In mid-July, Stewart-Haas Racing, one of NASCAR’s top teams, announced that the U.S. Army would not be returning as the primary sponsor of Ryan Newman’s 39 Chevrolet in 2013. After a decade-long run as a NASCAR sponsor, the Army no longer believes that sponsorship draws enough recruits to warrant the money spent on it. Many companies in recent years have arrived at the same conclusion: Sponsorship is not resulting in a suitable return on investment. Fewer fans are coming to the tracks or watching races on television. Has NASCAR run its course?
As a professional-sports enterprise in the United States, NASCAR, founded in 1948, is relatively young. In its early years, motorsports were popular mostly in the Southeast. NASCAR made an auspicious entrance on the national scene with the running of the Daytona 500 in 1979 — the first race of that season and the first to be televised nationally, live and flag to flag. It ended in a last-lap crash between the two drivers in the lead, Donnie Allison and Cale Yarborough. Cameras caught the ensuing fistfight between them and Allison’s brother Bobby. NASCAR couldn’t have hoped for a more attention-grabbing national debut.
NASCAR developed a following outside the Southeast over the next two decades. By the late 1990s, it was working hard at going national. Longtime NASCAR tracks such as Rockingham and North Wilkesboro, both in North Carolina, lost their dates to new tracks in Southern California and Chicago.
Yet as NASCAR enjoyed its greatest financial success in the late 1990s and early 2000s in the course of its expansion to new markets, it was approaching rocky times just around the bend. Its transition from a blue-collar regional identity to one that was corporate-driven and national cost it some of its most devoted fans.
Today, when fiscal belt-tightening is a priority in many sectors of the economy, military and corporate sponsorships can look like a luxury. In Congress, Representatives Betty McCollum (D., Minn.) and Jack Kingston (R., Ga.) cosponsored a measure — an amendment to the most recent defense-appropriations bill — banning military spending on motorsports sponsorship. The amendment was defeated, but by a narrow margin, 216–202. If reintroduced, the ban could well pass if the economic climate hasn’t significantly improved.
Increasingly, the corporate world is finding that NASCAR sponsorship is not the profitable venture it was just a few years ago. The cost of fielding a team is high. A single set of tires, for example, good for only a few laps, costs around $2,000. Increases in sponsorship fees have not kept pace. A decade ago, a top NASCAR team could command about $25 million in sponsorship; today, the going rate to sponsor a front-running team is around $18 million.
Kenny Wallace, a TV analyst and current NASCAR driver, has seen NASCAR through multiple economic upturns and downturns. The son of a racer and the younger brother of Rusty Wallace, soon to be inducted into the NASCAR Hall of Fame, Wallace notes that the decline in the sponsorship fees that NASCAR commands has been accompanied by a decline as well in the number of sponsorships. Companies that not so long ago would commit to primary sponsorship of a Sprint Cup car for entire seasons have either pulled back, sponsoring a car for only selected races, or exited altogether.
Exacerbating this trend is NASCAR’s practice of barring certain sponsors to avoid competition with existing sponsors. The clearest example is cell-phone carriers. Since Sprint is the title sponsor of NASCAR’s premier division, no car is allowed to be sponsored by a competing company. This quasi-protectionism has turned away many willing sponsors. Cingular and Alltel used to sponsor top teams in the Sprint Cup Series, but no longer.
And it’s not only the competitors who are affected. Fans have been feeling the pressure as well. High ticket prices, combined with hotel, travel, and meal costs, have meant that fewer fans have been going to the tracks. For decades, tickets to races at the half-mile Bristol Motor Speedway in Tennessee were all but impossible to get. Its streak of 55 consecutive sellouts ended with the spring 2010 race. Wallace says that NASCAR and the individual tracks are loath to lower ticket prices, fearing that would signal a decline in the quality of their product.
NASCAR’s increasingly uneasy relationship with its own history and the evolution of drivers into corporate spokesmen are affecting the future of motorsports. Whereas MLB and the NFL tout their traditions and histories, NASCAR has often swept its own past under the rug. Its roots are in illegal activities — running moonshine on southern back roads during Prohibition, attempting to outrun the police.
