Monday, December 15, 2008

TV Contract Key To Saving NASCAR


The words leap off the page of the New York Times website:

In hindsight, Mr. France’s broadcast deal, which brings in about $500 million a year, may be the main thing that saves NASCAR from ruin.

Click here to read the entire article from Susanna Hamner entitled "NASCAR Sponsors, Hit By Sticker Shock."

Ms. Hamner calls NASCAR "particularly vulnerable" to the problems with the economy and points-out that automakers provide approximately one-third of the total sponsorship in the sport.

“Many of the major sponsors pulling back have been involved in our sport for decades,” NASCAR Chairman France tells Hamner. “They’re making cuts, and we’re affected.”

Perhaps, the most surprising financial figures used in the article were in reference to the Camping World sponsorship of the Truck Series. Hamner quotes Camping World CEO Marcus Lemonis on the fact that Camping World is only paying 2 million dollars a year for the title sponsorship, half of what Craftsman was paying in 2007.

“We told them what we could afford,” says Lemonis. “They were very sensitive to us and offered an appropriate price for the market conditions.”

Ultimately, the single consistent source of income for NASCAR may be the scheduled payments from the NASCAR TV partners. In 2005, Mr. France was part of the team that reached a $4.48 billion, eight-year TV deal with ABC-ESPN, Fox, the Speed Channel and TNT.

At the time, this was viewed as icing on the NASCAR cake. Teams and owners were flush with the cash of sponsors standing in line to get involved with the hottest sport in the nation.

TV networks also wanted their piece of the action and were willing to pay top dollar. Now, Hamner suggests the TV contract may be the only thing that allows NASCAR itself to survive this economic downturn.

As Fox, SPEED and ESPN gear-up to start the season in Daytona, it should be interesting to see what changes the TV networks have decided to make in the overall coverage of the sport given the new financial dynamic.

One thing is for sure. NASCAR will continue to get paid in full over the next six years even as many teams in all three of the national touring series struggle just to survive.

There are 63 days until the 2009 Daytona 500.

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33 comments:

Rockin Rich said...

So, a little analysis here please, JD.

With your inside knowledge, do you think that FOX, TNT, and particularly BSPN are going to come to Baby Brian, and demand a renegotiation of the contracts?

Will they succeed?

Will BSPN in particular take this as an opportunity to exercise even greater arrogance, and further ignore the oft stated wishes of the remaining NASCAR TV viewers?

It appears to me that this is a time fraught with some very real unpleasant possibilities for long time NASCAR TV fans.

What do you think?

ri88girl said...

I'm not sure it is acurate to assume that the original contract does not contain some kind of 'out' claus that allows ESPN et al to negate it if there is a 'material' change to the sport. I'm sure the bright lawyers at ESPN can find such a change as the motorsports industry stands now. The fact is that dropping ad revinue will continue to affect the networks going forward, and it may become adventagous to break the nascar contract to save other more espnlike sports TV dollars.

As I pointed out in my missing post, ESPN, FOX and TNT are all as dependent on sopnsorship dollars as is all of NASCAR, only they come in the advertising buys not on the sides of cars. When everyone drinks form the same tit it becomes survival of the fittes, and I can't make a case for the servival of NASCAR as we knew it, with BF at the helm. I firmly believe NASCAR will survive, but again, as a more regional sport with far less tv coverage.

I wanted to point out that the lack of manufacturers support to the sport and teams is not the only revinue stream they provide to NASCAR. A lot of owners and participents use owning dealerships to create income. If GMAC can't become a bank and goes under, it can't continue to finance the invantory of the dealers, then the dealers go under. There are few sources of short term financing for them to rely on to keep doors open. These conditions will only exaserbate the problems within the NASCAR family.

Daly Planet Editor said...

If we see any type of renegotiation it will be reported here. I do not anticipate that happening, however.

JD

Erik said...

ESPN still signed a multi-billion dollar long term deal for SEC college football a few months ago. Things can't be that bad over there to make that size of a commitment in this economy.

Anonymous said...

The problem with relying on the TV contract money is that, when it is time to re-up, if the circumstances haven't returned to NASCAR's "Boom Days" of a couple of years ago, there is no way the networks will pay the megabucks France got them to agree to this time around.

I don't see that happening, by the way, especially if Brian keeps tinkering with the formula that got him here.

