Is NASCAR’s Business Model Flawed?
By SM Staff On Fri, Sep. 09, 2011
Often we forget that as much as we love a sport there is ultimately a business model behind it. They are intrinsically connected whereas one cannot survive without the other. It is why there are labor stoppages and why leagues such as Major League Soccer struggle to establish a foothold in the American sports landscape.
In NASCAR, the business side is inherently more visible and interconnected than in other sports. Since Richard Petty first donned the STP colors in the 1970s, the power a sponsor has had over a team, and to an extension the sport, has greatly increased. No sponsor means no team, no team means no driver and no driver means no series.
Today’s announcement of Kevin Harvick Incorporated’s exit from NASCAR team ownership provides yet another example of the problems with the current NASCAR business model.
From a business standpoint , KHI is the dream NASCAR organization. They have public and passionate owners in Kevin and DeLana Harvick. They possess a great depth of drivers, including several past champions. They have countless race wins and series championships. Yet they too have struggled to secure sponsorships, despite their impressive resume.
What more does a team have to do?
Earlier this year Red Bull Racing’s announcement of their exit from the sport may ultimately be viewed as the catalyst for the demise of teams like KHI. Red Bull personifies the demographic NASCAR yearns for, yet the corporate offices in Austria decided that NASCAR is not a viable enough source of said demographic to justify continuing to build a team.
So what has changed in NASCAR? A mere ten years ago the sport was the darling of numerous Fortune 500 companies, but now finds themselves often shunned by those same companies. When successful drivers like Carl Edwards, Matt Kenseth and Clint Bowyer struggle to find sponsor dollars, clearly there is something wrong.
Much of this can be explained by one of the simplest mantras in business, the lack of a clear identity. In order for your product to thrive, and yes NASCAR is ultimately a product, it has to differentiate itself from others. This is what spurred the rapid growth in the mid-1990s as fans and sponsors relished and the differences of NASCAR when compared to other sports. It was brash, it was exciting and it often produced mesmerizing television.
Over the last ten years those differences have slowly been erased, being replaced by a more monochromatic vision of the sport. To the average fan, the only real difference between the three national series is the length of the race and the vehicles they drive. It is the same tracks, the same drivers and usually the same race winners.
Once upon a time the Camping World Truck Series was known as an old school series, with plenty of beating and banging on short tracks around the country. The Nationwide Series was known as the stomping grounds of future NASCAR greats at both short tracks and the large superspeedways of the Sprint Cup Series. All were interconnect with the occasional appearance of Cup Series stars and companion race weekends, but ultimately each were their own series.
Granted NASCAR has finally taken steps to give the Nationwide Series an identity, but there is still a long way to go. This is most exemplified by the fact the current points leader, and multi-race winner, often lacks a sponsor on race day. In the truck series it is becoming almost a regular occurrence for a season’s champion to suddenly be out of a ride the next season. As a business, why would I be attracted to either of these models? If other businesses are not interested in it enough to sponsor proven teams and drivers, clearly there must be something wrong with the sport.
A slowing economy finally brought to light the issue of changes in NASCAR over the last decade. Clearly the sport road the coattails of growth a little too long and have now boxed themselves into a corner. This doesn’t even touch on the issues with the large numbers of despondent fans who have a tendency to give the sport a negative vibe. NASCAR now has one of the most cynical fan bases in the country, a fact that I’m sure businesses are well aware of.
If the diehard fans don’t believe in the sport, why should a business?
How does NASCAR fix this? There is no quick or easy answer. Mitigating costs has not worked. Neither has the fabrication of a championship battle by denying points to Cup drivers in the Nationwide series.
Ultimately the sport needs to find some way to give each series its own identity. Put the Truck Series at tracks like Irwindale or Myrtle Beach and market it as the series where drivers cut their teeth and become men. Make the Nationwide Series the place where drivers get their first taste of Cup cars and occasionally battle the stars of the sport. Institute a true ladder system like every other major sport has to attract both fans and sponsors back.
It works for college athletics and their associated
professional counterparts, why wouldn’t it work for NASCAR?
If I were NASCAR CEO Brian France, I would be greatly concerned about today’s announcement. There will be plenty of positive spin, identifying that KHI will still be around, just under the RCR banner. Yet one still has to acknowledge that KHI chose to end their organizational presence despite a wealth of success.
And if that’s not enough to entice teams and sponsors to the sport, than what is?