NJJammer
Team Owner
- Joined
- May 11, 2016
- Messages
- 710
- Points
- 323
Interesting reading for a fan like me (only since 2010.)
Is it possible to return to the peak days or was it a cultural fad? I hope the former is true.
Enjoy.
America's Fastest Growing Sport
TV ratings are soaring. Corporate money is flowing. And the crowds just keep getting bigger. How NASCAR is racing ahead.
By BRIAN O'KEEFE
September 5, 2005
(FORTUNE Magazine) – It's 10 minutes before race time at the Indianapolis Motor Speedway, and in the grandstand, a quarter of a million fans--some of them fresh from a two-day-long tailgate party--are settling onto their NASCAR seat cushions, sipping from their NASCAR cups, adjusting their NASCAR caps. All around the 2.5-mile track, 74 television cameras are poised to capture every angle of the 43-car, 400-mile race for millions at home. Out on the asphalt, amid the race officials and mechanics in fire-retardant jumpsuits, is the suntanned figure of Home Depot CEO Bob Nardelli. His mission: to introduce FedEx CEO Fred Smith, who's standing at his elbow looking slightly overwhelmed by the noise and fumes and August heat, to Tony Stewart, the roly-poly star driver of the bright- orange No. 20 Home Depot Chevrolet.
Nardelli strides over to Stewart, who beams at the Home Depot chief. The driver then turns the brights on for FedEx's Smith, as if he's welcoming a new member to the club--which in fact he is. FedEx is in its first year as the primary sponsor of a NASCAR team, meaning Smith is the latest FORTUNE 500 CEO to commit tens of millions of dollars to the pursuit of breakneck speed--and the best return on investment in professional sports. Stewart, for instance, isn't just Nardelli's ace driver. He's his top salesman. After winning the Pepsi 400, the 5-foot-8, 185-pound Stewart celebrated by climbing--awkwardly--the 20-foot fence at Daytona and seizing the checkered flag from amused race officials. Home Depot rushed out a print ad featuring a picture of Stewart's ascent with text that read, "Hey Tony, we have ladders," and offered a 10% discount to customers who brought it in. "Ladder sales," says Nardelli, "popped up double digits."
Commerce, of course, is all around the track. Leave aside that the cars are rolling billboards for corporate sponsors. And that the name of the race has been sold to an insurance company--it's now "the Allstate 400 at the Brickyard" (the latter a nickname for the Indy track). In the parking lots outside the speedway, where keg parties, pig roasts, and wet-T-shirt contests evoke a Mardi Gras mood, a makeshift mall is also going gangbusters. Levi's is sizing up the waistlines and inseams of potential customers in its Fit Pit, while DeWalt is demonstrating jigsaws and drills from the side of an 18-wheeler known as Rolling Thunder. New sponsor Garnier Fructis, a division of L'Oreal, has dispatched a fluorescent-green-clad Fru Crew to sculpt the hair of fans in the style of its cute young driver Brian Vickers. Branded gear is hawked from foldout tractor-trailers, pickup beds, and bustling arena vending booths. All this on top of the $740 million Nextel has ponied up over ten years to headline NASCAR's championship series--and the exclusive B-to-B summits NASCAR arranges for its sponsors to meet and greet each other.
This, race fans, is the new world of NASCAR, the fastest-growing, best-run sports business in America--with the emphasis on business. Once the province of moonshine runners and good ol' boys, the sport has courted corporate America for decades. But NASCAR's recent explosion in popularity--and the establishment of its racetracks as big-time commercial venues--is unprecedented. Stock-car racing is now a multibillion-dollar industry. The second-most-watched sport on television behind pro football, NASCAR has seen its ratings increase by more than 50% since it inked a six-year, $2.4 billion network deal five years ago. The sport is on pace this year for its highest TV viewership ever; the last time a major professional sport set a new high was the NFL in 1981. Licensed retail sales of NASCAR-branded products have increased 250% over the past decade, totaling $2.1 billion last year alone (up from $1.3 billion in 2000). Nascar.com is one of the most highly trafficked sports websites. The NASCAR name is so hot that market research firm PSB picked it as the country's No. 2 brand for 2005, ahead of both Google and iPod (BlackBerry was No. 1).
With NASCAR claiming one-third of all American adults as followers--including a growing swarm of blue-state and female fans--corporate America is stumbling all over itself to get in on the action. It doesn't hurt that while other major sports keep waking up to one PR nightmare after another--baseball's ongoing steroid scandal, last season's NHL lockout, fisticuffs between NBA players and fans--NASCAR drivers are media-savvy, fan-friendly marketing machines. (They never talk about their cars without mentioning their sponsors: "the Cingular Chevrolet," "the Viagra Ford," and so on.) According to the IEG Sponsorship Report, NASCAR had total corporate sponsorship revenue last year of $1.5 billion, compared with $445 million for the NFL and $340 million for Major League Baseball. "Talk to anybody in sports marketing right now," says Larry DeGaris, who runs the Center for Sports Sponsorship at James Madison University, "and NASCAR is the first thing out of their lips." There are 106 FORTUNE 500 companies involved as sponsors--more than in any other sport. "We had been talking about it for over a decade," says FedEx CFO Alan Graf Jr. of his company's decision to sponsor a team this year. "But the sport has gone to such a higher level, we decided we had to jump in."
At the center of it all is NASCAR itself, a private, family-controlled, for-profit company started 57 years ago in Daytona Beach, Fla., that now includes offices in midtown Manhattan, L.A., and the center of U.S. retail, Bentonville, Ark. Once focused on simply bringing order to the cheerful, low-down chaos of stock-car racing--where vehicle standards used to shift from track to track--the business today is run like a FORTUNE 500 company, dot-com, and media conglomerate rolled into one. In other big-money sports like football or baseball, local franchises own teams and stadiums and dominate league management. Stock-car racing is entirely different, with team owners--who spend millions outfitting cars and fronting drivers--and track owners reliant on an independent NASCAR (the National Association of Stock Car Auto Racing) to bring them together. There are no union troubles, and if a team fails to perform, it doesn't drag down the league--it's simply replaced by the next new faster car and driver. If a track is getting shabby and failing to draw a capacity crowd, NASCAR can simply shift to another site. Meanwhile, beyond the high-profile, big-money events, NASCAR also oversees more than 1,000 races at tracks spread across 38 states.