Daly Planet Editor said...

Erik,

The ESPN move where the SEC was concerned was to prevent that conference from establishing a stand-alone TV network like The Big Ten.

Ultimately, the goal of any TV network owned by a conference or sanctioning body is to create value by bringing high-profile product back from third parties (like ESPN) and keep all the potential revenue (the "upside") in-house.

JD

Dot said...

If NASCAR wants to be saved, the Emperor needs to step down. There has to be someone with a better vision to save our sport.

I agree with ri88girl, some crack attorney is probably looking for some contract loophole as we speak. Whatever happens, the fans will feel it first.

JD, correct me if I'm wrong, but isn't there some clause about having a full CUP field? I thought I read that here sometime back. The linked article mentioned that there might not be full fields.

Daly Planet Editor said...

Dot,

Unfortunately, I did not get my copy of the existing TV contract in the mail quite yet.

The rumor or truth about a full field has been something long debated and commented on by lots of parties, including TDP.

While there is little doubt that a full field will come along for Daytona, it will be the races immediately after that will tell the real tale of the 2009 season.

JD

SallyB said...

With all the financial problems facing Nascar, the sagging TV ratings, attendance, and sponsors fading, has anyone noticed that television is crucial in providing valuable exposure for the sponsors cars? If sponsors aren't getting the television exposure that makes their sponsorship worth while, then why should they sponsor a car? Many of us here at this site have complained loudly and often about how TV tends to cover only selected cars and/or drivers during the races...following their 'story lines' to exclusion of roughly 1/3 of the field. Why spend the money to sponsor a car the television never shows? It seems to me that the networks could go a long way to relieving some of the financial pressure if they would guarantee that every car would get some screen time. They no longer even show every car/sponsor logo as the run the starting lineup banner. If they don't do something, they may have contributed to a big part of the problem.

Ken said...

I read the article and the NYT made it look like is a hero and savior of NA$CAR. The writer clearly has no clue about NA$CAR.

I would wager that the networks have language regarding performance in the contract that NA$CAR didn't bother to object to because they couldn't imagine that the sport wouldn't continue to expand. If the networks didn't do so, they deserve what they get.

Anonymous said...

If the sponsors of the cars want to get TV time, they can buy advertising with the TV Partners like everyone else. Car sponsors pay the teams, not the TV networks.

Anonymous said...

I said it last week in another thread and I will say it again: I am very worried that this upcoming NASCAR season will either be cancelled or, more likely, abbreviated to 20 races or less.

The economy is in the dumper and guess what: it's going to get much, much worse before we see any signs of recovery. Right now the TV contracts are keeping NASCAR afloat, but what if car sponsorship from corporate ads or even manufacturers dries up and NASCAR has to alter the schedule? Then the TV networks have their out to break the contracts.

I am very worried about the immediate future of NASCAR.

diane said...

Since Brian doesn't share TV revenue with the teams what difference does it make to some teams short term survival?

Anonymous said...

Just read the NYTimes article. I cannot believe that Camping World got their name on the Truck Series for only $2 million.

When you think how many times "Camping World" will be said on the air, and the exposure on so many products (not to mention fans saying "CampingWorldTruckSeries" as though it were one word, just like they do now with "CraftsmanTruckSeries".... it is probably one of the best advertising deals ever signed. The exposure Camping World will get for only $2 mil is staggering.

allisong said...

RE: Full fields...I caught an old race from 1996 yesterday that was rebroadcast on MASN (Mid-Atlantic Sports Network.) It was a race from Michigan that was originally broadcast on ESPN. I noticed that there were only 41 cars entered in that race.

BTW, it was great listening to Benny, Ned, and Bob in the booth, and Dave Despain, Bill Weber, and Dr. Punch in the pits.

Anonymous said...

Whenever there is a crisis, many use that to push their agenda.

Advertising (sponsorship) becomes more important when times are bad. That's the last thing you want to cut off. Television is the best bet. What companies are doing is being careful who is taking their message. Companies are shrinking their butdgets, but not cutting them off.

This artice sure shows the bias of the author. She states things like "some analysts" say, and then she can push her opinions, like comparing practices in other sports to justify the idea of profit sharing and salary caps.

