Monday, November 17, 2008

The Economy Hits NASCAR Hard

How quickly the mighty have fallen. After a meteoric rise over the past 10-15 years, NASCAR was on the verge of challenging the NFL, America’s number one sport, for the top spot in television ratings. No more. NASCAR has taken a hit. Make that multiple hits.

Where to begin? Hopefully, it can’t be as bad as the recent headline in The Boston Herald which screamed, “Will NASCAR Survive?” But the reality is many of the teams that form the backbone of the sport are hurting. And the worst is apparently yet to come.

Attendance at Sprint Cup races around the country took a nosedive this year. The drop in attendance was evident prior to the meltdown in the economy, but coincided with the run-up in the price of a barrel of oil and a gallon of gas. Fans, apparently concerned with paying their mortgages and fearful of the floundering stock market, were staying close to home.

Merger talks aimed at strengthening teams struggling for sponsorship dominated the garage throughout the season. Some of those talks have been successful, including the recent announcement that Dale Earnhardt, Inc. and Ganassi Racing will merge, with the latter assuming control. In effect, DEI ceases to exist, barely one year after CEO Theresa Earnhardt rejected a bid from Dale Earnhardt, Jr. to purchase controlling interest in the company founded by his father. Theresa’s stubbornness personifies the old adage that a smaller percentage of something is better than 100% of nothing.

With the Cup season ending last Sunday, expect a blizzard of pink slips in the garage, reflecting a number of teams’ uncertain future in an unstable economy. Some teams are fortunate to have long-term sponsorship agreements with stable companies. But teams with expiring sponsorship deals are justifiably concerned about qualifying a car in next year’s Daytona 500.

The Big Three American automakers, bleeding cash and lobbying Congress for a bailout, are reassessing all marketing expenses and sponsorship relationships. It’s hard to imagine what NASCAR would look like without direct subsidies from Detroit. But for now, none of the three auto manufacturers, Ford, Chevy or Chrysler (Dodge), have announced plans to pull out of NASCAR entirely. Their position acknowledges the obvious: They need to move inventory, and one of the best ways to draw buyers into the showroom on Monday is to have a presence at the track on Sunday.

In an effort to reduce team costs, NASCAR last week announced a ban on all testing at tracks that host NASCAR events. The move was controversial, with some arguing it will give multi-car teams who share information an advantage over smaller, less successful teams. Although NASCAR admitted it didn’t know how much the move would save teams, some estimates put the cost of testing at $100,000 per day, meaning industry-wide savings could total as much as $30 million per year.

The falling popularity of NASCAR was made painfully obvious during the penultimate Sprint Cup event of the season, the November 9 race at Phoenix International Raceway. With 34 laps remaining, and Jimmie Johnson, who was leading the race, on the verge of becoming only the second driver in NASCAR history to win three Championships in a row, ABC switched the telecast to another Disney network, ESPN2, in the Eastern and Central time zones. Seems ABC was committed to showing America’s Funniest Home Videos in its entirety.

The move was reminiscent of the infamous “Heidi Game” of 40 years ago. With the New York Jets leading the Oakland Raiders 32-29 and 1:05 left in an American Football League game, NBC elected to begin showing the movie “Heidi.” The Raiders proceeded to score two touchdowns in those final 65 seconds and won the game, 43-32, creating a firestorm of complaints from viewers and provoking criticism from the media. ABC was spared similar scorn, as Johnson won the race and increased his points lead over runner-up Carl Edwards.

But the message to NASCAR was clear: You aren’t relevant, at least, not as relevant as America’s Funniest Home Videos. Who would have thunk it just two short years ago?

The economic times are tough for many Americans, and destined to get tougher. And the sports world won’t be spared. NASCAR is just the first of the big-five sports to feel the pinch.

Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is an Assistant Professor of Sport Management at Eastern New Mexico University, teaches the Business of Sports at the University of Wyoming, and is a contributing author to the Business of Sports Network. Jordan can be reached at

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