The kingpin charged with executing this bare-knuckle business model is a 43-year-old college dropout named Brian France. The third generation in his family to run stock-car racing's governing body, France took over as NASCAR's CEO just a year and a half ago--and quickly made major changes, aggressively borrowing business tactics from other professional sports and recruiting some of their top next-generation talent. France sees the sport he grew up in not merely as a racing circuit, but as an entertainment empire that happens to move at 190 miles per hour.
The day that kicked off NASCAR's latest and greatest growth phase is also one of the saddest in its history. Legendary driver Dale Earnhardt--whose brinkmanship earned him the nickname "the Intimidator"--was rounding the final turn of the Daytona 500 in February 2001 when his car was bumped and then slammed into the wall. He was killed instantly. NASCAR nation erupted in grief, and the Intimidator became bigger than ever, his face on the covers of magazines and countless hats and T-shirts. His last race happened to be the first broadcast in NASCAR's huge TV deal with Fox, NBC, and TNT (Fox broadcasts the first half of the Nextel Cup season, NBC and TNT the second half). NASCAR's all-time leading money winner at the time of his death, Earnhardt had used his success and iconoclastic reputation to build a multimillion-dollar licensing business. His ability to monetize his fame became a template for other drivers, teams, and NASCAR itself.
It was a coming-of-age moment for a sport long considered a regional curiosity. When "Big Bill" France founded NASCAR in 1948, his goal was to bring a set of common rules to stock-car racing. Standing a sturdy 6-feet-5 with an outsized personality to match, Big Bill established what everyone inside the sport refers to today as NASCAR's "benevolent dictatorship." He didn't hesitate to disqualify drivers for unfairly souping up their vehicles or to banish them for trying to unionize. In 1972 his son Bill Jr. inherited the dictatorship--a fragmented web of independent track operators and drivers ignored by national marketers and TV execs. With limited financial options, NASCAR under Bill Jr. cultivated corporate sponsors with an ardor that other sports found unseemly. Logos were embroidered into the fabric of the sport.
The Brian France era has seen a new iteration of dictatorship. As television gradually discovered NASCAR during the '80s and '90s, individual tracks made their own deals with networks, usually getting a few million dollars for each race. The events were spread over multiple networks, giving each station less incentive to cross-promote or invest in extra cameras and graphics that would enhance broadcasts and ratings. Brian, then an executive vice president in charge of marketing, knew there was a better way. Working with Bill Jr. in the late '90s, he persuaded track owners to consolidate their TV rights and allow NASCAR to negotiate a package deal with the networks. The result was the $2.4 billion contract with Fox, NBC, and TNT. NASCAR is now negotiating a new package that is expected to be even richer.
Brian's business vision--and strong-arming--continued after his father turned over day-to-day operations to him in the fall of 2003. His first act: to rewrite the nearly 30-year-old formula for determining NASCAR's annual points championship. Rather than tally up points all season, the top ten drivers after 26 races would qualify to compete in a ten-race playoff called the Chase for the Nextel Cup. (The other drivers' motivation over the final two months would be to win races for their sponsors, or maybe muck up the works for their rivals.)
The outcry was immediate and vicious. "I compared it to Clinton starting right off the bat with health-care reform," says George Pyne, a former football player at Brown University who's now NASCAR's COO. "I said, 'Wouldn't it make sense to wait a year and get established first?'" But France was adamant that NASCAR, like baseball and basketball, would benefit greatly from a playoff run to keep it in the news, especially in the fall after the football season started. It turned out he was right. The race for the first championship in 2004 came down to the final lap, boosting viewership. This year, despite the fact that fan favorites Dale Earnhardt Jr. and Jeff Gordon are long shots to qualify, Cup series TV ratings are up 9%.
Sitting in an air-conditioned, Nextel-branded trailer near the garage area in Indianapolis, France explains that growing up, he didn't think he would make a career out of stock cars. "I thought I'd go into law or something," he says. "I always loved NASCAR, but I didn't view it as a business opportunity." After dropping out of the University of Central Florida, however, he went to work managing a small dirt track in Tucson and found he had an aptitude for the sales side of the business. Then, in 1994, NASCAR ran its first Brickyard race at Indy, drawing a sellout crowd and a sizable television audience. France began to see the potential. By then, his father had put him in charge of marketing, and he went at it with a vengeance. He took NASCAR to L.A., where he opened the first Hollywood office for a professional sports league. Now NASCAR's goal is one film a year with a stock-car-related plot (this summer it was Disney's Herbie: Fully Loaded; Will Ferrell has signed to play a driver in a comedy due next summer with the working title Talladega Nights), plus NASCAR placement inside the story lines of popular TV shows (as when driver Jamie McMurray appeared on The West Wing in January).
France has been equally aggressive elsewhere. NASCAR's New York office now includes marketing pros formerly employed by the NBA, the NFL, the NHL, and Major League Baseball. "It's not so much that we have a passion for the sport at first," says Justin Johnson, who recently came over from MLB. "We have a passion for the business of NASCAR." France feels strongly that stock-car racing doesn't get enough coverage in newspapers and on talk radio, so he's hired PR specialists in New York and Los Angeles; the publicity staff has grown from two full-timers in 2001 to 25 today. France has even talked about starting a news service to help increase coverage; NASCAR already has a password-protected website for journalists with suggested story ideas.
The night before the All-State 400, just over 100 FedEx employees and clients sit down for dinner in the Murat Centre, a former Masonic Shrine Temple in downtown Indianapolis. The Centre's Egyptian room features hieroglyphics on the walls and art deco chandeliers; big-band stars such as Glenn Miller once entertained from its stage. On this night it holds a racecar. As the guests settle at tables decorated with FedEx-orange flowers in glass vases, the lights dim and up-tempo music begins to play. Behind the No. 11 FedEx Chevrolet Monte Carlo, the seven members of the car's pit crew, clad in their purple fire-retardant jumpsuits, take their positions. The stage lights flash on, the timpani swell, and the pit crew leaps into action. Fourteen highly choreographed seconds later, the car has four new tires and a virtual new tank of gas. The crowd, including CEO Fred Smith, erupts in applause at this display of post-modern automotive performance art.
