Sports apps designed to do it all First Look podcast: Wal-Mart, 10th SBAs Breaking Ground: A’s and Indy 2017 Sports Business Awards nominees FC Dallas streaming local matches Digital media’s recent rush of deals Big East, ACC tourneys thrive in NYC Toyota goes deep with Team USA Cost poses Wi-Fi hurdle on campus From The Executive Editor: 10th SBAs
SBJ/June 4 - 10, 2007/This Weeks News
New NHRA owners fire up marketing plan
Published June 4, 2007
The new owners of the NHRA Pro Racing division didn’t shy away from comparisons to the NASCAR model last week while announcing their $121 million acquisition.
HD Partners Acquisition Corp., a group of former DirecTV executives who raised $150 million from investors to pursue a sports entertainment property, acknowledged a desire to emulate NASCAR’s marketing success by filling more sponsorship categories and increasing the NHRA’s licensing revenue.
|The NHRA will no longer have to reinvest its
Powerade Series profits into the amateur ranks.
The first step likely will include expansion of the Powerade Series’ 23-race schedule with an eye on moving into Canada and/or Mexico in the not-too-distant future. In the next three to five years, the NHRA hopes to add at least three new events, possibly more.
HD Partners said it will use the excess capital of about $30 million to pursue other acquisitions that would be ancillary to NHRA Pro Racing.
“NASCAR did not become what it is today because the racing evolved. They’ve been driving around in circles for 50 years,” said Eddy Hartenstein, CEO of HD Partners and the former president of DirecTV. “It grew because of how they marketed the sport. That’s our opportunity.”
With the acquisition, the NHRA Pro Racing division will break away into a separate entity from the association’s amateur side, which consists of 80,000 members and 35,000 licensed competitors.
HD Partners bought all of the assets that go with the Powerade Series, including the contract with ESPN that goes through 2011, a perpetual license to the NHRA brand, sponsorship and licensing rights, media rights, merchandise rights related to the brand and four tracks, as well as a long-term lease to a fifth.
HD Partners paid $100 million in cash, $9.5 million in HDP common stock and assumed $11.5 million in NHRA debt. The money was paid to the NHRA, which maintains sanctioning duties, such as safety.
The NHRA is a nonprofit organization, but the sale means the Powerade Series will go public as part of HD Partners. The essential benefit to the move is that the NHRA will no longer have to reinvest its profits from the Powerade Series into the amateur side of the association.
Under the old model, the NHRA had experienced revenue growth in recent years, going from $82 million in 2004 to $93 million in 2006. Nearly half of that revenue comes from admissions, a revenue line that grew from $41 million to $46 million from 2004 to 2006.
The NHRA’s sponsorship and licensing revenue remains underdeveloped, though, and those are areas Hartenstein and his team will target, he said. Hartenstein cited categories such as wireless, satellite TV, consumer-packaged goods, big-box electronics and quick-service restaurants as obvious areas for growth. NHRA’s nonendemic partners include UPS, Brut, Budweiser, U.S. Army, AAA, Oakley and Motel 6.
He also said that NASCAR-branded products generated license fees of more than $300 million in 2005, pointing out another opportunity for the NHRA to have revenue surge. NHRA showed revenue of $7 million last year in royalties.
The series will revamp and relaunch its licensing efforts, offer more merchandise through its Web site, NHRA.com, and establish a presence in retail outlets. The series also will relaunch NHRA.com.
“As a property, the NHRA has been very successful in an under-the-radar way,” said Tim Frost, a financial analyst and consultant in motorsports. “This is going to raise a lot of eyebrows.”
The sale is subject to regulatory approval. Frost said when an entity goes from nonprofit to public, it often undergoes review by the state attorney general’s office.