NASCAR, AT&T continue court battle
By Michael Smith , Sporting News NASCAR Wire Service
NASCAR and AT&T go back to court this week, at odds over the paint scheme on Jeff Burton's No. 31 Chevrolet. But the larger issue of exclusivity in the wireless category will loom over the proceedings.
Sprint Nextel, NASCAR's top series sponsor, bought the largest sports sponsorship ever sold, exclusivity included, and has spent close to $100 million a year since 2004. Cingular and Alltel were allowed to stay as team sponsors under certain restrictions.
But in a preliminary injunction ruling in May, a judge said AT&T could replace Cingular on the No. 31 Nextel Cup car because the restriction on rebranding wasn't spelled out in NASCAR's contract with Richard Childress Racing.
Those in the industry said it was widely known that Cingular and Alltel could not rebrand if one of them merged with another company in the volatile telecom world. But NASCAR didn't put it in writing, so AT&T's blue globe has been on the hood of the orange No. 31 for the past two-plus months.
"AT&T has nothing to lose," said Zak Brown, founder and CEO of motorsports agency Just Marketing. "They might not have very good relationships in the industry, but they've got the globe on the car. It just shows how corporate the sport is.
"In the old days, you'd get called into the (NASCAR trackside) trailer and sort it out. But the days of going to the trailer are long gone."
AT&T's emergence in NASCAR this year has led Sprint Nextel to say that its exclusivity has been compromised. And it remains at risk, based on the current legal precedent. Alltel is ripe for acquisition, analysts say, which could allow another company to rebrand Alltel on the No. 12 Penske Racing entry. Alltel was bought earlier this year by two private equity firms.
"For Alltel and other brands with competitive categories, this will make them take notice," said Jonathan Gibson, vice president of marketing at Pierce Promotions and a former executive at Miller Brewing. "This is one of the first major cases of somebody pushing the envelope. NASCAR and other sanctioning bodies selling entitlements are going to have to closely monitor their language in these contracts and watch for potential changes. You can't predict every change, but you have to be strategic in your approach."
Unless the judge hearing NASCAR's appeal of the preliminary injunction on Thursday overturns the ruling, Sprint Nextel must prepare for its next move.
There are any number of ways in which Sprint Nextel might seek relief if AT&T prevails. NASCAR could attempt to add value without reducing the required spending, or it could offer a discount. Escalators in the contract could be voided or additional years could be added. These are all options Sprint Nextel has begun to explore, but it's uncertain which ones might emerge as most plausible.
How NASCAR reacts to Sprint Nextel is part of the intrigue.
"NASCAR should be proactive, understand that Sprint Nextel's exclusive rights have been devalued and figure out what the damages are so they can move on," said Bob Cramer, the former president of Genesco Sports and formerly the MasterCard sponsorship chief. "If AT&T wins, and I think it will, NASCAR and the teams are going to have to get together so that this doesn't happen again. Sponsors are supposed to be going down a mutually beneficial path with the league."
Most team officials expressed some level of satisfaction that AT&T has been allowed to rebrand the car. With funding as critical as ever, most people at the team level don't want to see the sport lose a sponsor as large as AT&T.
NASCAR has always maintained the right as a private business and the sport's ultimate authority to control the sponsors on paint schemes and uniforms. But the AT&T ruling, if it's upheld, challenges that authority.
People in the industry don't envision sponsors using a magnifying glass to find contractual loopholes, but AT&T is showing that it might have found a weakness in the sanctioning body's longtime way of doing business.
"This case could change the way every sanctioning body handles its agreements," Gibson said. "They might have to really enhance the detail and the way they approach every category."
Michael Smith is a reporter with SportsBusiness Journal.
This story was produced by the Sporting News NASCAR Wire Service.
By Michael Smith , Sporting News NASCAR Wire Service
NASCAR and AT&T go back to court this week, at odds over the paint scheme on Jeff Burton's No. 31 Chevrolet. But the larger issue of exclusivity in the wireless category will loom over the proceedings.
Sprint Nextel, NASCAR's top series sponsor, bought the largest sports sponsorship ever sold, exclusivity included, and has spent close to $100 million a year since 2004. Cingular and Alltel were allowed to stay as team sponsors under certain restrictions.
But in a preliminary injunction ruling in May, a judge said AT&T could replace Cingular on the No. 31 Nextel Cup car because the restriction on rebranding wasn't spelled out in NASCAR's contract with Richard Childress Racing.
Those in the industry said it was widely known that Cingular and Alltel could not rebrand if one of them merged with another company in the volatile telecom world. But NASCAR didn't put it in writing, so AT&T's blue globe has been on the hood of the orange No. 31 for the past two-plus months.
"AT&T has nothing to lose," said Zak Brown, founder and CEO of motorsports agency Just Marketing. "They might not have very good relationships in the industry, but they've got the globe on the car. It just shows how corporate the sport is.
"In the old days, you'd get called into the (NASCAR trackside) trailer and sort it out. But the days of going to the trailer are long gone."
AT&T's emergence in NASCAR this year has led Sprint Nextel to say that its exclusivity has been compromised. And it remains at risk, based on the current legal precedent. Alltel is ripe for acquisition, analysts say, which could allow another company to rebrand Alltel on the No. 12 Penske Racing entry. Alltel was bought earlier this year by two private equity firms.
"For Alltel and other brands with competitive categories, this will make them take notice," said Jonathan Gibson, vice president of marketing at Pierce Promotions and a former executive at Miller Brewing. "This is one of the first major cases of somebody pushing the envelope. NASCAR and other sanctioning bodies selling entitlements are going to have to closely monitor their language in these contracts and watch for potential changes. You can't predict every change, but you have to be strategic in your approach."
Unless the judge hearing NASCAR's appeal of the preliminary injunction on Thursday overturns the ruling, Sprint Nextel must prepare for its next move.
There are any number of ways in which Sprint Nextel might seek relief if AT&T prevails. NASCAR could attempt to add value without reducing the required spending, or it could offer a discount. Escalators in the contract could be voided or additional years could be added. These are all options Sprint Nextel has begun to explore, but it's uncertain which ones might emerge as most plausible.
How NASCAR reacts to Sprint Nextel is part of the intrigue.
"NASCAR should be proactive, understand that Sprint Nextel's exclusive rights have been devalued and figure out what the damages are so they can move on," said Bob Cramer, the former president of Genesco Sports and formerly the MasterCard sponsorship chief. "If AT&T wins, and I think it will, NASCAR and the teams are going to have to get together so that this doesn't happen again. Sponsors are supposed to be going down a mutually beneficial path with the league."
Most team officials expressed some level of satisfaction that AT&T has been allowed to rebrand the car. With funding as critical as ever, most people at the team level don't want to see the sport lose a sponsor as large as AT&T.
NASCAR has always maintained the right as a private business and the sport's ultimate authority to control the sponsors on paint schemes and uniforms. But the AT&T ruling, if it's upheld, challenges that authority.
People in the industry don't envision sponsors using a magnifying glass to find contractual loopholes, but AT&T is showing that it might have found a weakness in the sanctioning body's longtime way of doing business.
"This case could change the way every sanctioning body handles its agreements," Gibson said. "They might have to really enhance the detail and the way they approach every category."
Michael Smith is a reporter with SportsBusiness Journal.
This story was produced by the Sporting News NASCAR Wire Service.