Ticket prices and merchandise sales among ISC priorities as revenues drop
Fans slide items through the fence at Pocono Raceway in an attempt to get drivers to autograph the souvenir merchandise. // Bill Anderson, NASCAR Scene
International Speedway Corp. says it is continuing to see lower admissions, less corporate spending and worsening struggles in the Motorsports Authentics merchandise business it owns in partnership with Speedway Motorsports Inc.
On Thursday, ISC reported that revenues from December to August were down significantly, partly because of the economy but also because the NASCAR weekend at Auto Club Speedway in California was included in the first nine months of fiscal 2008 but not 2009.
Total admissions revenue for the first nine months of the year was down 16.5 percent from $172.24 million to $143.87 million, while other motorsports-related revenue (television, sponsorships, etc.) was down 12.3 percent from $343.66 million to $301.41 million. Concessions and merchandise revenue was down 33 percent from $58.82 million to $39.43 million.
While ISC had a net profit of $101.09 million for the first nine months of 2008, it has recorded a loss of $2.051 million in 2009, although when excluding Motorsports Authentics and other impairment charges, net profit was down 40.2 percent from $100.47 million to $61.1 million.
ISC continues to project that admissions revenues will be down 15 percent this year, company President John Saunders said. Advanced ticket sales (both tickets sold and revenue) have been down 25-30 percent before a surge in the month leading up to the events, he added.
“Hopefully, in time that will turn around, but it’s not something that we expect in the near term,” Saunders said.
ISC lowered prices for entry-level tickets this year, and 90 percent of those were sold, with 50 percent going to first-time buyers, Saunders said. Next year, ISC will discount about 33 percent – more than 500,000 – of its Sprint Cup tickets throughout the year for the 19 ISC Sprint Cup races.
ISC will not decrease the price of tickets once they go on sale.
“It is important that we maintain the integrity of our pricing model by rewarding our best and loyal customers who renew early,” Saunders said. “We will not discount our ticket in the sales cycle.”
The weighted average ticket price is down 2 percent for Sprint Cup events, ISC Chief Financial Officer Dan Houser said. He also noted that Michigan and Florida have been two of the most challenged states in the economy, and the races in those states had a bigger impact than the others.
As far as merchandise sales, Motorsports Authentics has not paid all of its guaranteed royalties this year. In a filing with the U.S. Securities and Exchange Commission on Wednesday, SMI said that bankruptcy could be possible if certain contracts aren’t renegotiated and certain deadlines aren’t extended. In the worst case, ISC could owe $11.6 million in guaranteed royalties if the company cannot meet its payment deadlines and does not get extensions, Houser said.
Many of the guaranteed royalties come from contracts signed in 2005 and earlier, Saunders said. NASCAR is exploring a sport-wide licensing model that would encompass the drivers and teams, but for now Motorsports Authentics must deal with those guaranteed royalties, Saunders said.
“We want something to happen here that is better for the sport, better for our shareholders and, hopefully, seamless to the race fans,” Saunders said. “We remain cautiously optimistic that we can come to an agreement with the licensors, but it’s too early to tell.”
ISC alone has lost $62.2 million this year on Motorsports Authentics – $55.6 million from a write-down (a devaluation of the company) and $6.6 million in operating losses. Houser said ISC considers its share of the company at $15.5 million; just two months ago SMI said its valuation of its half of the company was $18.1 million.
“While certainly not our intention at this point, we could choose to increase our investment in MA in the form of equity contributions or loans,” Houser said.
In other ISC news:
• ISC said it expects the lower range of its 2009 full-year total revenue to be $700 million (as it did three months ago) and revised the top-end range from $720 million to $710 million. ISC also reiterated its lower range of its earnings per diluted share guidance for 2009 of $1.80 and lowered the top-end range from $2 to $1.90.
“We do not anticipate a quick recovery in the economy,” ISC Chief Executive Officer Lesa France Kennedy said. “In fact, we anticipate 2010 will continue to challenge our company. Fortunately, we have a focused management team that has a clear vision.”
• France Kennedy said ISC expects to send a request to NASCAR in early 2010 to realign a second Sprint Cup date at Kansas Speedway, pending the completion of a successful bid to the state for ISC to build a casino on the property. France Kennedy did not say which of its tracks it would take a race from.
• ISC has seven Sprint Cup and six Nationwide race title sponsorships open for 2010, Saunders said.
• ISC also recorded a $13 million write-down on the value of its property in Staten Island, N.Y., which it has been trying to sell since failing in its attempt to build a track there.
