Business in racing: Tough economic times expected in 2009 for NASCAR

By Erik Spanberg
Thursday, October 30, 2008
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Tough economic times throughout the county could have a definite impact on NASCAR fans.

Doug Pensinger
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COMMENTARY

If a recent quarterly report by International Speedway Corp. serves as an industry bellwether, expect tough times ahead for NASCAR in 2009.

At the same time a number of race teams are mulling mergers with rival shops and scrambling to find scarce corporate sponsorship dollars, Daytona-based ISC recently told stock analysts that it expects revenue to fall by 3 percent while earnings decline by 5 to 10 percent next year.

With the company’s tracks controlling more than half of all Sprint Cup race dates, the forecast offers the latest evidence of how the national economic malaise impacts the stock-car circuit.

The problems are straightforward: Companies pinched by credit markets, higher costs and other worries have grown leery of spending millions on advertising — in NASCAR or elsewhere. Those that do elect to move ahead with hefty marketing investments take a lot longer to make a decision, sending ripple effects of uncertainty coursing through speedways, race teams and others in the industry. In recent months, the ISC tracks have begun to see corporations cutting back on the amount spent entertaining clients at NASCAR races.

Fans, now preoccupied by fears of job security, higher grocery bills and other financial pressures, may decide to skip races and watch on TV instead.

If they do attend in person, they are more likely to cut back on souvenirs and concessions, yet more bad news for track operators.
NASCAR fans who attend races earn a median income of $46,700, less than the overall national median income of $50,200, according to Wachovia Capital Markets research.

“In a tough time, you’ve got to meet other needs,” says Tim Conder, an analyst at Wachovia Capital Markets who follows ISC and its publicly traded rival, Speedway Motorsports Inc..

This month, as International Speedway reported third-quarter results, analysts praised NASCAR for its continued popularity and for improving TV ratings after two seasons of declining interest. Despite those strengths, the track operators, race teams and others in the sport will be unable to avoid the same economic worries blanketing the nation.

After a dismal 2008, economists and other experts now believe the economy will show little improvement next year, either.
   
Perhaps the strongest evidence of fans’ hesitance can be seen in advance ticket sales. Most tracks begin selling seats for the following year’s race within days or weeks of staging an event. Thus, ticket renewals for the 2009 Daytona 500 go out soon after the 2008 race, and so on.
   
ISC reported advanced sales dipping by 10 percent to 15 percent in recent months as the economy worsened.
   
At the same time, souvenir sales are also expected to be difficult next year. ISC and SMI share ownership of Motorsports Authentics, the largest of the collectibles companies.
   
Fueled in part by a management overhaul and the timely sales jolt spurred by Dale Earnhardt Jr.’s move to a new team this season, Motorsports Authentics has generated a $10 million profit to date in 2008. During the same time period last year, Motorsports Authentics lost $16 million.

Even with a more stable foundation, the collectibles company is projected to take a step back in 2009 because of the wobbly economy, ISC officials told analysts.
   
Amid all the challenges, analysts say NASCAR remains on solid footing when compared with other entertainment companies.
   
“NASCAR still has an extremely loyal and avid fan base,” Conder says. “That’s still good, that’s still there. Advertisers recognize that and sponsors. They should continue to hold up relatively better.”
   
Better, but not without plenty of challenges in the months ahead.

Comments

15 responses to "Business in racing: Tough economic times expected in 2009 for NASCAR ". Post a Comment.
  1. 1
    del brown said:
    Oct 30, 2008 at 2:12 PM

    Add to that a possible reduction in factory sponsorships for the teams. That may close the doors on more than one team. With costs of a competitive team - in terms of being able to compete in every race - and less funding from makers and sponsors may result in fewer than 43 cars starting a Cup race. Kodak is pulling out of NASCAR and at least some of the long term associations are likely to follow Kodak, Goodwrench, Busch and Craftsman, etc bailout. Although the 2009 schedule is set the 2010 schedule may feature fewer races as a means of reducing costs for teams. Times are tough and are likely to get tougher before a real recovery begins.

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  2. 2
    David Frechtman said:
    Oct 30, 2008 at 2:23 PM

    Fewer races will be good,the schedule is too hectic now.

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  3. 3
    David Frechtman said:
    Oct 30, 2008 at 2:32 PM

    Let's face it, out of 43 cars, how many are really competitive maybe 20 to 25. Back in the late 80's and early 90's there were only 36 positions available at tracks like Bristol and Martinsville and the racing was just as entertaining. At the big events like Daytona and the Brickyard as well as many other races they are sure to have more than 43 qualifiers. The field was expanded to 43 cars to appease sponsors. So if the sponsors are reduced, they can reduce the size of the field, no harm or foul.

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  4. 4
    Darrell Driskell said:
    Oct 30, 2008 at 2:47 PM

    As a sports business owner, i can tell you that since Motorsports authentics bought out Action and Chase authentics, they have run the nascar merchandise industry into the ground! They have gradually increased prices each year, over-produced collectible die-cast and taken 2-3 months longer to get items to dealers and well after it is needed to coincide with a track event.

    Along with that, we don't see the race purse's coming down, while ticket prices go up.. This is only going to drive away more fans and sooner or later the drivers and teams will have to accept less winnings and fewer perks not to mention cut back on so much on over-spending in the shop.

