The biggest question for NASCAR in 2008 may be whether the sport can survive in 2009.
The answer to that question is most likely yes. But for a sport where “roughly 80 percent of the typical … team’s budget” comes from corporate sponsorships, the economic downturn is having an especially big impact.
Last season, “400 companies put up more than $1.5 billion to sponsor races, cars and drivers,” with a third of that coming from the struggling auto industry. Outside the auto industry, the New York Times reports that “Longtime sponsors including Kodak, Texaco and Domino’s Pizza ? are abandoning Nascar.” Craftsman has “[cut] its ties to the truck series,” replaced by Camping World, which will pay “half of what Craftsman is estimated to have paid.” Overall, NYT reports that “Nascar expects its take from title sponsorships to drop 20 percent next year.”
The struggles of the big three automakers, GM, Chrysler and Ford, which “made up roughly 75% of the cars in the field” in 2008, may have the biggest impact of all. The big three provide significant funding to NASCAR; the automakers are estimated to “spend about $120 million to $140 million annually” on the sport. Heading into 2009, support from those struggling automakers is dwindling. Ford and Chrysler are reducing their NASCAR spending by 20% and 30%, respectively. Foreign carmaker Toyota is also cutting its NASCAR budget in ’09.
As a result, NASCAR has seen a spate of layoffs and mergers since the end of its season in November. Dale Earnhardt Incorporated and Chip Ganassi Racing merged into one four-car team, eliminating three cars and 100 jobs in the process. Meanwhile, Petty Enterprises is seeking a merger with Gillett Evernham Motorsports. Since the end of the season, Petty Enterprises has laid off nearly 70 workers. Overall, approximately 600 NASCAR team employees were laid off in ’08.
Even with these negative developments, NASCAR may not be headed for a complete meltdown. If one or more of the big three were forced to pull out of NASCAR, the sport would see significant changes. However, unlike other racing series, NASCAR could survive on its diverse streams of revenue — including its “multibillion-dollar TV contract that started in 2001, a $70 million annual deal with title sponsor Sprint and sponsorship from more than 100 Fortune 500 companies.” Quoting Jeff Gordon, NASCAR is far less dependent on manufacturer support than other racing leagues. Gordon: “Where 80-90% of their funding comes from the manufacturer in F1, it’s maybe 10-20% of our funding.” The New York Times suggests that NASCAR’s most recent television deal “which brings in about $500 million a year, may be the main thing that saves Nascar from ruin.”
In addition to the economic crisis, NASCAR also dealt with a PR black eye in 2008. In June, former employee Mauricia Grant sued NASCAR for $225 million for alleged racial and sexual harrassment. That suit was settled in December for an undisclosed amount, with no admission of wrongdoing.
If there was any good news for NASCAR in 2008, it was that ratings increased on FOX. The network averaged a 5.7 rating, up from ’06, marking the first time since 2005 that ratings for NASCAR on FOX increased. On the flip side, ratings were down 3% on ABC, which aired the Chase for the Nextel Cup.
Overall, 2008 set the stage for a potentially rocky 2009 in NASCAR. The sport figures to have a tougher time than the other U.S. sports leagues weathering the economic downturn. Still, those in the know believe the sport will find a way to survive, even without the big three car manufacturers.
