Tough Times for NASCAR

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New measures for a new economic reality

Several years ago, on the Speed Channel television program “Wind Tunnel,” host Dave Despain made some pointed remarks on NASCAR’s rapid growth 2_08MICH1nk03730_optand its relationship to motorsports in general.

“Not to discredit them in any way, but NASCAR has become this black hole sucking up sponsorship, fans, TV viewers and all the things that make racing work,” said Despain. “It’s like a giant vacuum cleaner. So how everybody gets along with reduced crowds, reduced money, and reduced ratings, to me, is the real issue.

“Look at what many others perceive as the crisis in open-wheel racing. A lot of that has to do with NASCAR just taking over the audience.”

In 2008, the black hole began sucking up itself.The collapse of the economy, both in the States and throughout the world, has shifted NASCAR’s focus. Revenues are sagging. Crowds are down. Teams are losing sponsors.

The NASCAR sky is no longer the limit. Signs are everywhere, and they fell like dominoes during the Ford Championship Weekend at Homestead-Miami Speedway. Two prominent teams, Dale Earnhardt Inc. and Chip Ganassi Racing with Felix Sabates, abruptly merged, turning two three-car teams into one with four. More moves will likely follow.

Crewmen dubbed Nov. 17, the day after the final Sprint Cup race, “Black Monday” in deference to suspected layoffs. One estimate was that theChart_Graphic_opt industry of major-league stock car racing would suffer an almost immediate loss of approximately 800 jobs.

NASCAR officials, who had floated the possibility of liberalized testing regulations earlier in the year, announced they were eliminating the process at NASCAR-sanctioned tracks altogether next year. Among the casualties were the fan-friendly Preseason Thunder sessions previously held at Daytona International Speedway each January.

As NASCAR chairman Brian France admitted, albeit belatedly, “NASCAR, as an industry, is not immune” to the fall collapse of the economy.

Canadian driver Patrick Carpentier lost his ride at Gillett Evernham Motorsports, not because he wasn’t showing progress but because a major sponsor couldn’t be secured in his behalf. Carpentier will be replaced next year by Reed Sorenson, a Ganassi castoff who is much younger and presumably capable of attracting sponsorship.

“I knew it was a possibility,” said Carpentier. “(NASCAR) is a sport that is sponsor-dependent.

“For sure, it’s a shock to learn someone else is taking your spot. … I’m not pissed off. I kind of expected it. … With the economy and the way things are, Reed (Sorenson) just fits the bill better.”

Storm clouds are brewing for NASCAR, though mainly not on the sports pages.

Dales_optA generation of NASCAR fans, not to mention officials, have grown accustomed to a boundless expectation of unlimited growth. This growth has already waned in a manner not unlike what stock analysts refer to as “a bubble.” Over the past two years, television ratings have declined by approximately 21 percent, and crowds at races have similarly dwindled. The decline has so far been more hindrance than harm.

The events of Homestead indicate the boom is over. NASCAR officials have changed their rhetoric to talk of stability and paying more attention to the “core audience.” It marks the first time in recent memory where anything other than “change” has been the sport’s mantra. Translation: Maybe the cart has finally pulled ahead of the horse.

No sport is more susceptible to the vagaries of the economy than NASCAR, where rising costs have crippled many teams hunting for crucial sponsorship leading into the 2009 season. NASCAR isn’t the bargain it once was for corporate America, and it’s not uncommon for many major teams to turn to a hodgepodge of different corporate entities adorning the paint schemes of cars. Once the look of the cars was as familiar as Yankee pinstripes or Red Sox piping.

Yet men who race for a living persist in roaring into the uncertainty full speed ahead. Most team owners scoff at the notion that recent changes will actually save them money and make racing more affordable.

“We’re still going to spend all the money we have,” said Kevin Harvick’s crew chief, Todd Berrier. “The difference is that we used to spend a million dollars to pick up a second on the track. Now we spend a million for a 10th of a second.”

The alienation of longtime fans is readily apparent to any journalist who monitors e-mails, letters and phone calls from fans. Fans who used to attend a dozen races annually can now afford only a few annual sabbaticals to their favorite tracks. Many just can’t afford it anymore.

“These are tough times for everybody,” said Mark Martin, one of few active drivers with some recollection of hard times. “I think everyone sees it or feels it. Most of America feels it. At the same time, I think America is very resilient.”

How about tracks? For the first in many years, most of the tracks on the Sprint Cup Series were decorated with empty seats during major races. The disappointment was most obvious in the denial of it. The crowd estimates listed on race reports were laughably overstated, often by 25,000 or so, during the 10 “Chase races” that ended the season.

Bruton Smith -- who a year earlier had purchased, at a gaudy price of $384 million, the track in Loudon, N.H., for his Speedway Motorsports Inc. -- found the SMI stock trading at $13.45 a share, just 37 percent of its value after the New Hampshire purchase. International Speedway Corporation’s stock had lost half its value since the turn of the century.