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  5. 5
    Jozef Colomy said:
    Oct 30, 2008 at 3:14 PM

    I think this is the best time for a company to advertise in NASCAR than ever. Look, it's well-known that several companies are opting-out of NASCAR-related sponsorship next season, but that just opens the door for others.

    Using Del's Kodak example: What better time would there be for Canon or Nikon to get involved in NASCAR with their biggest competitor getting out? It's a classic example of Game Theory. Everyone's actions are dependent upon others' and whoever acts first doesn't necessarily get an advantage. That's why you don't see any of the alcohol companies dropping their sponsorships: Why would Bud leave Kahne's team when Miller is sticking with Kurt Busch? That's why you won't see Jim Beam or Crown Royal leave Robby Gordon or Jamie McMurray's teams since good old Jack is sticking around, and has all the free media of a new driver's buzz in Casey Mears. I think companies who act impulsively, like Kodak, will ultimately lose because NASCAR is the biggest spectator sport in the country and sports are more or less recession-proof (in terms of viewership, ad exposure) and writers'-strike-proof and anything else like that. I think all these articles talking about the hardship teams will face next year are very premature and I think we'll see most teams announcing sponsorship within the next few weeks, provided their marketing guys and gals have done their work.

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  6. 6
    Werner Boehmert said:
    Oct 30, 2008 at 4:07 PM

    i can handle the ticket prices, the gas, but those motel rates and airfares are outragous...or how about a t-shirt for $30...Johnson's championship diecast for $90 and all they did was put a sticker on it...

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  7. 7
    said:
    Oct 30, 2008 at 4:10 PM

    I guess I'm on the high end of the "median income". At the race in Kansas, I dumped almost $800 over the 2 days we were there, and that didn't include food, hotel, car rental, airfare and the cost of the race tickets.

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  8. 8
    Richard Reyes said:
    Oct 30, 2008 at 4:51 PM

    As others have mentioned the costs have gone to a NASCAR race have spiraled out of control. For the first time in 8 years, I did not attend a race this season after regularly going to NASCAR races in Las Vegas and on occasion, Phoenix.

    Instead, I chose to travel to Canada to watch the Formula One Canadian Grand Prix. Not only did I get a better value for my money, the racing was just as exciting and just as intense! Hopefully in the future, I will save enough from skipping NASCAR races to travel to Australia to watch the Australian Grand Prix. While I will continue to watch NASCAR races, I will probably not attend a race in person in the foreseeable future.

    SMI and ISC have to do something about controlling costs and delivering VALUE to race fans who spend thousands of dollars at their venues every year, otherwise there will be fewer and fewer people in the stands on Sunday. Count on it!

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  9. 9
    Frank Pinto Jr said:
    Oct 30, 2008 at 5:22 PM

    Motel/Hotel prices are outragously inflated for the races and Nascar hogs up all the close hotels which leaves you to drive almost an hour to get to track, sit in more traffic,in&out, which costs a fortune in gas. And of course, most tracks are out in boonies(more gas)! And the product is not getting better for the price, although my tickets have not increased amazingly, more tracks need to do like Darlington, allow 4 payments spread over 8 months or low hold payment option like Dover and balance after new year when you could use tax return(if you get one assuming)to pay off. Still, Nascar needs to either improve Chase-it is possible for driver to win 3,4 or 5 races and not make Chase or go back to old system where at you were rewarded for overall consistency. Also change some dates to have a better chance of better weather. Martinsville spring race was brutal(great race, but too cold and all we got was a thank you letter! Woop dee do! oh and the flu too!)Too much room for improvement to print on and on...Love the sport and that's why for the sake of sounding like whining that I hope they can save this sport from it's decline!

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  10. 10
    Robert Airheart said:
    Oct 30, 2008 at 5:51 PM

    I agree with Darrell. I have over three hundred collectable cars, 95% of which are NASCAR cars and I line them up after every race to points (top 25). Granted all of Joe Gibbs cars are still Chevy's and the sponsers have changed but I either use car number or ping scheme. I still won't buy a Toyota, especially at the prices they are now. At the old prices I have about $17,000.00 invested. Enoough is enough.... enough......

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  11. 11
    Robert Airheart said:
    Oct 30, 2008 at 5:52 PM

    Sorry, I meant paint scheme.....

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  12. 12
    Werner Boehmert said:
    Oct 30, 2008 at 5:59 PM

    it's about making $$$ for the shareholders...

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  13. 13
    Mr Galvan said:
    Oct 30, 2008 at 6:15 PM

    The best way to help things is to help out the smaller teams!! im tired of seeing jimmie johnson or kyle busch win, its why people are being turned off from the sport. make some races shorter and shorten the amount of races!

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  14. 14
    Grover rickman said:
    Oct 30, 2008 at 6:59 PM

    The only way they will listen,STOP GOING TO NASCAR RACES,STOP BUYING t-shirts and hats and everything Nascar makes a fortune on and they will hear us!!!!

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  15. 15
    Richard Clower said:
    Oct 30, 2008 at 9:08 PM

    Grover got it exactly right!!!!!
    Let your wallet do the talking. Beleive me, they will listen.

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