SBJ/July 30 - August 5, 2007/Marketingsponsorship

Back to court for AT&T, NASCAR

NASCAR and AT&T go back to court this week, at odds over the paint scheme on the No. 31 race car. But the larger issue of exclusivity in the wireless category will loom over the proceedings.

Cingular on the No. 31 Nextel Cup car.

Sprint Nextel, NASCAR’s top series sponsor, bought the largest sports sponsorship ever sold, exclusivity included, and has spent close to $100 million a year since 2004. Cingular and Alltel were allowed to stay as team sponsors under certain restrictions.

But in a preliminary injunction ruling in May, a judge said AT&T could replace Cingular on the No. 31 Nextel Cup car because the restriction on rebranding wasn’t spelled out in NASCAR’s contract with Richard Childress Racing.

Those in the industry said it was widely known that Cingular and Alltel could not rebrand if one of them merged with another company in the volatile telecom world. But NASCAR didn’t put it in writing, so AT&T’s blue globe has been on the hood of the orange No. 31 car for the last two-plus months.

“AT&T has nothing to lose,” said Zak Brown, founder and CEO of motorsports agency Just Marketing. “They might not have very good relationships in the industry, but they’ve got the globe on the car.”

AT&T’s emergence in NASCAR this year has led Sprint Nextel to say that its exclusivity has been compromised. And it remains at risk, based on the current legal precedent. Alltel is ripe for acquisition, analysts say, which could allow another company to rebrand Alltel on the No. 12 Penske Racing entry. Alltel was bought earlier this year by two private equity firms.

“For Alltel and other brands with competitive categories, this will make them take notice,” said Jonathan Gibson, vice president of marketing at Pierce Promotions and a former executive at Miller Brewing. “This is one of the first major cases of somebody pushing the envelope. NASCAR and other sanctioning bodies selling entitlements are going to have to closely monitor their language in these contracts and watch for potential changes. You can’t predict every change, but you have to be strategic in your approach.”

Unless the judge hearing NASCAR’s appeal of the preliminary injunction on Thursday overturns the ruling, Sprint Nextel must plan its next move. There are any number of ways in which Sprint Nextel might seek relief if AT&T prevails. NASCAR could attempt to add value without reducing the required spending, or it could offer a discount. Escalators in the contract could be voided or additional years  added.

How NASCAR reacts to Sprint Nextel is part of the intrigue.

“NASCAR should be proactive, understand that Sprint Nextel’s exclusive rights have been devalued and figure out what the damages are so they can move on,” said Bob Cramer, the former president of Genesco Sports and formerly the MasterCard sponsorship chief. “If AT&T wins, and I think it will, NASCAR and the teams are going to have to get together so that this doesn’t happen again. Sponsors are supposed to be going down a mutually beneficial path with the league.”

Most team officials expressed some level of satisfaction that AT&T has been allowed to rebrand the car. With funding as critical as ever, most people at the team level don’t want to see the sport lose a sponsor as large as AT&T.

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