Other sports have a set field. You have 30 or 32 or whatever teams. That's it. No one else can compete! If others want in, (expansion) those in the league can vote them in or out. (Many fans feel that expansion has watered down the fields)

Is that what she wants? Does she want the top owners to decide if new teams can come and race? As it is, many complain about the 35 rule. What if it was a 35 rule and no one else? Instead, NASCAR is a "ya'll come" series.

Salary cap! Is she kidding? Sure it works when teams have 53 athletes. NASCAR has max 5 drivers per team. How is that going to save NASCAR?! Even if they lowered the salary of the 4 HMS drivers, Petty wouldn't be able to complete with a team of 550 support employees. Petty wouldn't be able to compete with the state of the art shops at Roush/Gibbs/Hendrick/ etc.

I know that NASCAR will survive, maybe not the same as before, but that's okay. America loves sports, and they love variety in sports.

Richard in N.C. said...

When the first line of the NY Times article starts off with "NASCAR fans chuging beer, roasting pigs" I got a hint that the article was not going to be favorable about the sport. I question how much effort the writer put into the article when she fails to discuss how the money from the TV contracts is applied. I have not had a chance to try to find, but my recollection is that at least half (or more) of the TV money ends up in the hands of the tracks and the year-end point funds.

At some point the media decided that bad news sells and good new does not. What little positive news there has been recently gets little reporting. For instance Jim Beam's recent renewal of its sponsorship of Robby Gordon and, apparently, GEM's plan to run the 10 car in 2009 even though there has been no report of sponsorship, so far.

Also I've seen no articles about what Honda's pulling out of F1 might mean for NASCAR. Pulling out of F1 will free up $200 - $300 million annually for Honda, which could make it easy for them to make a move into NASCAR when the economy begins to recover - and Honda has a history of wanting to compete against Toyota.

Anonymous said...

Richard, my thoughts exactly.

The tv money is divided between car owners, track owners, and NASCAR. The way it is often inferred is that bad NASCAR and France keep all the money. WRONG!

Owners get 25%
Track owners 65%
NASCAR 10%

About 25% of the driver's purse comes from the broadcast rights.

I think the track owners have had lots of expenses the last years. Ths soft barriers have cost a bloody fortune. I get sick and tired of the comparison to other sports without mentioning their differences. Some of these tracks have only 1 race per year! Some 2, so you cannot compare it to ball parks that have 80 games in a season!

David said...

Brian France is fiddling while NASCAR's teams burn. They wiped out INDY Cars for most and don't care who shows up they get their money. This week Revell stopped making Plastic Model kits of NASCAR cars. They couldn't afford the licensing. That is not real bright and short sighted on their part. Of course Mark Dyer of Motorsports Authentics is going to be telling us they will be coming out with their line of overpriced plastic models on Sirius Radio this week I am sure... They will not relinquish control. NASCAR needs a Commisioner, not a CENO and VP and PR guy that have not clue what the fans want. They can' prove to me they now what the regular fan wants..

Anonymous said...

Every time NASCAR talks about cutting costs, they don't to anything to keep teams from shifting those funds to other areas. So there is no testing this season on NASCAR-sanctioned tracks? Then go to a non-sanctioned track. Or, invest in new seven-post rigs, wind tunnel testing, computer simulations, etc. Restrict the number of people who can attend races per team? Keep those extra people on the payroll, rotate them among your teams and reassign them to more R&D projects.

If a team has the staff, the resources and the funds to look for an advantage, they will. How do they justify to their sponsors, employees and drivers NOT doing so?

NASCAR can cut costs-by reducing the length of races, cutting down on the number of races and forcing teams to only build a certain number of cars and engines a year.

Anonymous said...

Heres a money maker for espn and all there little side shows..pinks..etc..Midgets with Models..Sorry JD I cant help myself.

Anonymous said...

NASCAR needs to drop the rule about competing sponsors of THEIR series sponsors not being able to play in the sport. I would think in these economic times, if a sponsor wants to play in the game ... LET THEM!!!!
the AT&T and Alltel deals come to mind.
drop the greed!!!! it is a deadly sin!!!!!

Anonymous said...

It is not about NASCAR having a "rule." It's about signing a contract that give that kind of exclusivity to a series sponsor. What NASCAR is doing is adhearing to and enforcing their contract. Every owner knows what the contracts say.

When there is a difference of opinion, they bring in the lawyers and maybe go to court. The outcome is then decided, and that's that.

alex said...

