NASCAR teams feel pressure on sponsor pricing
|Hulu's deal with little-known Circle Sport raises concerns about a correction in team sponsorship.
Many top teams have open inventory, making it a buyer’s market where brands can align with the sport’s best cars this season for a discount. But the pact with Hulu, which has about 12 million subscribers to its over-the-top network, was with Circle Sport-The Motorsports Group, a little-known Monster Energy NASCAR Cup Series team with fewer than 22,000 Twitter followers.
The digitally oriented Hulu may be more focused on generating content on driver Jeffrey Earnhardt, Dale Earnhardt Sr.’s grandson, than getting brand exposure on television, where less competitive teams like Circle Sport rarely appear. But at a time when blue bloods like Hendrick Motorsports, Joe Gibbs Racing and Stewart-Haas Racing have numerous unsold races, the deal with the buzz-worthy brand underlined the erratic sponsorship environment that has taken root in NASCAR.
With an unusually high amount of unsold inventory on the market and the fiercely competitive environment to land ever-scarcer dollars, NASCAR’s sponsorship space continues to go through a market correction, according to sponsorship executives around the sport. The sport has seen price wars in sponsorship for years, but with lower-rung teams like Circle Sport asking a fraction of what top teams ask and even some top teams now delving far below their prior price ranges, a new level to the price war has emerged, executives said.
“NASCAR, like many other sports and entertainment properties fighting for corporate partnership and advertising revenues, is indeed going through a correction; the growth rate and levels of corporate partner investments experienced over the past 20 years were not sustainable,” Brian Corcoran, founder and CEO of Shamrock Sports & Entertainment, which consults with several stakeholders in the NASCAR space, said via email.
This comes as some of the sport’s top teams, who used to be seemingly impervious to sustained sponsorship issues, have started to see cracks in the foundation. For example, Joe Gibbs Racing primary sponsor Dollar General went from 30 races to none in one fell swoop last year; Stewart-Haas Racing’s Nos. 10 and 14 teams have had trouble rounding out their sales inventory; and the two sponsors on Hendrick Motorsports’ No. 5 team with the most races, Farmers Insurance and Great Clips, will both depart after 2017.
“It is very competitive,” said Ben Schlosser, chief marketing officer of Richard Childress Racing. “I don’t know that it’s more competitive than it was four years ago, but I think there are teams with more inventory than they’re used to having.”
Exacerbating the issue, some executives said, are the incremental declines the sport has seen in business metrics in the last decade, underscored by the sanctioning body selling its Cup Series title sponsorship to Monster Energy for around $20 million a year. With top teams having previously sold yearlong team deals for around or even more than that figure, some are having to face a reset on their pricing to make the economics of the system work, these executives said.
“There is a natural evolution and cycle of deals — as new sponsors come in, it can drive sales and prices up; as sponsors leave or renegotiate, it can drive prices down,” said Tyson Webber, president of GMR Marketing, which represents several NASCAR sponsors including Lowe’s, which recently signed a one-year extension with Hendrick driver Jimmie Johnson. “The effect can be felt industrywide, but many times the market adjustment may take years based on the length of terms.”
He would not disclose whether his agency was able to negotiate a lower fee as part of its extension.
While lower-rung teams have been asking lower amounts than top teams for decades, there have been renewed gripes privately of teams devaluing sponsorship.
“It’s worse than I’ve ever seen,” said a team executive who declined to be quoted over the sensitivity of the issue. “Sponsors talk [to each other], and once you price a Cup race at Truck and Xfinity fees, you’re in a world of hurt long term. It’s hard to get someone to pay three times as much from their initial investment for the same asset.”
The precise dollar figure of Hulu’s deal could not be confirmed, but sources familiar with it said the amount was in the low to mid-five-figure range per race. That would pencil out to a fee that’s likely less than $1 million despite being for more than half the season, a fraction of what the sport’s top teams would typically ask for that length. For example, Nature’s Bakery in 2015 struck a three-year, $45 million deal with Stewart-Haas in the 25-race range, which pencils out to around $500,000 per race.
A correction of team sponsorship could hurt teams in the short term but potentially help the sport in the long term; theoretically, as prices come down, the pool of brands that could serve as sponsors should widen.
“This is probably a very difficult time to be out in the marketplace with a lot of inventory,” said Andrew Campagnone, senior managing partner of Sports Marketing Consultants, a Charlotte-based sales and marketing agency that has deep ties in NASCAR. “But at the same time, it’s a buyer’s market — it’s a great time for a company to be looking at the sport because you can get in at a low rate and you have the cream of the crop with some assets that are open. You’ll have a shot of winning races and bringing value. I think the teams are just finally getting to the point where everything is resetting.”