NEW YORK (AdAge.com) -- Once-unstoppable Nascar is hitting a wall as its fan base erodes, race attendance declines, TV ratings slip, the auto industry implodes and economically stressed marketers slam the brakes on sponsorships. The pileup is so big that Nascar, long held up as the gold standard in sports marketing due to its followers -- fiercely loyal to the sport and its sponsoring brands -- had to lay off 1,000 employees and is fretting over whether it could actually lose money next year.
CEO Brian France, speaking last week in New York at its big year-end promotional event, Champions Week, said Nascar won't see increased sponsorship revenue in 2009 -- a seemingly unthinkable turn of events for a sport that added $150 million in sponsorship dollars last year. "Next year, we will not obviously make that kind of a gain," he warned, then added, "The question is, are we going to back up?"
Of Nascar's 42 full-time drivers, 12 currently do not have primary sponsors for the 2009 season, which begins in less than 10 weeks with the Daytona 500. Primary sponsors pay $18 million to $20 million to be featured as the main logo for all 38 races on a driver's car, such as DuPont does with Jeff Gordon. Running nearly a third of its cars without a major sponsor is a huge problem, since under its team business model, at least 75% of the budget comes from sponsors.
"I don't think it's necessarily an indictment of the value of a Nascar sponsorship as much as it is the fact that it's more expensive than ever to do business with Nascar," said Mel Poole, president of SponsorLogic, a sports consultancy in Charlotte, N.C. "Primary sponsors who spend $20 million to put the sticker on the car are spending just as much, if not double or triple that, in media support to leverage that."
According to an Advertising Age analysis of TNS Media Intelligence figures, advertisers spent $538.8 million on TV ads surrounding Nascar programming from January through September of this year, down from $567.2 million in the same time period in 2007.
And two Nascar marketing staples have left. Eastman Kodak ended a 22-year relationship, while Sears Roebuck, hard hit by the economic downturn and anemic retail sales, decided to end its 13-year title sponsorship of the Craftsman Truck Series after this year.
"Just as we have transformed our company, we are transforming our marketing," said Kodak's Betty Noonan, VP-corporate marketing and branding. Kodak said it is concentrating most of its business on digital cameras, and is putting more of its sports marketing dollars into golf, whose audience demographic is far more lucrative than Nascar's.
"Nobody appreciates sponsors more than us," said the VP-business development of a Nascar team who asked not to be identified. (Indeed, the sport did sign on a number of sponsors in 2008, among them Wrigley and Best Buy.) "But you look around as you're trying to form partnerships, and you look at who's leaving, and it's just disheartening."
It's not only sponsors that are abandoning Nascar; fans are too. This is the third consecutive season it has suffered from declining TV ratings and third straight year track attendance has fallen -- down some 9% from last season.
According to a Sports Business Journal report, even Nascar's legendary brand loyalty among fans is down. Of more than 400 race fans who were surveyed by the publication, only 42% said they were "much more likely" or "somewhat more likely" to trust a particular product or service that is an official sponsor of Nascar, down nearly 13 percentage points from the responses to the same question in 2007.
For its part, Nascar maintains it's still on track. "While we're not immune to the downturn, by many measures and just about every important metric, we are in a strong position," said Andrew Giangola, VP-business communications. "We're still the second-highest- rated sports programming on TV, and while attendance is down, we still average about 120,000 fans per race."
Indeed, Nascar is No. 2 to the National Football League by most measures, except for sponsorship revenue. The NFL pulls in about $1.2 to 1.5 billion per year compared with Nascar's $3 billion; in third place is Major League Baseball, followed by the National Basketball Association and the National Hockey League.
As for the layoffs, Mr. Giangola said to "consider the context," noting, "You had several years of very strong growth. Then Nascar made some changes with the new car [introducing the more efficient Car of Tomorrow]. We believe some of [the layoffs] would have happened anyway. With the [Car of Tomorrow] you need fewer fabricators, fewer engineers, there's less labor costs. ... But, certainly, it's been exacerbated by the [economic] situation."
Moreover, the death throes of the Big Three domestic automakers could have drastic consequences for Nascar: 32 of the 42 full-time teams for 2009 drive Chevys, Fords or Dodges. (The other 10 are Toyota, which saw unit sales fall 34% in November). General Motors Corp. already reduced sponsorship at 12 tracks last year to seven in 2008. According to reports, Ford Motor Co. canceled its pre-banquet party in New York last week, GM canceled its post-banquet party and representatives from Chrysler weren't even in attendance at the celebration.
GM has already publicly said everything is on the table when it comes to cuts. "We're obviously watching the situation very closely," Mr. Giangola said. "We're hopeful and optimistic that Congress will help the automakers. The domestic automakers have been a part of our tradition and history."
But if the Big Three disintegrate or scale back on Nascar, there doesn't appear to be another foreign company ready to jump in. Honda announced last week that it is pulling out of Formula 1 racing, a shocking development.
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CORRECTION: When Nascar CEO Brian France was quoted as saying "The question is, are we going to back up" he was referring to whether the sport was going to be able to reach the gains it made in 2008 sponsorship dollars; he was not referring to whether it could lose money this year. Also, the 1,000 layoffs referenced in the story refer to the teams, not Nascar's governing body. And though Sears did end its 13-year title sponsorship of the Craftsman Truck Series after this year, Craftsman remains the "official tool" of Nascar.