SBJ/October 15 - 21, 2001/Marketingsponsorship
Naming beef creates value questions
Published October 15, 2001
The push between rights holders and rights buyers became a shove last week at Lowe's Motor Speedway, and the loser may be the value of naming rights throughout sports.
The dispute swirled around NBC/Turner's refusal to mention the speedway by name during its coverage of the Oct. 7 UAW-GM Quality 500 at the Charlotte area track. Track officials were threatening to interrupt NBC and TNT's telecasts if the networks did not refer to the track by its official name, something the networks refused to do until Lowe's Companies Inc. agreed to buy commercial time on NBC's race coverage.
The showdown became so heated at one point that flamboyant track president H.A. "Humpy" Wheeler ordered tow trucks and security personnel to NBC/ Turner's TV compound on Oct. 6, threatening to haul off satellite trucks after learning Lowe's name would not be mentioned during the weekend race telecasts. A last-minute deal involving Lowe's ad spending with NBC resolved the dispute, but the spat could have lingering effects in terms of naming rights and the value that is attached to them.
"This will bring full clarification," said Breck Wheeler (no relation to Humpy Wheeler), analyst at Legg Mason Wood Walker Inc. "Everybody will be evaluating the TV cost now [in considering naming-rights deals] because it's obvious you just can't count on free TV exposure."
"I think it's a cautionary reminder for everyone in the naming-rights business," added Max Muhleman, president at Muhleman Marketing Inc., a longtime motorsports agency owned by IMG.
According to NBC Sports President Ken Schanzer and several Turner executives, the contract the networks have with NASCAR is explicit: They are not obligated to mention the name of the racetracks on the air. If they do say the name, they have to use the official name, whether or not it has a corporate sponsor. But the contract clearly states that they're allowed to avoid giving a sponsor a free plug by not saying the name of the racetrack at all.
In fact, Schanzer and others said, the contract actually uses Lowe's Motor Speedway as an example to illustrate this point.
"We have been very clear from the beginning of this deal," said Schanzer, who left his son's soccer game on Oct. 6 to fly to North Carolina to try to resolve the dispute. "With NASCAR, we radically ramped up the amount of money paid [in rights fees], so questions of commercial time were absolutely essential to the deal. We made it very clear to Lowe's where we stood on this when they didn't make the buy."
Speedway executive Wheeler, who also is chief operating officer of Speedway Motorsports Inc., which owns and operates six NASCAR Winston Cup tracks, said he only has a "short form" of NASCAR's new TV contract and that it simply says the networks must use the proper names of the racetracks when referring to them.
The NASCAR television deal actually is the only known network contract that ever addressed the issue of whether a broadcaster had to say the proper name of a venue on the air. With other leagues, the networks are able to do what they wish, generally mentioning the name of a facility at the top of each broadcast, but occasionally refusing to unless a sponsor runs advertising with the network.
When NBC had NFL football, Schanzer said the network never referred to the corporate names of stadiums on the air. But he said the network does not have a set policy with other sports.
ABC also has no set policy but generally mentions the proper name of the facility at the top of each broadcast in every sport, and then leaves it up to the announcer whether to repeat the name.
Fox handles it in much the same way for the NFL and Major League Baseball, but is more stringent about giving free corporate plugs in its NASCAR coverage than with any other sport. Like NBC and Turner, it does not refer to the title sponsor of a race more than twice per broadcast — its minimum obligation under terms of the NASCAR contract — unless the sponsor also buys advertising. The venue name question has never come up because Lowe's Motor Speedway is the only track on the Winston Cup circuit that has a naming-rights agreement. Fox aired one race from Lowe's Motor Speedway earlier this year and used the proper name because Lowe's had bought advertising with the network.
CBS sports handles named facilities on a case-by-case basis. The network referred to Raymond James Stadium during last year's Super Bowl broadcast because Raymond James Financial doesn't buy very much national television advertising to begin with. But when PSINet bought commercial time on other networks and not CBS, CBS would not say "PSINet Stadium" during broadcasts of Baltimore Ravens home games.
"The only time we're really strict is when we think we're not being treated fairly," said CBS Sports President Sean McManus.
Schanzer said that while the issue is more important to the network with NASCAR than with other sports, naming-rights sponsors can't take anything for granted.
"The principles are simple," he said. "We sell air time. If someone believes that by buying naming rights that automatically assures them the right to air time, they're wrong."
Home improvement retailer Lowe's signed a 10-year, $35 million naming-rights deal with the track in February 1999. Lowe's spent an estimated $35 million in advertising with NBC during the last year, but none of that was with NBC/Turner's NASCAR coverage.
Lowe's spokesman Brian Peace said the company was "put in the middle" of the situation and wanted no part of possibly pulling the plug on the telecast. Peace declined to name the Lowe's executive dispatched to the track to help resolve the standoff.
In resolving this dispute, Peace said a final determination on how the company shifts ad spending or enhances it hasn't been completed.
The naming-rights battle arrives at the same time that everyone across NASCAR is struggling to find and keep sponsors. That includes first-year broadcasters Fox, NBC and TNT, who, despite all-time viewership highs, stand to lose a combined $20 million on the NASCAR TV deal this year, according to industry experts.
NBC and Turner jointly are paying $200 million a year over six years for half of NASCAR's TV rights. Fox is paying $200 million a year over eight years for the other half.
The Oct. 7 race originally was scheduled to appear on NBC, but the early-afternoon attacks on Afghan-istan caused NBC to switch the coverage to cable partner TNT, which abided by the naming agreement with the speedway.
Throughout the fracas, NASCAR tried to play peacemaker, said NASCAR senior vice president George Pyne, a posture that a source said frustrated NBC and Turner officials who wanted firmer backing.
According to one source directly involved in the dispute, NASCAR executive vice president Brian France went to the networks at one point and suggested they work out a compromise with the track. The networks refused.
Pyne, who said he had no knowledge of such a suggestion, said that before NASCAR was able to review the contract, "We were unclear what our position was." But once it became clear that the wording supported NBC and Turner, NASCAR backed the networks but still encouraged the parties to find a joint solution.
"At the end of the day the contract is clear about what you can and can't do," Pyne said. "But in business, it's better to leave contracts in the drawer and never have to reference them. Good business is about partners working things out."
Chris Hafner, a writer in Charlotte, contributed to this report. Erik Spanberg writes for The Business Journal in Charlotte.