In Nascar parlance, this is called "activating" a sponsorship. A company like FedEx might pay as much as $20 million a year to be the lead sponsor for a top-notch race team. But the sponsor may also spend $20 million more on promotional campaigns, client entertaining, and other marketing to maximize the value of its Nascar presence. In fact, Nascar execs frown on sponsors who shirk their activation responsibilities. They like to see cardboard cutouts of drivers posted in retail stores and crowds of clients--potential new fans--flown to the racetrack on junkets. France's crew actually runs seminars to help sponsors make the most of their investments. Earlier this day, NASCAR hosted a lunch for representatives of about ten sponsors, including DuPont, UPS, and USG. A marketing manager from Sunoco (the official fuel of NASCAR since 2004) gave a PowerPoint presentation on his company's activation program, which features a joint contest with Nextel that gives away $250,000 and a full 9,000-gallon tanker of gasoline.
One of the guests at the FedEx gala is Norm Miller, the chairman of Interstate Batteries. Like FedEx and Home Depot, Interstate is a primary sponsor of a team owned by Joe Gibbs Racing, run by the Redskins coach. When Miller first began sponsoring a team in 1992, the rate was just $2.5 million a year. But even as the cost of sponsorship has escalated, Miller insists his company has gotten its millions' worth. NASCAR, he says, has helped boost potential customers' "front-of-brain awareness" of his brand from 22% to 70%. There are other benefits too. A couple of years ago Miller asked Gibbs to make an introduction for him at Home Depot. Interstate now sells its lawn and garden batteries at the home-supply giant. "That's $4 million in business a year," says Miller.
Sponsors rave about the purchasing loyalty of NASCAR fans. According to a NASCAR licensing study, 72% of fans are more likely to buy a product if it has the sport's logo on it. (No wonder celebrity chef Mario Batali is writing a NASCAR cookbook.) Nextel says that it has found that NASCAR fans are several times more likely to try their service than the average person. Margie and Phil Chaney, both 45, who flew into Indianapolis from San Martin, Calif., to attend the Brickyard race, are living proof. "Absolutely," says Phil. "I don't care what it is--gasoline, auto parts, or whatever. If it has NASCAR on it, that's the one I'm going to buy."
The breadth and volume of licensed goods NASCAR sanctions--in more than 3,500 categories--is extraordinary. They range from standard T-shirts and baseball caps to vegetables. Yes, vegetables: Produce distributor Castellini Group now sells NASCAR-branded potatoes, lettuce, and tomatoes in supermarkets across the country. "It's been a big boost," says Jack Bertagna, Castellini's head of sales and marketing. "Apples to apples, our sales are up 20%."
A few chairs away from Senator Hillary Rodham Clinton on the stage of the St. George Theatre in Staten Island, N.Y., sits Lesa France Kennedy. A reserved, soft-spoken woman of 44, Kennedy is both Brian France's sister and the president of International Speedway Corp., a publicly traded company that owns or has interest in 12 racetracks around the country, all of which host Nextel Cup races. Her company is 62% controlled by the France family, making their Thanksgiving dinners akin to an industry conference. (NASCAR and ISC are headquartered in the same Daytona building.) She's here on a Thursday morning in early August speaking to a crowd of a couple of hundred women to garner support for putting a $600 million speedway nearby. To the France family, the New York City area is a crucial pushpin on NASCAR's national map, the gateway to full acceptance by blue-state America. Since the late 1990s, NASCAR has added Nextel Cup races in California, Chicago, and Kansas City. The goal: to make stock-car racing as popular in urban America as it is in the heartland.
Easy to say, hard to do. New York City politicos aren't exactly jumping up and down to bring NASCAR to town. Even NASCAR's tightly controlled universe has its skeptics. There are only 36 Nextel Cup events a year to be parceled out around the country, and 18 of them are run at ISC properties. Considering that an event like the Brickyard race might pump a couple of hundred million dollars into the local economy, those on the outside looking in tend to get jealous. In July the owners of the Kentucky Speedway in Sparta sued NASCAR and ISC in federal court, alleging that the companies are violating anti-trust laws by refusing to award them a Cup race. The track, built in 2000, hosts NASCAR-sanctioned Busch Series--the equivalent of Triple A for stock-car racing--and Craftsman Truck events and has become a favorite place for drivers to test racecars. But NASCAR has refused to give the speedway a chance at the big show. France settled a similar suit in 2004 by the proprietors of the Texas Motor Speedway outside Dallas, awarding that track a second Cup event. But France vows to fight the Kentucky suit--"We're going to be extraordinarily aggressive at defending our business practices," he says--and points to NASCAR's long history of making the sport work financially for an extensive network of interested parties. "There's no question that NASCAR has some vertical integration," says Tulane University's Gary Roberts, a sports-law expert. "On the other hand, you might say that there's nothing inherently anticompetitive about an entity vertically integrating, if it doesn't injure the consumer."
NASCAR is looking to expand demographically as well. On a race day, you're hard-pressed to find more than a handful of non-whites at a track, and the Confederate flags still wave from some tailgaters' RVs. There may be many people of color watching at home, but for now every single driver in the Nextel Cup races remains white and male. Last March, NASCAR traveled to Mexico City, filling 95,000 seats for a Busch Series race at the Autodromo Hermanos Rodriguez. "We want to be more relevant to the fastest-growing segment of the population--Hispanics," says France. He's launched a program to support minority drivers, and at NASCAR's Craftsman Truck Series race in Indianapolis, a young Hispanic named Aric Almirola was in the field against, among others, a 44-year-old African American named Bill Lester. Lester has a degree in electrical engineering from Berkeley and gave up a job with Hewlett-Packard to pursue his auto obsession. "I think there are a lot of closet African-American NASCAR fans out there," he says.
