NASCAR explores changing sponsorship model
Motorsports marketers met last week’s surprising news of NASCAR possibly overhauling its sponsorship model in 2020 with cautious optimism, but the plan still has an array of unknowns.
NASCAR announced a one-year extension with Monster Energy as title sponsor of its premier series through 2019. But Steve Phelps, NASCAR’s executive vice president and chief operating officer, revealed at the same time that NASCAR is looking closely at changing its commercial model in 2020 and moving away from one title sponsor in place of several top-tier partners who acquire rights to the league’s top assets, plus other secondary partners.
Such a change — which would include bundling assets between the league, tracks, teams and media-rights partners — would be a dramatic shift in a sport that has had a title sponsor since Winston first signed on in 1971.
What it means
• NASCAR could move away from a single title sponsor for its racing series and instead sign a group of top-tier partners.
• NASCAR would bundle assets across the sport, including with the league, teams, tracks and media partners.
• The model would be similar to systems in play at the NCAA, IOC and the English Premier League.
The proposed model is in its infancy and still being developed, and Phelps admitted that a final decision on what it would look like — or even if it would be adopted — has not been made. But industry executives largely believe a new model would benefit a sport that’s had the same model for nearly 50 years.
“The current NASCAR sponsorship model with a big title sponsor, several official sponsors and separate track partners creates clutter and tight restrictions on categories,” said Ashlee Huffman, general manager of CSM Sport & Entertainment’s motorsports division. “NASCAR created a fantastic model back in the day, but … if they go to a new structure that removes the title, that can give the opportunity for a handful of partners to make a bigger impact and clinch their category for clarity and real engagement with consumers.”
NASCAR’s proposed model was compared to the sponsorship framework of the International Olympic Committee, NCAA and English Premier League. The NCAA, for example, has three top-tier Corporate Champions in AT&T, Coca-Cola and Capital One, while it has 15 secondary Corporate Partners that get more limited rights.
NASCAR has more than 50 official sponsors, including three national series title sponsors in Monster, Xfinity and Camping World. Monster pays $20 million annually, while Xfinity pays closer to $10 million and Camping World pays closer to $5 million. How the sanctioning body would divvy up official sponsors into different categories under a new model was unclear, but Phelps hinted that there could be a tier for business-to-consumer brands and a different tier for business-to-business brands.
Daryl Wolfe, NASCAR’s senior vice president and chief sales and partnership officer, said NASCAR is still working through how it would handle existing partners, including if they would be shifted into new tiers. He acknowledged the task will be complicated because of the different levels of deals that have varying expiration dates. Wolfe said the idea to examine a new model came out of consensus from high-level executives associated in the sport at the team, track, media and sponsor level, and that any change would have to fit into the culture and framework of the sport.
“We have to make sure it’s uniquely NASCAR, and there are some certain characteristics to that — one is just the sheer number of companies [that are already official NASCAR sponsors],” Wolfe said. “Thankfully we have all these companies investing in our sport, but that’s a lot of volume that we have to sift through and manage to make sure they’re all getting a return. Candidly, a lot of those other sports don’t have that level of involvement. That’s a luxury we have, but it also adds a layer of complication that we’ll have to work through.”
Wolfe moved in December from solely being an executive at International Speedway Corp. to holding dual roles at ISC and NASCAR, and several industry executives remarked last week that the revelation of a new sponsorship model with greater bundling between leagues and tracks further underscores why Wolfe was assigned dual roles.
Phelps, who said the idea of a new model has been considered for a few years, added that working closer together with track and TV advertisers is a major impetus behind the consideration. NASCAR has been working to make it easier for sponsors to navigate the complex sport, because some companies have been frustrated by the multiple stakeholders needed to execute across the landscape. If successful, NASCAR hopes it could create a one-stop shopping model that makes it easier to buy into and across the sport, and result in stronger activation.
NASCAR also likely recognizes that moving away from the current model could help it spread its sponsorship revenue across multiple companies and do away with an asset that diminishes every time it trades hands. The premier series title sponsorship is being seen as an increasingly hard sell with its high price tag coming in an era where brands want to spread their assets among different platforms and do shorter-term deals.
Winston was title sponsor from 1971 through 2003. Sprint-Nextel then became title sponsor in 2004 through 2016 before Monster took over in 2017.
Jimmy Bruns, senior vice president of client consulting and services for GMR Marketing, which has multiple sponsors in motorsports, said that if NASCAR doesn’t get $20 million from a title sponsor but the new model “creates a scenario where more brands can be involved in a more significant way and have assets across the board, the benefit to NASCAR in terms of healthier teams and tracks far exceeds that potential $20 million they’re getting from that title sponsor only.”
To the extent that we can create more opportunities for brands to engage in the sport in a bundled manner, I believe that’s a positive outcome.
NASCAR is likely to focus on bundling league, track and TV assets to start because those are the easiest assets to line up, but Wolfe said the league would eventually include teams in the structure whether through directly bundling assets or referring new partners to do separate deals with teams. Teams rely on corporate sponsorship revenue for about 75 percent of their annual total revenue.
Rob Kauffman, chairman of the Race Team Alliance and co-owner of Chip Ganassi Racing, did not appear to be a fan of a potential new model when he noted the already crowded sponsorship market by posting on Twitter: “Saturation of the market and take needed sponsorship sources away from the teams. #terrific.”
But Steve Newmark, president of Roush Fenway Racing and co-chairman of the Team Owner Council that was formed from the charter system, said the concept has potential.
“Our sport needs to continue to evolve and change is part of that,” Newmark said. “To the extent that we can create more opportunities for brands to engage in the sport in a bundled manner, I believe that’s a positive outcome.”
Phelps said Monster is not expected to come back in 2020 if NASCAR were to end up keeping its current model with one title sponsor, though Monster executive Mitch Covington later told SportsBusiness Journal that the company is open to the possibility of participating in a new structure, were it to come to fruition. NASCAR observers will be watching to see if current partners are interested and how many current or new sponsors in the sport snap up any newly available assets.
“For the right price and right assets, it would be something we would want to look into,” said Patrick Judge, senior marketing planner of experiential and brand promotion for Geico, which has several deals throughout NASCAR including with teams, tracks and media partners. “We are focusing on reaching the consumer beyond the normal mediums.”
NASCAR did not say when it had to make a final decision, though it has close to two years before the 2020 season starts. But given the complexities involved in an already complicated sport, NASCAR executives will have a busy rest of the year trying to arrange the system.
“From a financial liability perspective, let’s say you go out and get four or five platinum partners at $5 million per year,” said Matt Wray, vice president of business development for CSM Sport & Entertainment, who recently joined the company. “When one of those decides to leave for any reason, we’re not in a total panic, because we still have a good core here, can go replace them with another $5 million brand and don’t have to spend two years going, ‘Oh my gosh, where am I going to find my next 15 to 20 million [dollar] sponsor?’”