The southern past of NASCAR, and particularly its association with the Confederate flag, has proved to be problematic as it has transitioned to the national stage. The montage opening the telecast of the final race of the 1992 season featured the controversial Confederate battle flag. NASCAR regarded it as an image of southern pride at the time. Nearly 20 years later, it recognized the offensive connotations often attributed to it. In February 2012, NASCAR banned The Dukes of Hazzard’s “General Lee” car (which has a Confederate flag on its roof) from a parade at the Phoenix International Raceway.
Motorsports reporter Jeff Gluck noted that “NASCAR’s decision not to promote a potentially offensive symbol may be laudable, but some fans will likely consider it as an overly sensitive move.” This comment goes to the heart of the sport’s dilemma: NASCAR wants to avoid offending anyone in its fan base, but its efforts can come off as trying too hard to be politically correct.
Why would NASCAR, with its rough-and-tumble history, now want to be seen as politic and sensitive? The answer is easy — sponsorship dollars. Conventional wisdom says that companies would be more willing to commit sponsorship dollars to a NASCAR that appeals to a wider and more diverse potential fan base. And that helps to explain why drivers have become more vanilla in recent years. They want to keep their jobs, and that largely depends on whether they can attract and keep a sponsor. A tough economy means fewer sponsors, and fewer sponsors means that fewer teams now exist.
The problem is, the conventional wisdom has proven to be incorrect. Wallace says that the sport reached its apex around 2004, when ticket sales and TV viewership were both riding high. Since then, sellouts have become rare, and TV ratings are down. According to Wallace, the sport has lost about 1 million viewers since 2004. NASCAR fans often complain that today’s drivers lack personality, that they are more like corporate spokesmen than the wild men of NASCAR’s past.
The fans may have a point. Following the Janet Jackson “wardrobe malfunction” at the 2004 Super Bowl, NASCAR, responding to an FCC crackdown, held a meeting to inform drivers that they would be subject to steep fines for profanity on the in-car radio, used as a line of communication between driver and crew. It didn’t take long for this warning to be put to the test. A few weeks later, driver Johnny Sauter was fined 25 championship points and $25,000 for cursing in a post-race radio interview. Kevin Harvick, a teammate of Sauter’s, sided with NASCAR’s decision: “It’s not NASCAR cracking down, it’s the government. It’s time to clean it up.” A strong message had been sent and delivered. But adverse fan reaction began soon after, when fan favorite Dale Earnhardt Jr. was slapped with a penalty for saying the s-word in a televised interview after a race at Talladega Superspeedway in Alabama.
Fan alienation from NASCAR’s attempt to sanitize the sport is amplified by social media, according to Wallace. It’s a negative echo chamber. Fans can now take to Twitter and Facebook to express displeasure at what they see as boring races, high ticket prices, and bad decisions on the part of NASCAR management. It’s “an outlet to voice their frustrations,” Wallace says, but it also enables negativity to spread like a “virus.”
Wallace says that NASCAR executives are at a loss over how to recapture fan interest. Dale Earnhardt Jr.’s win at Michigan in June — his first win in four years — may help to boost attendance and TV ratings in the short term. But the long term? Unless the economy picks up considerably, NASCAR may have to operate this way for years to come. Indeed, Wallace thinks it has already reached its peak and will likely struggle to match its performance of a decade ago.
Despite all the pessimism about NASCAR’s economic woes, Wallace maintains that the state of motorsports is strong, with 4 million people tuning in to watch races every week, and 80,000 to 100,000 at the racetrack on a given weekend. But for now, he says, NASCAR’s problem is like the federal government’s: “We don’t need to find more money to buy expensive things, we need to make things cheaper so that we can afford them.”
He doesn’t see NASCAR making any “drastic moves” to cut competition costs in the Sprint Cup Series, even though the financial support provided by sponsors is what enables car owners to fund a team and, in a difficult economy, attracting new sponsors and holding on to current ones becomes a greater challenge. Additionally, on the fan side, ticket prices are mostly remaining stable. So for now, NASCAR’s efforts to increase sponsor and fan interest in tough economic times will be a matter of going around in circles.
— Jennifer Marsico is a senior research associate at the American Enterprise Institute.