SBJ/December 7 - 13, 1998/No Topic Name
Motorsports stocks still drawing a crowd
Published December 7, 1998
Corporate America's booming interest in auto racing shows no signs of slowing.
More than 150 investment and auto racing professionals squeezed into a New York hotel conference room last week for Josephthal & Co.'s second annual conference on auto racing, twice the number that attended the investment bank's event last year. And for good measure, a red racer from Championship Auto Racing Teams' FedEx Series sat quietly in the back.
Investment banks commonly hold these industry conferences to promote a specific sector's stocks, whether it be banking, energy or auto racing. Just five years ago, this kind of conference would have been unthinkable in auto racing. But the surges of money into the business, plus the spate of companies going public, made the event attractive to Wall Street.
"[Auto racing] revenues continue to grow, with additional gains likely over the next few years, particularly as most of the existing television contracts come up for renewal after the 2000 season," said Dennis McAlpine, Josephthal's media and entertainment analyst.
McAlpine is bullish on all five publicly held racing-related companies, including four track owners and one sanctioning body. Rising attendance and sponsorships, he said, plus increased TV rights fees should boost the auto racing business.
Indeed, McAlpine predicted that the average $1 million to $2 million rights fee paid by broadcast networks for auto racing events would rise to the $5 million to $6 million range. The rights for the Dura Lube/Kmart 500 in Phoenix cost TNN $700,000 this year, for example, but the rights for next year's race are believed to have been sold for $5.5 million, said McAlpine.
There is every reason to believe that rights fees will continue to rise, added Neal Pilson, president of Pilson Communications Inc. Whereas most sports are moving downstream to smaller markets, auto racing is expanding into large cities, he said.
"The demand is there to push rights fees up," Pilson said.
Nonetheless, while NASCAR is enjoying record TV numbers, ratings for CART's FedEx Series have fallen in the past year. CART Chief Executive Andrew Craig said they were reflective of a general decline in sports ratings.
CART is looking to connect with new fans by launching a program of interactive entertainment, including Web and video games and racing schools. CART views the effort as a way to promote the sport and to increase revenue, Craig said.
Asked if rumors were true that CART might compete with the rival Indy Racing League in the Indianapolis 500 in 2000, Craig said the reports were "grossly exaggerated." IRL founder Tony George declined to comment.
CART and the IRL split several years ago.