Sponsors hit the brakes on NASCAR
Earlier this month, a U.S. congressman from Georgia advanced an unusual amendment related to the defense spending bill in the House Appropriations Committee. The amendment, addressing a bill valued at more than $600 billion, sought to ban the sponsorship of sporting events by the U.S. military.
Jack Kingston, R-Georgia, was primarily targeting the military’s sponsorship of NASCAR. Kingston and his co-sponsor, Betty McCollum of Minnesota, made the point that NASCAR sponsorship isn’t worth the money in this economy.
McCollum claims the U.S. military spent $90 million sponsoring motor sports in 2011 and 2012. In fiscal year 2011, the National Guard reported it spent almost $33 million on NASCAR sponsorship, or 8.6 percent of its recruiting budget.
With attendance declining and a tough economy putting pressure on marketing budgets, companies are dropping out or avoiding NASCAR for sponsorships. Trevor Bayne was a 20-year-old part-time driver with no major sponsor when he won the Daytona 500 last year. This year, he returned to Daytona a year older but in the same driving situation.
“When I won the 500, in the back of my mind, I was thinking I’m set now,” Bayne said before this year’s Daytona race. “We call it a lifer. Once you won a Cup race, you used to be a lifer. But it just shows how tough it is.”
NASCAR legend Jack Roush has called this “the roughest economic depression that we’ve had.” Fellow legend Roger Penske has said major sponsorship values have dropped from $20 million to $25 million to lows of $10 million to $13 million.
It’s not just the money for the sponsorships themselves. According to Forbes, NASCAR sponsors expect to pay an additional amount for promotions around the sport, around twice the value of the sponsorship. Commercials, promotional events and hosted events at race-day hospitality tents add to what is really a full-blown marketing strategy, not just a sticker on a car.
Big-name sponsors have left the sport or reduced their sponsorships, among them General Mills, Red Bull and a UPS brand that was once ubiquitous with Dale Jarrett behind the wheel.
In a few ways, sponsors aren’t getting the bang for the buck they used to. Race attendance is dropping. In 2007, 270,000 fans attended the Brickyard 400 at Indianapolis Motor Speedway. Just four years later, attendance was 138,000 — still a great number, but a huge drop. Forbes says TV ratings are down 24 percent since 2006.
NASCAR has responded by implementing cost-cutting measures to help teams. It accelerated the implementation of a new car, limited the number of crew members in the truck series and banned testing at NASCAR tracks.
In response, nontraditional sponsorships are popping up. More brands are electing to sponsor a car for as little as one race, for just a couple hundred thousand dollars.
Brands that you never saw before are appearing, like AARP, or highly regional or specialized businesses such as Ollie’s Bargain Outlet, which jumped into the fray in February, sponsoring a car for the Daytona 500.
While it didn’t take the checkered flag, Ollie’s still saw an incredible return on its investment, though through some luck. After a crash led to a fuel fire on the track, its car sat in the lead and in TV lenses for more than an hour, leaving some wondering if this one-time sponsor would come away with the biggest win of the year.
Bill Sayer is a financial analyst in the insurance industry and holds a degree in economics. A native of Upstate New York, Bill enjoys watching college football, the NFL, NHL and Premier League soccer from his home in Palmyra. Have a suggestion, link or question?