There is at least a chance that the first minority driver to make it big in stock-car racing will come via the NFL. Joe Gibbs is the most successful NFL alum in NASCAR, while former Dallas Cowboys quarterbacks Roger Staubach and Troy Aikman this summer received a commitment from Texas Instruments to sponsor a Nextel Cup team for 2006. But former Heisman Trophy winner Tim Brown created an even bigger stir when, announcing his retirement from the NFL in July, he revealed plans to launch a NASCAR team with Jack Roush, one of the sport's top owners. At the Brickyard in Indy, the former Oakland Raider showed up to spark sponsor interest--and talk up his intent to provide an opportunity for minority drivers. Such a team could tap into an urban market rich with potential, he says: "You know, it's not too cool to wear a Dale Earnhardt jacket in the neighborhood. We want to make it cool."
Brown admits he isn't much of an auto aficionado. The former business major at Notre Dame says that he first got interested in the late 1990s, when he started a lingerie company and "wanted to go after the NASCAR market." He approached Dale Earnhardt's people to discuss a deal, he says, and was told it would cost him $1 million to meet with the racer. "Just for a meeting," says Brown, who passed on the offer. "I never could get over that. But it's the kind of thing that sticks in your mind."
If stock-car racing has a spiritual home, it's a V-shaped slice of land between I-77 and I-85 near Charlotte, N.C. Often called NASCAR Valley, it's the home of nine out of every ten Nextel Cup teams. Many of the sport's drivers live in swanky houses on nearby Lake Norman. North Carolina has been a hotbed of racing since moonshiners first came down out of the Appalachians to race souped-up sedans on Saturday nights. The old Charlotte Speedway was the site of the first NASCAR-sanctioned "strictly stock" race, on June 19, 1949. When John Holman and Ralph Moody established their influential racing factory outside Charlotte in the late 1950s, it solidified the area as the place to build fast cars.
These days there's an arms race going on in the Valley--a high-tech effort by team owners to create the fastest stock car, fueled by the unprecedented flow of money into the sport over the past decade. Although the basic engine technology inside stock cars--a V-8 without fuel injection--is a relatively simple design dating from the 1950s (NASCAR regulates it to maintain competitive balance), virtually every part of the cars is handmade and heavily tested. Every major race team has its own office park with multiple buildings for the race shop, engine shop, and a research and development center--not to mention a museum of racing artifacts. And every new shop seems to be bigger and fancier than the last. Earlier this year Indy racing legend Roger Penske, who currently operates three NASCAR Nextel Cup teams, opened a new 424,000-square-foot facility on the site of a former Matsu****a factory. In addition to a dazzling garage area, it has a 138-seat cafeteria, a one-mile nature trail, two baseball fields, and nine conference rooms on 105 acres of land--just in case he needs room to expand.
No one personifies the changes that NASCAR has gone through over the past few decades more than Richard Childress. Growing up outside Winston-Salem, Childress got his first taste of racing while selling peanuts at nearby Bowman Gray Stadium. Working nights at a filling station, he got to know some of the area's moonshine runners and often made local deliveries when he got off work. He was 18 when he got his first racecar, a 1947 Plymouth he bought for $20, and he started Richard Childress Racing six years later. He drove the Cup series for 12 years without a victory. Then, in the early 1980s, as an owner, he hooked up with Dale Earnhardt, and the two went on one of the most successful and profitable runs in the sport's history. Childress, 59, now owns three full-time Nextel Cup teams and two Busch Series cars. His race shop and museum near Winston-Salem attract about 70,000 visitors a year. In the fall of 2004 he also opened Childress Vineyards a few miles away; the former moonshiner now loves his merlot.
"When I had one team, there was a lot of things I could go and do," Childress recalls. "Hell, I used to play golf. But with the commitments that everybody has today, that's impossible." He did more than 100 events with sponsors last year. The cost of running a team is enormous--as much as $1 million a year just for tires. Economies of scale help, which is why big players like Childress run multiple teams. But anyone on the margins is getting squeezed. "You're down to big owners that own a lot of race teams," says Childress. "And you have to operate more teams to survive. It's definitely swayed to the amount of teams and the amount of resources you can put together. Who would have ever dreamed a race team would have an in-house CFO and retainers with attorneys and human resource departments?" Childress worries that the rise of multiple-team operations could upset the balance of power that makes NASCAR's benevolent dictatorship work. "We don't need five owners with eight teams apiece running our show, even if I'm one of them," he says. "To make the sport healthy, you need 20 owners, and we're down to less."
One of the most powerful owners at the moment is Jack Roush. The veteran of drag and open-wheel racing now runs five Nextel Cup teams, and he's captured the last two championships with drivers Matt Kenseth and Kurt Busch. Roush Racing president Geoff Smith says the sponsorship market "is the hottest I've ever seen it." But that has a downside too. "One sponsor could come in, pull a Steinbrenner, and try to buy success," he says. Every new big spender ups the ante for the rest of the owners. Like Childress, he worries that the trend toward ultrapowerful, multiteam owners could throw up impenetrable barriers to entry and erode the competitive balance. Plus, he says, even for a big operation, the economics aren't getting any easier. The hotter the sport becomes, the more money drivers, crew chiefs, and even star tire changers demand. Not to mention the astronomical expense of building hundreds of engines a year.
Back in Daytona, at the NASCAR headquarters where Brian France keeps his office, they're well aware of the perils that confront the sport as it strives to challenge football and baseball. Most critical, perhaps: What happens to NASCAR's core fans as the sport continues to expand? Stock-car racing has long attracted a targeted audience--a way for sponsors to wrap themselves in the flag and have their brand displayed where PA announcers pray "in the name of Jesus Christ." In expanding its reach, NASCAR risks losing the distinctiveness of its audience and turning off its base. And that could dilute its fans' Pavlovian responsiveness to ads.
Other sports leagues would love to have those kinds of concerns. And so far, certainly, NASCAR's sponsors seem unworried. Home Depot's Nardelli, for one, has plenty of reasons to keep the faith. After more than three hours of racing at Indianapolis, his driver, Tony Stewart, took the checkered flag for the Allstate 400, his fourth victory in six races. This time not just Tony but his entire crew climbed the fence near the finish line. Home Depot was ready for the photo op with a dozen ladders out on the track. But an opportunistic sponsor's work is never done. In keeping with recent tradition at Indy, Stewart got down on pit road after the race and kissed the strip of red bricks that give the track its nickname. Sure enough, Home Depot quickly brought out an ad featuring his celebratory smooch. Bricks have been selling briskly ever since.