With all of that money going to Nascar, how much of that is delegated down to the teams, and how much is just used by Nascar?

If Nascar makes 500 mil per year from TV, they surely don't need all of that just to operate. If they needed all of that, then I would wonder how they spend their money. Maybe they can survive on 250 million, and share the other 250 million with all of the race teams. IMO, the teams are the ones that made Nascar what it is today, and they should share some of the profits from the TV deal.

Several million dollars to each race team could go a long way in a temporary substitute for corporate sponsorship and help the car counts this year.

Anonymous said...

Alex, read anon@12/14 6:35pm

alex said...

Thanks, that's what I get for not reading all of the comments before I post.

I didn't realize the majority of the money went to SMI/ISC (the tracks), and the few independent tracks. They certainly need all the money they can get to recoup the losses due to low ticket sales. If the next contract is for less money as expected, it will be interesting to see who can cut costs, or who is left to cut costs.

Broomfield, Colorado said...

Just reading my weekly subscription to Cup Scene Daily, and it's reported that Brian France will not want to be in charge of NASCAR past 2010. Perhaps that opens the door to renegotiate TV contracts over this next year.
Since you have reported, JD, that Fox will no longer have pre-game shows in MLB, does that mean that the pre-race ceremonies will no longer be shown?
Given the current TV package contracts, especially with ESPN,I don't know how they can be a saviour, what with pre-empting races, switching networks at the last minute, falling ratings, and fans beyond disgusted with the coverage. Networks can show all they want of the races, but if fans don't watch, no amount of coverage, good or bad, will save the sport as we know it.
It's a very real possibility that many teams, including top teams, will suffer from the Big Three problems. When it's a one-horse race, who benefits? But most importantly, who will care to watch?

Anonymous said...

The Arena Football League has suspended operations for 2009 due to the economy. ESPN bought the TV rights a couple of years ago.

A significant number of teams wanted to still play, however, ESPN said they will not televise the games if the league couldn't field a full slate of teams. About 8-10 out of 15 teams were willing to go forward.

I really wonder what ability ESPN has on backing out, or reducing revenue for NASCAR if 43 cars aren't racing. Too bad those TV contracts aren't made public.

Anonymous said...

I saw an announcement on ESPN that stated they have a minority stake in Arena Football and do not play a decision making role. Apparently there is a major funding problem with the league and they hope to play in 2010. I think it might still be fluid situation.

Richard in N.C. said...

For better or worse, there are more than enough high-powered lawyers around for NASCAR to be well represented in regard to the contract with EESPN.

The state of the economy could even result in improved coverage of NASCAR by EESPN. It is easy to be arrogant and sloppy when times are good and the money is rolling in - but when ad budgets are being cut, broadcasters should need to make an increased effort to keep and attract eyeballs to its shows. It is even possible that some Disney director might wake up and ask why EESPN's ratings are lower than those of FOX for NASCAR. It would appear that EESPN has a huge nut to cover each month and if it is to make a profit it must come from ad revenue.

carl (not edwards) said...

Im sick of Nascar treating everything like a public relations move.The economy is bad so they have to try to appear pro-active in helping save teams money.The latest brilliant idea i heard was to reduce the number of pit crew members allowed over the wall by 1.Gee like thats going to keep a team in buisness.If they want to help teams as well as the sport survive they need to look at the point fund pay outs. They need to shift millions away from the top teams and move it to mid and lower funded teams. If 1st place paid 5mil instead of over 7mil hendrick would still be able to keep the doors open I think.

Anonymous said...

To Anon @ 6:35 pm

If you look a little further, your own percentage breakdown of tv revenues will tell you that 65% going to the tracks means that 65% plus 10% Nascar goes, in most cases to the Franc family!! ISC owns the majority of nascar tracks!!

alex said...

Anon 7:50,

You're basically right, but ISC doesn't have all the tracks. ISC and SMI have roughly the same amount give or take a few, and there are still the independants out there: Pocono, Dover (unless they sold?)

Getting back on track, let's say ISC owns 40% of the tracks. 40% of 65 is close to 30, plus the 10% to Nascar, and the France family is still walking away with 40% of that money. I apologize for my crude math, but it's still unbelievable that the money isn't distributed a little more evenly. I guess we have ISC/SMI to thank for buying up all the tracks they can.