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