FEEDBACK [email protected] and [email protected]
REPORTER ASSOCIATES Doris Burke and Jenny Mero
Is it possible to return to the peak days or was it a cultural fad? I hope the former is true.
Enjoy.
America's Fastest Growing Sport
TV ratings are soaring. Corporate money is flowing. And the crowds just keep getting bigger. How NASCAR is racing ahead.
By BRIAN O'KEEFE
September 5, 2005
(FORTUNE Magazine) – It's 10 minutes before race time at the Indianapolis Motor Speedway, and in the grandstand, a quarter of a million fans--some of them fresh from a two-day-long tailgate party--are settling onto their NASCAR seat cushions, sipping from their NASCAR cups, adjusting their NASCAR caps. All around the 2.5-mile track, 74 television cameras are poised to capture every angle of the 43-car, 400-mile race for millions at home. Out on the asphalt, amid the race officials and mechanics in fire-retardant jumpsuits, is the suntanned figure of Home Depot CEO Bob Nardelli. His mission: to introduce FedEx CEO Fred Smith, who's standing at his elbow looking slightly overwhelmed by the noise and fumes and August heat, to Tony Stewart, the roly-poly star driver of the bright- orange No. 20 Home Depot Chevrolet.
Nardelli strides over to Stewart, who beams at the Home Depot chief. The driver then turns the brights on for FedEx's Smith, as if he's welcoming a new member to the club--which in fact he is. FedEx is in its first year as the primary sponsor of a NASCAR team, meaning Smith is the latest FORTUNE 500 CEO to commit tens of millions of dollars to the pursuit of breakneck speed--and the best return on investment in professional sports. Stewart, for instance, isn't just Nardelli's ace driver. He's his top salesman. After winning the Pepsi 400, the 5-foot-8, 185-pound Stewart celebrated by climbing--awkwardly--the 20-foot fence at Daytona and seizing the checkered flag from amused race officials. Home Depot rushed out a print ad featuring a picture of Stewart's ascent with text that read, "Hey Tony, we have ladders," and offered a 10% discount to customers who brought it in. "Ladder sales," says Nardelli, "popped up double digits."
Commerce, of course, is all around the track. Leave aside that the cars are rolling billboards for corporate sponsors. And that the name of the race has been sold to an insurance company--it's now "the Allstate 400 at the Brickyard" (the latter a nickname for the Indy track). In the parking lots outside the speedway, where keg parties, pig roasts, and wet-T-shirt contests evoke a Mardi Gras mood, a makeshift mall is also going gangbusters. Levi's is sizing up the waistlines and inseams of potential customers in its Fit Pit, while DeWalt is demonstrating jigsaws and drills from the side of an 18-wheeler known as Rolling Thunder. New sponsor Garnier Fructis, a division of L'Oreal, has dispatched a fluorescent-green-clad Fru Crew to sculpt the hair of fans in the style of its cute young driver Brian Vickers. Branded gear is hawked from foldout tractor-trailers, pickup beds, and bustling arena vending booths. All this on top of the $740 million Nextel has ponied up over ten years to headline NASCAR's championship series--and the exclusive B-to-B summits NASCAR arranges for its sponsors to meet and greet each other.
This, race fans, is the new world of NASCAR, the fastest-growing, best-run sports business in America--with the emphasis on business. Once the province of moonshine runners and good ol' boys, the sport has courted corporate America for decades. But NASCAR's recent explosion in popularity--and the establishment of its racetracks as big-time commercial venues--is unprecedented. Stock-car racing is now a multibillion-dollar industry. The second-most-watched sport on television behind pro football, NASCAR has seen its ratings increase by more than 50% since it inked a six-year, $2.4 billion network deal five years ago. The sport is on pace this year for its highest TV viewership ever; the last time a major professional sport set a new high was the NFL in 1981. Licensed retail sales of NASCAR-branded products have increased 250% over the past decade, totaling $2.1 billion last year alone (up from $1.3 billion in 2000). Nascar.com is one of the most highly trafficked sports websites. The NASCAR name is so hot that market research firm PSB picked it as the country's No. 2 brand for 2005, ahead of both Google and iPod (BlackBerry was No. 1).
With NASCAR claiming one-third of all American adults as followers--including a growing swarm of blue-state and female fans--corporate America is stumbling all over itself to get in on the action. It doesn't hurt that while other major sports keep waking up to one PR nightmare after another--baseball's ongoing steroid scandal, last season's NHL lockout, fisticuffs between NBA players and fans--NASCAR drivers are media-savvy, fan-friendly marketing machines. (They never talk about their cars without mentioning their sponsors: "the Cingular Chevrolet," "the Viagra Ford," and so on.) According to the IEG Sponsorship Report, NASCAR had total corporate sponsorship revenue last year of $1.5 billion, compared with $445 million for the NFL and $340 million for Major League Baseball. "Talk to anybody in sports marketing right now," says Larry DeGaris, who runs the Center for Sports Sponsorship at James Madison University, "and NASCAR is the first thing out of their lips." There are 106 FORTUNE 500 companies involved as sponsors--more than in any other sport. "We had been talking about it for over a decade," says FedEx CFO Alan Graf Jr. of his company's decision to sponsor a team this year. "But the sport has gone to such a higher level, we decided we had to jump in."
At the center of it all is NASCAR itself, a private, family-controlled, for-profit company started 57 years ago in Daytona Beach, Fla., that now includes offices in midtown Manhattan, L.A., and the center of U.S. retail, Bentonville, Ark. Once focused on simply bringing order to the cheerful, low-down chaos of stock-car racing--where vehicle standards used to shift from track to track--the business today is run like a FORTUNE 500 company, dot-com, and media conglomerate rolled into one. In other big-money sports like football or baseball, local franchises own teams and stadiums and dominate league management. Stock-car racing is entirely different, with team owners--who spend millions outfitting cars and fronting drivers--and track owners reliant on an independent NASCAR (the National Association of Stock Car Auto Racing) to bring them together. There are no union troubles, and if a team fails to perform, it doesn't drag down the league--it's simply replaced by the next new faster car and driver. If a track is getting shabby and failing to draw a capacity crowd, NASCAR can simply shift to another site. Meanwhile, beyond the high-profile, big-money events, NASCAR also oversees more than 1,000 races at tracks spread across 38 states.
