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SBJ/May 28 - June 3, 2007/This Weeks News
Alltel considers next move after AT&T ruling
Published May 28, 2007
The court ruling that allowed AT&T to rebrand its No. 31 Cingular racecar has Alltel thinking about challenging the restrictions placed on its NASCAR team sponsorship.
|Without contract specifics on NASCAR’s
restrictions, a judge allowed AT&T’s logo
on No. 31.
Until now, Alltel has abided by a set of rules that aren’t specifically written into its deal with Penske Racing, and many of those rules restrict Alltel from activating the way other sponsors do.
Because it is a wireless company that competes directly against Sprint Nextel, which spends close to $100 million a year to be NASCAR’s top series sponsor, Alltel can’t set up interactive displays, it can’t title sponsor a race, it can’t do any more than put its mark on driver Ryan Newman, the car, the pit crew and a single merchandise trailer.
And like Cingular, Alltel has always been told that it can’t change its name if ever acquired by another company. But these prohibitions could be subject to debate after a judge’s ruling on May 18 that allowed Cingular’s No. 31 car to be rebranded to AT&T. Sprint Nextel has said that the ruling diminishes its exclusivity in the sport.
U.S. District Court Judge Marvin Shoob granted AT&T a temporary injunction to put its blue globe on the No. 31 car because, in part, NASCAR’s restrictions weren’t specifically outlined in Cingular’s team contract with Richard Childress Racing.
Alltel’s restrictions are likewise vaguely referenced in its contract with Penske, said Samira Zebian, Alltel’s director of sponsorship marketing.
“Could this allow us to leverage the racetrack and other platforms that have been off-limits to us?” Zebian asked. “What has been conjecture in the past now must be formalized. We’ve always been very respectful of Nextel’s rights, but we need a better understanding of how far-reaching those rights are.
“What the suit brings to light is that a league deal shouldn’t impact our category so negatively that we can’t put our product in front of the fans the way every other team sponsor can.”
Alltel has no plans to challenge NASCAR legally, Zebian said, but “it does force a conversation” about Alltel’s activation rights.
“It’s a learning situation because you can never predict everything that may happen,” said Ron Schneider, president of Sport Dimensions, which has represented Shell, Best Western and others. “I doubt Nextel or anyone else would have predicted that Cingular, the industry leader, would go away. It’s going to lead to strong clauses being written into these contracts to address that.”
Meanwhile, NASCAR is moving forward with its defense in the AT&T case. NASCAR’s next filing isn’t due until June 4, but it moved forward ahead of schedule with briefs that were expected to be filed last Friday.
In those filings, NASCAR has requested that AT&T post a bond to cover any damages that might result from the lawsuit, possibly including damages to Sprint Nextel for any loss of exclusivity. Sprint Nextel also was expected to file its briefs last Friday.
In its briefs, NASCAR is expected to request AT&T to move quickly with its filings to expedite the court case. AT&T’s response isn’t due until June 19.
“NASCAR and Sprint Nextel want to get the case heard. We don’t want to wait until the end of July,” said NASCAR spokesman Ramsey Poston. “This is further indication of how important this case is to NASCAR and Sprint Nextel.”
Poston said the case could prompt NASCAR to review the way its team contracts are written. The governing body has purposely kept the wording in the contracts as neutral as possible to maintain flexibility with the teams and sponsors, he said, but that flexibility could be lost in future contracts. NASCAR likely will be much more specific in its wording on any sponsor restrictions.
“We’ve usually found ways to make things work and our model has been considered pretty sponsor-friendly, but now our hand might be forced to get rid of some of those gray areas,” Poston said.
Once the AT&T trial concludes, though, the issue still might not be settled. Alltel last week was acquired by TPG Capital and GS Capital Partners and while the name is expected to remain the same, some analysts believe Alltel remains a target for one of the larger wireless companies.
“This is an opportunity for sports properties and its sponsors to review the mechanics of exclusivity,” said OnSport’s Malcolm Turner, who has an extensive background in contract negotiations. “A property can issue any number of keys to the castle and a company will pay a premium for exclusivity, as long as the back door isn’t left open for competitors to crash the party.”