Smith also acquired Kentucky Speedway early in 2008, pre-crash, but hadn’t been able to secure a date on the Sprint Cup schedule for the track. Disagreements on the wisdom of Smith’s extravagance contributed to the untidy parting of Smith and his chief operating officer and president, H.A. “Humpy” Wheeler, in May.

It was Smith, by the way, who once said of another of his properties, Bristol Motor Speedway in Tennessee, “If the Romans had any sense, they would’ve built Bristol instead of the Colosseum.”

Such expansive statements have fallen out of fashion, even for a tycoon like Smith.

Smith was hardly the only boom-timer gone bust. Twenty years ago, a typical NASCAR team fielded one car and had 20 employees. Nowadays the mega-teams – and those are now the only ones that really matter – routinely employ more than 300.

“It’s very difficult for the car owners,” observed driver Jeff Burton. “For everybody involved, the last few years have produced an all-time high in the number of fully-funded, fully-staffed race teams. I’m sure I’m correct when I say I would imagine more people have been employed within the teams in the last three years than any other point in our history. With the economy the way it was, with the exposure that NASCAR was able to give sponsors, there was a tremendous amount of willingness to get involved, which created a lot of jobs.

“Now, at a time when the economy isn’t as good, we’re going to see the negative side of that. It’s really hard to be part of a team that has to let people go. I’ve said this before. We think about this as a sport, and that’s what it is, but to the people involved in this sport, this is the way they pay their mortgages, and this is the way they pay their car loans and send their children to school and pay their bills. This is the way that you make a living, and at a time when the economy turns bad, it’s just tough. … It will come back, but next year is going to be a real tough year.”

Given the reality of the economy, the testing ban was generally greeted as a necessary cutback.

“We are at time in our sport where we’ve got to look at ways to cut some costs. There’s no doubt about it,” said Burton. “We’ve been in conversation with NASCAR about what it is they can do. More importantly, we as teams ultimately have the responsibility to pay attention to what we’re spending. Jack Roush is a master at that. Richard Childress (owner of Burton’s No. 31 Chevrolet) is a master at that, of trying to figure out where to spend the dollars without wasting them.”

Though he claimed that NASCAR had been mindful of gathering storm clouds for a year, there was little evidence that recent moves had been calculated or planned. France expressed the view that the Sprint Cup Series’ new car design, phased in during 2007 and fully implemented this year, would create opportunities for savings.

“We believe strongly that this car will deliver cost savings in the long run, for sure,” he said on Nov. 11. “In some cases, it’s produced savings in the short run. … It will allow us, in the future, to continue to take cost out the system, which is what everyone in our industry is trying to do.”

For now, France said he isn’t considering a cutback in the length of the either the season or individual races.

“The reduction of the number of events is not practical,” he said. “We have contracts in place and historically important events. Where would you choose? They’re all successful in one form or another, so that would not be possible.

“But there are lots of other places where we can be more aggressive. The good news is that no one could have anticipated the economy, but we anticipated the cost-containment aspect of our sport is always a significant issue.”

France left ticket policies in the hands of individual tracks. “They’re certainly very familiar with their individual markets,” he said. “Some are more effective than others. They’re trying to add as much value for the race fan as they can, and we’re encouraging them to do that.”

The short-term effect of all the recent changes has been a loss of parity. In 2007, one team, Hendrick Motorsports, won half the races. This year three drivers – Sprint Cup champion Jimmie Johnson, Carl Edwards and Kyle Busch – combined to win two thirds. Only four teams – Hendrick, Roush Fenway, Childress and Gibbs – made the Chase for the Sprint Cup, which tends to make everyone else little more than an afterthought during the stretch drive. Survival of the fittest has always been the rule in NASCAR, but survival is getting more difficult what with the economic climate change.

France can’t afford to see a perception of decline spreading in regard to the NASCAR empire. The competition between sports is a secondary issue.

“We share a lot of partners,” he conceded. “A lot of our partners are their partners: broadcast partners, licensees, advertisers, you name it. We all count on the national economy to drive our sports.

“When the economy is this difficult, I think all the sports will feel it, maybe not equally in every category, but I think, on the aggregate, when you pull it all together, we’re all very similar in impact.”

The president – and essentially No. 2 man – of NASCAR is Mike Helton, who maintains closer contact with the teams and drivers than France. The common term for all the auxiliary interests involved in the sport is “stakeholders.”

“It’s their sport today,” said Helton. “We have to consult with sponsors, race tracks, owners and other partners. That’s what decisions have to be based on. We have to talk with the stakeholders to see how they’re being impacted.”

Even Johnson, who equaled a 30-year-old record by winning the Cup championship for the third year in a row, was wary about the future.

“I guess we’re finally seeing the impact of this bad economy that we’re in,” he said. “I don’t think there’s any business in the world that’s immune to it. It’s taking its toll on everyone. Until the sponsors get their return on their investment in the sport and they can feel comfortable spending the money they have, and they continue to sign on and spend more, I don’t know how it’s going to change.

“It’s a big sport and it’s expensive.”

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