The kingpin charged with executing this bare-knuckle business model is a 43-year-old college dropout named Brian France. The third generation in his family to run stock-car racing's governing body, France took over as NASCAR's CEO just a year and a half ago--and quickly made major changes, aggressively borrowing business tactics from other professional sports and recruiting some of their top next-generation talent. France sees the sport he grew up in not merely as a racing circuit, but as an entertainment empire that happens to move at 190 miles per hour.
The day that kicked off NASCAR's latest and greatest growth phase is also one of the saddest in its history. Legendary driver Dale Earnhardt--whose brinkmanship earned him the nickname "the Intimidator"--was rounding the final turn of the Daytona 500 in February 2001 when his car was bumped and then slammed into the wall. He was killed instantly. NASCAR nation erupted in grief, and the Intimidator became bigger than ever, his face on the covers of magazines and countless hats and T-shirts. His last race happened to be the first broadcast in NASCAR's huge TV deal with Fox, NBC, and TNT (Fox broadcasts the first half of the Nextel Cup season, NBC and TNT the second half). NASCAR's all-time leading money winner at the time of his death, Earnhardt had used his success and iconoclastic reputation to build a multimillion-dollar licensing business. His ability to monetize his fame became a template for other drivers, teams, and NASCAR itself.
It was a coming-of-age moment for a sport long considered a regional curiosity. When "Big Bill" France founded NASCAR in 1948, his goal was to bring a set of common rules to stock-car racing. Standing a sturdy 6-feet-5 with an outsized personality to match, Big Bill established what everyone inside the sport refers to today as NASCAR's "benevolent dictatorship." He didn't hesitate to disqualify drivers for unfairly souping up their vehicles or to banish them for trying to unionize. In 1972 his son Bill Jr. inherited the dictatorship--a fragmented web of independent track operators and drivers ignored by national marketers and TV execs. With limited financial options, NASCAR under Bill Jr. cultivated corporate sponsors with an ardor that other sports found unseemly. Logos were embroidered into the fabric of the sport.
The Brian France era has seen a new iteration of dictatorship. As television gradually discovered NASCAR during the '80s and '90s, individual tracks made their own deals with networks, usually getting a few million dollars for each race. The events were spread over multiple networks, giving each station less incentive to cross-promote or invest in extra cameras and graphics that would enhance broadcasts and ratings. Brian, then an executive vice president in charge of marketing, knew there was a better way. Working with Bill Jr. in the late '90s, he persuaded track owners to consolidate their TV rights and allow NASCAR to negotiate a package deal with the networks. The result was the $2.4 billion contract with Fox, NBC, and TNT. NASCAR is now negotiating a new package that is expected to be even richer.
Brian's business vision--and strong-arming--continued after his father turned over day-to-day operations to him in the fall of 2003. His first act: to rewrite the nearly 30-year-old formula for determining NASCAR's annual points championship. Rather than tally up points all season, the top ten drivers after 26 races would qualify to compete in a ten-race playoff called the Chase for the Nextel Cup. (The other drivers' motivation over the final two months would be to win races for their sponsors, or maybe muck up the works for their rivals.)
The outcry was immediate and vicious. "I compared it to Clinton starting right off the bat with health-care reform," says George Pyne, a former football player at Brown University who's now NASCAR's COO. "I said, 'Wouldn't it make sense to wait a year and get established first?'" But France was adamant that NASCAR, like baseball and basketball, would benefit greatly from a playoff run to keep it in the news, especially in the fall after the football season started. It turned out he was right. The race for the first championship in 2004 came down to the final lap, boosting viewership. This year, despite the fact that fan favorites Dale Earnhardt Jr. and Jeff Gordon are long shots to qualify, Cup series TV ratings are up 9%.
Sitting in an air-conditioned, Nextel-branded trailer near the garage area in Indianapolis, France explains that growing up, he didn't think he would make a career out of stock cars. "I thought I'd go into law or something," he says. "I always loved NASCAR, but I didn't view it as a business opportunity." After dropping out of the University of Central Florida, however, he went to work managing a small dirt track in Tucson and found he had an aptitude for the sales side of the business. Then, in 1994, NASCAR ran its first Brickyard race at Indy, drawing a sellout crowd and a sizable television audience. France began to see the potential. By then, his father had put him in charge of marketing, and he went at it with a vengeance. He took NASCAR to L.A., where he opened the first Hollywood office for a professional sports league. Now NASCAR's goal is one film a year with a stock-car-related plot (this summer it was Disney's Herbie: Fully Loaded; Will Ferrell has signed to play a driver in a comedy due next summer with the working title Talladega Nights), plus NASCAR placement inside the story lines of popular TV shows (as when driver Jamie McMurray appeared on The West Wing in January).
France has been equally aggressive elsewhere. NASCAR's New York office now includes marketing pros formerly employed by the NBA, the NFL, the NHL, and Major League Baseball. "It's not so much that we have a passion for the sport at first," says Justin Johnson, who recently came over from MLB. "We have a passion for the business of NASCAR." France feels strongly that stock-car racing doesn't get enough coverage in newspapers and on talk radio, so he's hired PR specialists in New York and Los Angeles; the publicity staff has grown from two full-timers in 2001 to 25 today. France has even talked about starting a news service to help increase coverage; NASCAR already has a password-protected website for journalists with suggested story ideas.
The night before the All-State 400, just over 100 FedEx employees and clients sit down for dinner in the Murat Centre, a former Masonic Shrine Temple in downtown Indianapolis. The Centre's Egyptian room features hieroglyphics on the walls and art deco chandeliers; big-band stars such as Glenn Miller once entertained from its stage. On this night it holds a racecar. As the guests settle at tables decorated with FedEx-orange flowers in glass vases, the lights dim and up-tempo music begins to play. Behind the No. 11 FedEx Chevrolet Monte Carlo, the seven members of the car's pit crew, clad in their purple fire-retardant jumpsuits, take their positions. The stage lights flash on, the timpani swell, and the pit crew leaps into action. Fourteen highly choreographed seconds later, the car has four new tires and a virtual new tank of gas. The crowd, including CEO Fred Smith, erupts in applause at this display of post-modern automotive performance art.
