Analyzing Risks and Rewards for NASCAR's New TV Deal with NBC and FOX
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NASCAR's long-term television future is nearly set in stone with several pieces of the puzzle being locked into place Tuesday.
Now all that's left is to see how it affects the sport over the next decade. No big deal, right?
With NBC Sports officially announcing that it will return to cover Sprint Cup and Nationwide Series events as part of a ten-year deal starting in 2015, NASCAR is set to become televised by two primary sports media properties: FOX Sports and NBC Sports Group. The current package expires following the 2014 season and features FOX and ESPN taking the lion's share of the coverage with Turner Sports handling a six-race stretch in the summer.
NBC's return to NASCAR coverage will feature the final 20 Sprint Cup races of each season—seven on NBC and 13 on NBC Sports Network—as well as 19 Nationwide Series to close each year. Financial terms were not officially disclosed, but FOX Sports inked an extension last fall with Nascar through 2022 for their share of Sprint Cup coverage (and movement of several Sprint Cup races to the new FOX Sports 1 starting in 2015) in a whopping $2.4 billion deal.
NBC replaces ESPN as the primary home for coverage of the second half of NASCAR's season—certainly a risk for the sport as it moves away from mainstream programming on the most popular sports television network in the country.
"We wouldn't have made the change if it weren't favorable financially for the industry—and it is," NASCAR CEO Brian France said of the new NBC deal.
The fact that NASCAR sought the highest bidder in the rights battle is no surprise. Television revenue for the sport over the past two decades has exploded and trickled down to the tracks and teams. A story earlier this season by Scene Daily's Bob Pockrass estimated that 65 percent of the television revenues are distributed to race tracks, 25 percent to competitors via race purses and 10 percent stays with NASCAR.
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In fact, the guaranteed television money could have very well been the sport's lifeblood as it battled the two-fold problem of declining interest and declining sponsorship dollars from its peak in the early 2000s. Tracks that featured barren grandstands that were once full stayed afloat thanks to the hefty chunk of television money stuffing their wallets.
Still, there are plenty of questions about what the long-term ramifications of NASCAR's nearly-complete television future could really mean. Let's examine the risks and the rewards:
REWARD: Lots and Lots of Cash
Who doesn't love guaranteed cash? Certainly no one in NASCAR. The money has been flowing in the sport ever since NASCAR took over the responsibilities of television rights from individual tracks. The new contracts—which serve as the largest financial infusion into the sport's bottom line—will keep that gravy train going.
Teams can expect decent money from racing. Tracks are guaranteed significant income before they even sell a ticket. And NASCAR's cut will allow the sport to keep growing in more areas and trying new initiatives. Hopefully some of it gets dedicated to an increased focus on driver and fan safety.
RISK: Loss of America's Dominant Sports Network
NASCAR operated for a brief spell in its previous television contract without ESPN as a partner. And for a while, things were ugly. The network that helped NASCAR move from made-for-TV edited specials to live racing broadcasts was banished from covering the sport on track property and did interviews of willing drivers from sidewalks and helipads.
There's little doubt that both entities have changed, and that both can operate going forward free of one another. But what's the net loss for NASCAR when ESPN minimally covers the sport while focusing primarily on live event properties to which it owns the rights?
REWARD: Online Streaming Rights Have Been Granted
Perhaps the best hidden news in all of the FOX and NBC hoopla is that both networks have obtained "TV Everywhere" rights to NASCAR races. That means for the first time NASCAR races will be regularly streamed online in some form.
It may be in the form of a pay service, or it may only be open to specific cable and satellite subscribers, but it's a step in the right direction as more and more of the sports-consuming audience pines for alternate viewing options on mobile devices. This is the area that NASCAR has the most opportunity to grow, and it's good that the rights have been unleashed to allow for streaming innovation.
RISK: Moving to New Sports Networks with Unknown Futures
Previous to NASCAR's current deal, nearly all Sprint Cup races were shown on broadcast networks. Now, a majority of NBC's races will be held on the cable-only NBCSN while FOX plans to do something similar with Fox Sports 1. This isn't entirely new—ESPN placed just one race last season on ABC—but it's likely an issue among NASCAR's blue collar crowd that may not purchase a television subscription plan. That said, nearly every other major sport has shifted from broadcast networks.
Additionally, NASCAR is gambling that Fox Sports 1 and NBC Sports Network, one a brand new venture and one still still a fledgling network trying to gain consistent viewership, will take hold and serve as excellent hosts in the future. The risk that either is an unmitigated flop is low because of the respective television behemoths behind them, but it's still an unproven direction.
REWARD: Gives the Sport a Window for Needed Change
With more than a year until the 2015 Sprint Cup schedule will be announced, NASCAR has a chance to get creative to spur interest in the sport from a television perspective. Changes should include a revamp of qualifying procedures (how many casual fans tune to a qualifying session in its current form only to turn away within two or three single-car runs?) and some thought on structuring the schedule to maximize viewers and dramatic intensity.
Nate Ryan of USA Today proposed the golden idea of mid-week races in a bid to shorten the overall length of the schedule, an idea that definitely needs to be explored by NASCAR. How can NASCAR maximize its exposure and not get lost in the shuffle of traditional sports? You can bet the TV partners want to find out.
RISK: Increased Motivation for Fan Innovation
With the guaranteed money coming in for an extended period of time, the parties tasked with spurring growth could get complacent. After all, selling tickets to races takes a lot of effort and tracks aren't a integrated part of the television bargaining process.
One concern from the sport taking in nearly $5 billion over the next decade is that stakeholders won't do enough or think creatively enough to continue fan growth and engagement. No, NASCAR likely won't ever reach the fad-like status it had during the late 1990s or early 2000s. But there's still a lot of empty seats at race tracks and a decided decrease in local interest. What's the fix? Does anyone even care?
Along those same lines is the concern for what NASCAR's television product has become. There's no doubt that the production value at the track is as high as ever. But it's what happens when the broadcast breaks to commercial that's turning fans off each week.
Television contracts aren't just charity gifts. The television networks must pay for them via advertising sales. At what point is NASCAR's asking price so high that fan viewership improvements like side-by-side commercials are priced out of the equation? And at what point is NASCAR losing casual viewers who watch the occasional race because they are inundated with an infomercial-like feel of the event even as lead changes and caution flags take place? It's a realistic problem not evident to those watching at the track, and one that wasn't addressed during the NBC announcement.
All told, NASCAR's nearly $5 billion in expected revenue over the duration of the next television contracts gives the sport a stable foundation to once again build from. There is value in telling potential sponsors that their product will be visible on major sports networks in front of millions of fans. Tracks will be able to continue building to suit fans without drastically raising ticket prices. And NASCAR fans will have increased access to the sport they love.
But with the opportunity comes important decisions about how the sport should function by the end of the deal. Smart moves will make an extension easy. Bad ones could drastically change things.
That's the route NASCAR is taking. Let's hope they get it right.
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