The first phase of Nextel's NASCAR series sponsorship could be expensive for the company, even by the standards of a 10-year, $750 million deal.
Companies often spend two or three times a sponsorship fee in activation work each year, especially early in a deal that involves a significant rebranding. Even if Nextel only matches its $75 million outlay in year one dollar-for-dollar, it will be spending $150 million, or nearly 10 percent of its estimated $1.6 billion annual sales and marketing budget, on NASCAR. The company spent slightly more than $400 million in sales and marketing in its most recent quarter, according to its Securities and Exchange Commission filings.
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| Schweitzer |
The company is not disclosing specific activation plans. Mark Schweitzer, Nextel's senior vice president of marketing, did say, "It would be inappropriate to face an opportunity like this and not plan to activate it in a big way, and that will be everything from on-site through Internet through network advertising — we expect to use the full range of marketing options."
Nextel spends roughly 18 percent of its revenue on sales and marketing, relatively low for a wireless company, according to F. Drake Johnstone, who covers the wireless industry for investment firm Davenport & Co.
Nextel operates in an environment where the numbers are constricting. Its customer-acquisition fees have reached into the $450-a-customer range in recent quarters, more than $100 more than other companies'.
Schweitzer implied that the aim of the NASCAR deal is lower acquisition costs, if it can lure interested fans en masse and replace expensive types of outreach like telemarketing. "Marketing is inevitably more efficient when it's a 'pull' strategy than a 'push' strategy," Schweitzer said.
Nextel is entering a crowded NASCAR sponsorship field, and some experts questioned whether it would have enough room to operate. Ethan Green, vice president, North America, for the consultancy Redmandarin, said that for the money it's spending, Nextel should have both total category exclusivity — no competitors' deals with NASCAR grandfathered in — and a wide interpretation of the wireless category, so that its exclusivity is significant even as the technology undergoes large changes in the next decade, to include convergence with other devices.
Nextel got one of those. Schweitzer said current NASCAR team sponsors Cingular and Alltel can keep their deals and sign extensions. But other companies in negotiations with teams — AT&T Wireless has been widely reported in talks — must back off. "Our understanding is that new deals are not in play," he said.
As for the category's definition, he said, "We're satisfied that the definition of the category is sufficiently flexible to protect our exclusive investment, and we will work carefully with the NASCAR team on that." He said it encompasses "hardware in relation to wireless technology."
Pass-through rights should be another important issue, Green suggested, for a company that has alliances with Sun Microsystems, EDS, Motorola and other tech firms. This matter has to be resolved, Schweitzer acknowledged. "This is a very new deal, and between now and January we have a lot of work to optimize it."
FORTUNATE MATTESON: PGA Tour golfer Troy Matteson has signed multiyear deals with Titleist/FootJoy and corporate jet charter service Bombardier SkyJet. He made his first pro appearance earlier this month, making the cut at the FBR Capital Open.
His agent, SFX Golf President John Mascetello, would not disclose cash terms of the deals.
The Titleist/FootJoy deal is nearly head-to-toe, including shoes, bag, clubs, ball, glove and shirt, but not hat. "We're keeping that open for a separate corporate involvement," Mascetello said.
Matteson recently graduated from Georgia Tech, where he was the 2002 NCAA men's individual golf champion.
Noah Liberman can be reached at nliberman@sportsbusinessjournal.com.