In Nascar parlance, this is called "activating" a sponsorship. A company like FedEx might pay as much as $20 million a year to be the lead sponsor for a top-notch race team. But the sponsor may also spend $20 million more on promotional campaigns, client entertaining, and other marketing to maximize the value of its Nascar presence. In fact, Nascar execs frown on sponsors who shirk their activation responsibilities. They like to see cardboard cutouts of drivers posted in retail stores and crowds of clients--potential new fans--flown to the racetrack on junkets. France's crew actually runs seminars to help sponsors make the most of their investments. Earlier this day, NASCAR hosted a lunch for representatives of about ten sponsors, including DuPont, UPS, and USG. A marketing manager from Sunoco (the official fuel of NASCAR since 2004) gave a PowerPoint presentation on his company's activation program, which features a joint contest with Nextel that gives away $250,000 and a full 9,000-gallon tanker of gasoline.
One of the guests at the FedEx gala is Norm Miller, the chairman of Interstate Batteries. Like FedEx and Home Depot, Interstate is a primary sponsor of a team owned by Joe Gibbs Racing, run by the Redskins coach. When Miller first began sponsoring a team in 1992, the rate was just $2.5 million a year. But even as the cost of sponsorship has escalated, Miller insists his company has gotten its millions' worth. NASCAR, he says, has helped boost potential customers' "front-of-brain awareness" of his brand from 22% to 70%. There are other benefits too. A couple of years ago Miller asked Gibbs to make an introduction for him at Home Depot. Interstate now sells its lawn and garden batteries at the home-supply giant. "That's $4 million in business a year," says Miller.
Sponsors rave about the purchasing loyalty of NASCAR fans. According to a NASCAR licensing study, 72% of fans are more likely to buy a product if it has the sport's logo on it. (No wonder celebrity chef Mario Batali is writing a NASCAR cookbook.) Nextel says that it has found that NASCAR fans are several times more likely to try their service than the average person. Margie and Phil Chaney, both 45, who flew into Indianapolis from San Martin, Calif., to attend the Brickyard race, are living proof. "Absolutely," says Phil. "I don't care what it is--gasoline, auto parts, or whatever. If it has NASCAR on it, that's the one I'm going to buy."
The breadth and volume of licensed goods NASCAR sanctions--in more than 3,500 categories--is extraordinary. They range from standard T-shirts and baseball caps to vegetables. Yes, vegetables: Produce distributor Castellini Group now sells NASCAR-branded potatoes, lettuce, and tomatoes in supermarkets across the country. "It's been a big boost," says Jack Bertagna, Castellini's head of sales and marketing. "Apples to apples, our sales are up 20%."
A few chairs away from Senator Hillary Rodham Clinton on the stage of the St. George Theatre in Staten Island, N.Y., sits Lesa France Kennedy. A reserved, soft-spoken woman of 44, Kennedy is both Brian France's sister and the president of International Speedway Corp., a publicly traded company that owns or has interest in 12 racetracks around the country, all of which host Nextel Cup races. Her company is 62% controlled by the France family, making their Thanksgiving dinners akin to an industry conference. (NASCAR and ISC are headquartered in the same Daytona building.) She's here on a Thursday morning in early August speaking to a crowd of a couple of hundred women to garner support for putting a $600 million speedway nearby. To the France family, the New York City area is a crucial pushpin on NASCAR's national map, the gateway to full acceptance by blue-state America. Since the late 1990s, NASCAR has added Nextel Cup races in California, Chicago, and Kansas City. The goal: to make stock-car racing as popular in urban America as it is in the heartland.
Easy to say, hard to do. New York City politicos aren't exactly jumping up and down to bring NASCAR to town. Even NASCAR's tightly controlled universe has its skeptics. There are only 36 Nextel Cup events a year to be parceled out around the country, and 18 of them are run at ISC properties. Considering that an event like the Brickyard race might pump a couple of hundred million dollars into the local economy, those on the outside looking in tend to get jealous. In July the owners of the Kentucky Speedway in Sparta sued NASCAR and ISC in federal court, alleging that the companies are violating anti-trust laws by refusing to award them a Cup race. The track, built in 2000, hosts NASCAR-sanctioned Busch Series--the equivalent of Triple A for stock-car racing--and Craftsman Truck events and has become a favorite place for drivers to test racecars. But NASCAR has refused to give the speedway a chance at the big show. France settled a similar suit in 2004 by the proprietors of the Texas Motor Speedway outside Dallas, awarding that track a second Cup event. But France vows to fight the Kentucky suit--"We're going to be extraordinarily aggressive at defending our business practices," he says--and points to NASCAR's long history of making the sport work financially for an extensive network of interested parties. "There's no question that NASCAR has some vertical integration," says Tulane University's Gary Roberts, a sports-law expert. "On the other hand, you might say that there's nothing inherently anticompetitive about an entity vertically integrating, if it doesn't injure the consumer."
NASCAR is looking to expand demographically as well. On a race day, you're hard-pressed to find more than a handful of non-whites at a track, and the Confederate flags still wave from some tailgaters' RVs. There may be many people of color watching at home, but for now every single driver in the Nextel Cup races remains white and male. Last March, NASCAR traveled to Mexico City, filling 95,000 seats for a Busch Series race at the Autodromo Hermanos Rodriguez. "We want to be more relevant to the fastest-growing segment of the population--Hispanics," says France. He's launched a program to support minority drivers, and at NASCAR's Craftsman Truck Series race in Indianapolis, a young Hispanic named Aric Almirola was in the field against, among others, a 44-year-old African American named Bill Lester. Lester has a degree in electrical engineering from Berkeley and gave up a job with Hewlett-Packard to pursue his auto obsession. "I think there are a lot of closet African-American NASCAR fans out there," he says.
There is at least a chance that the first minority driver to make it big in stock-car racing will come via the NFL. Joe Gibbs is the most successful NFL alum in NASCAR, while former Dallas Cowboys quarterbacks Roger Staubach and Troy Aikman this summer received a commitment from Texas Instruments to sponsor a Nextel Cup team for 2006. But former Heisman Trophy winner Tim Brown created an even bigger stir when, announcing his retirement from the NFL in July, he revealed plans to launch a NASCAR team with Jack Roush, one of the sport's top owners. At the Brickyard in Indy, the former Oakland Raider showed up to spark sponsor interest--and talk up his intent to provide an opportunity for minority drivers. Such a team could tap into an urban market rich with potential, he says: "You know, it's not too cool to wear a Dale Earnhardt jacket in the neighborhood. We want to make it cool."
