SBJ/August 27 - September 2, 2007/This Weeks News

NASCAR, Subway at stalemate

NASCAR’s once-promising negotiations with Subway to title sponsor its No. 2 series have hit the skids, sources say, and the sanctioning body has spent the last few weeks revisiting many of the brands that initially turned down the sponsorship.

Subway’s talks to replace Busch were complicated by the presences
of fast-food team sponsors like McDonald’s and Arby’s.
KFC, Dunkin’ Donuts and Allstate, each of which had been contenders for the sponsorship earlier in the process, are among the companies NASCAR has approached in the last few weeks as its tries to replace Anheuser-Busch. A-B sponsored the Busch Series for 25 years before deciding to make this its final season.

Subway, which was considered the front-runner 30 to 60 days ago, remains in talks with NASCAR, but industry insiders no longer characterize America’s largest restaurant chain as the favorite.

As NASCAR seeks a new title sponsor, industry insiders say the price is dropping.

NASCAR was asking $30 million a year when it began the sales process in the first quarter of the year, but that figure has dropped by nearly half. As part of the new price, NASCAR and ESPN, working jointly to sell the title sponsorship, have relaxed the required media spend on ESPN, sources say. At first, about a third of that $30 million was a required spend on ESPN’s platforms.

NASCAR had no comment on potential partners or issues under negotiation and maintained that its goal is to announce a new series partner by mid-November, at the end of the Busch Series schedule. A Subway spokesman did not return phone calls.

Sources say that category exclusivity has been a primary obstacle as Subway and NASCAR try to resurrect their deal. Exclusivity has dominated the news this season with AT&T’s lawsuit against NASCAR and Cup series sponsor Sprint Nextel, which joined the lawsuit as a co-defendant, as well as an earlier turf war between Sunoco and Shell.

Exclusivity emerged as a major sticking point in Subway’s negotiations because of the broad quick-service restaurant category. Arby’s, McDonald’s, Jimmy John’s and Domino’s are among the team sponsors already involved in the Busch Series.

“The rub is going to be exclusivity,” said Trip Wheeler, vice president and general manager of Velocity’s motorsports office in Charlotte. “How is NASCAR going to tell the teams that they can’t sell to any QSR?

“You have to look at it like this: Every ESPN broadcast is going to be talking about your series because your name is on it. There could be a company out there that needs to look really big and doesn’t operate in a category where exclusivity is an issue. Then there could be a fit.”

Even at a reduced price, the clock is ticking on NASCAR to find a partner. Many companies have their 2008 marketing budgets on paper, especially when it comes to significant spends like a title sponsorship. Assets, such as a driver, car or track, typically have been established by now.

“Many, if not most, companies are well into their 2008 planning, so trying to get a typical six- or seven-figure deal done would be a real challenge, if it hasn’t already been budgeted,” said Mike Bartelli, senior vice president of motorsports for Millsport.

But Bartelli, whose clients include Tylenol and Sunoco, said a title sponsorship of this magnitude — likely reaching nine figures over the deal — would require the advocacy of a president or CEO.

“A brand manager or a vice president of marketing are beholden to their budgets,” Bartelli said. “The difference at the president and CEO level is that they don’t have the same constraints. History has shown that what a president or CEO wants, they figure out a way to get it.”

It’s uncertain whether NASCAR and Subway can revive their deal or if another brand will emerge late in the process. Subway has had a significant presence in NASCAR with title sponsorship of Nextel Cup races at Phoenix and Martinsville, Va., as well as commercials that feature driver Tony Stewart.

“This can still be a great deal for everybody if it gets done in the next month or so,” Wheeler said. “NASCAR is trying to find the right partner who’s going to activate and promote the series. From a buyer’s standpoint you might not have the money, but maybe you have the activation dollars and they can be re-purposed. Maybe you give NASCAR less in fees and more in activation.”

Subway, which has been represented by Just Marketing in the process, recently brought in Octagon Racing as a consultant. Octagon represents Sprint Nextel, title sponsor of NASCAR’s Cup series, and has been deeply involved with the wireless carrier’s attempt to protect its exclusivity as AT&T attempts to rebrand its No. 31 car from Cingular.

Steve Phelps, NASCAR’s chief marketing officer, and his team in the New York office, including Jim O’Connell, vice president of corporate marketing, and Brian Corcoran, managing director of corporate marketing, have led NASCAR’s sales effort along with ESPN’s Ed Erhardt, president of customer marketing and sales.

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