NASCAR Economics 101: State of the Sport

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NASCAR Economics 101: State of the Sport
(Photo by John Harrelson/Getty Images for NASCAR)

The stock market is falling. Cars aren’t selling. Banks are failing left and right.

America’s economic situation is hitting NASCAR arguably more than any other sport in the nation. A sport so dependent on sponsorship and manufacturing dollars is suffering more and more. Fourteen races into the Sprint Cup Series schedule, the landscape of NASCAR is changing much more than just double file restarts and town-hall meetings.

 

Teams shutting down, lacking sponsors

A lack of sponsorship has forced several teams in all three of NASCAR’s top series’ to cut back. Earnhardt Ganassi Racing, who raced a combined seven cars last year, started their merger with the three cars of Martin Truex, Jr., Juan Pablo Montoya and Aric Almirola. However, because of lack of sponsorship for Almirola’s No. 8 Chevrolet.

While his team hasn’t had to shut down, A.J. Allmendinger and his No. 44 Dodge for Richard Petty Motorsports doesn’t have full funding for the rest of the year. Sponsorship will run out for Allmendinger, who is sponsored by blank this weekend, runs out in September.

In the Nationwide Series, Kevin Harvick Inc. (KHI) has been forced to send driver Cale Gale to the Canadian Tire Series, after not being to find sponsorship for him to run more races. Harvick sights the sports sponsorship woes as a reason to not move his operation to Cup anytime soon.

His Camping World Truck Series teams of Ron Hornaday, Jr. and Ricky Carmichael and J.R. Fitzpatrick have also struggled to find sponsorship.

Johnny Benson and Red Horse Racing are the latest victims of NASCAR’s poor economic state. The team announced this week that a lack of sponsorship is forcing the defending champion out of a ride.

 

Manufacturer Support

In the past several weeks both Chrysler and General Motors has filed for bankruptcy, and now the companies have pulled support from the Camping World Truck and Nationwide Series’.

It was announced today that JR Motorsports and KHI have lost their GM support, and according to NASCAR.com “other Chevrolet teams on the Nationwide and Camping World Truck tours are bracing for similar cuts.”

“Kevin Harvick Inc. has lost its manufacturer support,” Kevin Harvick, who fields competitive entries in both the Truck and Nationwide series, said Friday in a statement.

“Although this will require some internal restructuring, our commitment to our sponsors to provide the best possible product on the racetrack will not change.”

Richard Petty Motorsports is also suffering on the Cup side. Dodge has put funding for the team “on hold,” and it’s unclear whether or not majority owner Fiat will reinstate that support.

“They’ve stopped everything,” Petty said in the garage at Dover International Speedway this past weekend. “They went into bankruptcy, and they’re sort of in a floating stage right now. They’re trying to see where they come out of this at. If they’ve got new people running the show, are they still going to continue to back everything exactly like they are, or whatever?

“They’re in a holding pattern right now. I think GM’s that way—I don’t know about Ford—and I know Chrysler’s that way. The rest of them I don’t know. I don’t deal with them.”

Since the announcement, RPM has cut nine jobs, cut pay for employees and formed a partnership with Toyota Nationwide team Braun Racing for drivers Elliot Sadler and Kasey Kahne. It could be the first move in transferring from Dodge to the more sound Toyota.

Beginning this season, Ford Racing pulled their financial support from the Camping World Truck Series. Ford itself has not filed for bankruptcy, nor have they taken government bailout money.

 

Lack of an audience

Attendance for races across the country has dropped for the fourth straight season, and television ratings are dropping anywhere from 10-20 percent depending on the race. Starting with the high gas prices of last season, NASCAR tracks across the nation began slashing ticket, concession and souvenir prices.

Humpy Wheeler, former president of Bruton Smith’s Speedway Motorsports Inc. believes tracks should follow the lead of tracks like Lowe’s and Texas Motor Speedway, who have eliminated 10,000 seats apiece to create more motorhome parking. Fans also get “suite-style perks” according to Wheeler.

NASCAR made an effort to make racing more exciting for fans by instating the “Double file restart–shootout style” rule. Despite this, lower prices and hotels near the track offering deals, it will take more to get the fans out to the track in the rough economy.

 

What teams, drivers earn

According to Forbes Magazine, between eight and 31 percent of revenue for a driver comes from souvenirs and sponsorship. And while the economy may be bad, drivers pay checks certainly don’t seem to be taking a hit. Hendrick drivers Dale Earnhardt, Jr. and Jeff Gordon made a combined $65 million last year. Ten drivers made over $10 million.

It’s not surprise with those numbers that Hendrick Motorsports is the most valuable NASCAR team, pulling in $195 million in revenue and a current value of $350 million. Roush Racing, Richard Childress Racing and Joe Gibbs Racing round out the top five.

Last years sixth and eighth ranked teams Dale Earnhardt, Inc. and Chip Ganassi Racing with Felix Sabates are now ranked ninth together. New team Stewart Haas Racing is currently valued at $80 million.

Forbes’ findings show that Roush, Gibbs and 10th ranked Red Bull Racing are the only teams in the top 10 that showed a decline in value, and RBR is the only team projected to lose money—$2 million in operating costs.

 

Final thoughts

No one knows what it’ll take for the sport, and the country, to pull out of this economic decline. NASCAR needs to evaluate how tracks are doing with ticket sales, and change the schedule accordingly.

It’s been said over and over by the sanctioning body that this is “The Year of the Fan.” If that’s so, NASCAR needs to start listening to the fans. They aren’t going to track A, but they are showing up for track B, so why does track A have a second date?

The landscape of this sport needs to change. Whether it’s eliminating seats from tracks, further lowering prices, or other changes, NASCAR needs to listen to the fans and make the necessary changes to regain their fan base.

Thanks to NASCAR.com, Jayski, Forbes, Bloomberg, Associated Press, ESPN and Scene Daily for the information and quotes used in this article. This article also appears on FanZone Sports.net.

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