driver. Why would Lowes sponsor an event or NASCAR, when it has six-time Sprint Cup Champion Jimmie Johnson winning an event sponsored by rival Home Depot?

Competing Factions Create Problems

Multiple cars are funded by private owners and have almost no shot at winning. Racing royalty such as the Wood family and its team, Wood Bros. Racing, can’t afford to enter a full season of races. The Woods pick and choose which races to enter, continually worried they won’t be able to even race to qualify because a crash in the rain could ruin their entire season.

Other teams go to qualifying with no sponsors, hoping to finish high and get a temporary sponsor the day before the race. That would be like the Dallas Mavericks trying to sell naming rights to their arena every other week. April 6, welcome to American Airlines Arena… April 13, welcome to Whataburger Wonderdome!

NASCAR and stock car racing get a lot of things right. It is an amazing experience live, and the fans are some of the most passionate in the United States. There are great personalities and consistent drama in the race to the Sprint Cup. There are huge stadiums for live entertainment and riveting drama for televised events.

However, there is the chance for more. First, NASCAR needs to fix its obvious revenue conflicts with the teams and tracks. Second, it needs to expand its fanbase into new domestic demographics and foreign countries to grow revenue. Third, it needs to work on creating some form of revenue sharing to create greater competitiveness. There is no reason the Wood Bros. should be wary of racing in qualifying. More teams and more cars create new rivalries and greater drama. In turn, this creates more fans, which in the end creates more eyeballs to sell to sponsors.

NASCAR seems comfortable where it is, the real issue is where it is going.

Michael Colangelo is Assistant Director at the USC Sports Business Institute. 

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