Brown admits he isn't much of an auto aficionado. The former business major at Notre Dame says that he first got interested in the late 1990s, when he started a lingerie company and "wanted to go after the NASCAR market." He approached Dale Earnhardt's people to discuss a deal, he says, and was told it would cost him $1 million to meet with the racer. "Just for a meeting," says Brown, who passed on the offer. "I never could get over that. But it's the kind of thing that sticks in your mind."
If stock-car racing has a spiritual home, it's a V-shaped slice of land between I-77 and I-85 near Charlotte, N.C. Often called NASCAR Valley, it's the home of nine out of every ten Nextel Cup teams. Many of the sport's drivers live in swanky houses on nearby Lake Norman. North Carolina has been a hotbed of racing since moonshiners first came down out of the Appalachians to race souped-up sedans on Saturday nights. The old Charlotte Speedway was the site of the first NASCAR-sanctioned "strictly stock" race, on June 19, 1949. When John Holman and Ralph Moody established their influential racing factory outside Charlotte in the late 1950s, it solidified the area as the place to build fast cars.
These days there's an arms race going on in the Valley--a high-tech effort by team owners to create the fastest stock car, fueled by the unprecedented flow of money into the sport over the past decade. Although the basic engine technology inside stock cars--a V-8 without fuel injection--is a relatively simple design dating from the 1950s (NASCAR regulates it to maintain competitive balance), virtually every part of the cars is handmade and heavily tested. Every major race team has its own office park with multiple buildings for the race shop, engine shop, and a research and development center--not to mention a museum of racing artifacts. And every new shop seems to be bigger and fancier than the last. Earlier this year Indy racing legend Roger Penske, who currently operates three NASCAR Nextel Cup teams, opened a new 424,000-square-foot facility on the site of a former Matsu****a factory. In addition to a dazzling garage area, it has a 138-seat cafeteria, a one-mile nature trail, two baseball fields, and nine conference rooms on 105 acres of land--just in case he needs room to expand.
No one personifies the changes that NASCAR has gone through over the past few decades more than Richard Childress. Growing up outside Winston-Salem, Childress got his first taste of racing while selling peanuts at nearby Bowman Gray Stadium. Working nights at a filling station, he got to know some of the area's moonshine runners and often made local deliveries when he got off work. He was 18 when he got his first racecar, a 1947 Plymouth he bought for $20, and he started Richard Childress Racing six years later. He drove the Cup series for 12 years without a victory. Then, in the early 1980s, as an owner, he hooked up with Dale Earnhardt, and the two went on one of the most successful and profitable runs in the sport's history. Childress, 59, now owns three full-time Nextel Cup teams and two Busch Series cars. His race shop and museum near Winston-Salem attract about 70,000 visitors a year. In the fall of 2004 he also opened Childress Vineyards a few miles away; the former moonshiner now loves his merlot.
"When I had one team, there was a lot of things I could go and do," Childress recalls. "Hell, I used to play golf. But with the commitments that everybody has today, that's impossible." He did more than 100 events with sponsors last year. The cost of running a team is enormous--as much as $1 million a year just for tires. Economies of scale help, which is why big players like Childress run multiple teams. But anyone on the margins is getting squeezed. "You're down to big owners that own a lot of race teams," says Childress. "And you have to operate more teams to survive. It's definitely swayed to the amount of teams and the amount of resources you can put together. Who would have ever dreamed a race team would have an in-house CFO and retainers with attorneys and human resource departments?" Childress worries that the rise of multiple-team operations could upset the balance of power that makes NASCAR's benevolent dictatorship work. "We don't need five owners with eight teams apiece running our show, even if I'm one of them," he says. "To make the sport healthy, you need 20 owners, and we're down to less."
One of the most powerful owners at the moment is Jack Roush. The veteran of drag and open-wheel racing now runs five Nextel Cup teams, and he's captured the last two championships with drivers Matt Kenseth and Kurt Busch. Roush Racing president Geoff Smith says the sponsorship market "is the hottest I've ever seen it." But that has a downside too. "One sponsor could come in, pull a Steinbrenner, and try to buy success," he says. Every new big spender ups the ante for the rest of the owners. Like Childress, he worries that the trend toward ultrapowerful, multiteam owners could throw up impenetrable barriers to entry and erode the competitive balance. Plus, he says, even for a big operation, the economics aren't getting any easier. The hotter the sport becomes, the more money drivers, crew chiefs, and even star tire changers demand. Not to mention the astronomical expense of building hundreds of engines a year.
Back in Daytona, at the NASCAR headquarters where Brian France keeps his office, they're well aware of the perils that confront the sport as it strives to challenge football and baseball. Most critical, perhaps: What happens to NASCAR's core fans as the sport continues to expand? Stock-car racing has long attracted a targeted audience--a way for sponsors to wrap themselves in the flag and have their brand displayed where PA announcers pray "in the name of Jesus Christ." In expanding its reach, NASCAR risks losing the distinctiveness of its audience and turning off its base. And that could dilute its fans' Pavlovian responsiveness to ads.
Other sports leagues would love to have those kinds of concerns. And so far, certainly, NASCAR's sponsors seem unworried. Home Depot's Nardelli, for one, has plenty of reasons to keep the faith. After more than three hours of racing at Indianapolis, his driver, Tony Stewart, took the checkered flag for the Allstate 400, his fourth victory in six races. This time not just Tony but his entire crew climbed the fence near the finish line. Home Depot was ready for the photo op with a dozen ladders out on the track. But an opportunistic sponsor's work is never done. In keeping with recent tradition at Indy, Stewart got down on pit road after the race and kissed the strip of red bricks that give the track its nickname. Sure enough, Home Depot quickly brought out an ad featuring his celebratory smooch. Bricks have been selling briskly ever since.
FEEDBACK [email protected] and [email protected]
REPORTER ASSOCIATES Doris Burke and Jenny Mero
