Value in NASCAR

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FLRacingFan

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A bit of a lengthy read, but worth it. An interesting look into the growing lack of parity in the sport, with how much Roush has really fallen, how big Hendrick really is, and how few players there are compared to just eight years ago.

http://racingnomics.com/on-value-in-nascar/

Some bits of note:
Forbes also theorizes that the governing body’s competitive mandates hampered financial growth as well. NASCAR’s “Chase” mechanism undermined special weekly performances by traditionally noncompetitive teams and shifted focus toward annual title contenders. Ongoing tweaks to the new “Car of Tomorrow” introduced unintended costs. Testing and entry limits binded the growth of large teams, but did not address problems of smaller, struggling groups. More recently, the periodical notes that NASCAR’s hunting for official sponsors has caused some businesses to partner with the series rather than directly with teams. In summary, Forbes encouraged the governing body to “[q]uit legislating competition from the boardroom and let NASCAR’s free-styling free market work.”
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Hendrick Motorsports is over twice as valuable as any other organization (Joe Gibbs Racing — the second most valuable — is worth just 49% of that). The team enlists 4 drivers with a combined 10 championships and 11 most popular driver awards. Its Chevrolet ally, Stewart Haas Racing, has steadily grown into the fourth most valuable organization. Tony Stewart’s buying into the mid-pack group improved the team’s value for 2009, while broadly appealing Danica Patrick’s joining has sustained the uptick.

Perhaps most relevant, Roush Fenway Racing’s value and share on the market has depreciated drastically. Its absolute value has dropped by 55% from its peak in 2007. More indicative of its decline within NASCAR’s landscape, the team commands just 12% of the entire industry value as estimated by Forbes. Just 8 seasons ago, the organization controlled over 20% — the greatest share for 2006. With its star driver Carl Edwards rumored to leave, the organization’s value may continue its downward trend on the market.

Value inequality has become an issue in recent seasons. As some richer teams have gained value, smaller organizations have stagnated or lost market share. While the 4 most valuable teams comprised 52% of the total value in the industry in 2006, the richest 4 now control over 66%. Together with an industry value that has shrunk every season since 2007, the gap is widening between the affluent and destitute.
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Clearly, the market has morphed into a relative oligopoly — a few organizations dominate the industry, while others are subject to more valuable teams’ movements in the sponsorship market. In addition to numerous consolidation efforts and a small number of active teams, other examples reinforce oligopoly.

Hendrick Motorsports, for instance, has been very deliberate in selling sponsorship for NASCAR’s most popular driver, Dale Earnhardt, Jr. In the current environment, the owner acts as a “price leader.” The group knows that price deductions they make for a sponsor will likely be followed by other teams and, thus, not benefit their search for a sponsor. The owner is protecting the sponsorship ecosystem for owners by setting rigid prices. As in many oligopolies, the most valuable programs tend to set prices, not take them.

Furthermore, the barrier to entry in oligopoly is extremely high. Tremendous subsidies from Toyota allowed Michael Waltrip Racing to become a viable operation. Business owner Gene Haas collaborated with NASCAR champion Tony Stewart to grow Stewart Haas Racing. Unlike previous decades, it takes remarkable effort and help to grow and compete in the Cup Series — a league with high-dollar equipment, heavy-hitting financiers, and regulations that may favor existing programs.
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Full article: http://racingnomics.com/on-value-in-nascar/
 
ToyYoda said:
Geez, no wonder Hendrick Motor$ports is clobbering everybody. I have an almost certain feeling the final four this year will be everybody at HMS not named Kasey Kahne, and Hendrick-powered Kevin Harvick.
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I wouldn't bet against that. The only other team that has the pure pace those four do is Penske, and then there's quite a drop-off to JGR.
 
does that mean you are throwing in the towel there Yoda?:p:p
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After reading the Start & Park article and this one I'm hoping small teams can survive. I think limiting teams to two cars might help the sport (but that will never happen).
 
Just wait until Hendrick gobbles up Larson and puts Chase in after Gordon retires.
 
I love Hendrick Motorsports as much as anyone, and I'm extremely happy with their success. That being said, I miss the days when you had a dozen or more different car owners with a chance to win every weekend.
 
The report shows some of the things mentioned on this forum in the past . Junior is leading the way in sponsorship . Carl's impending departure would be a death blow to Roush Racing . Danica is a major factor in the rise of Stewart Haas ' value .
 
roush started the out of control spending in nascar. Then Hendrick out bid ford for Jeffy and it was on.
 
chip / felix graph was a hoot ! ha!

good stats....but forbes wonks would prolly ****e britches at actual track .........etc ...ha!
remember.....#20 won 7 races last yr.

good stuff fl !
 
BOWTIE GUY said:
roush started the out of control spending in nascar. Then Hendrick out bid ford for Jeffy and it was on.
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Roush also started the "different sponsor every week" bull****. Remember when Irwin/Sharpie split time on the #97 car? That was easily four, five years before the economy went to ****.
 
TooSweet said:
I love Hendrick Motorsports as much as anyone, and I'm extremely happy with their success. That being said, I miss the days when you had a dozen or more different car owners with a chance to win every weekend.
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It's disappointing that there's less parity as time has passed, which is pretty much the opposite of how things have gone in most other sports. Something like thirty-four different drivers had a Top 5 and forty-five had a Top 10 in 2001.
 
As long as we have several drivers winning a year I'm good. I don't root for owners, only drivers. Heck, if either HMS, JGR, Roush, Penske, MWR, etc.... owned all 43, it wouldn't bother me a bit. It's still racing to me.
 
Nothing really new in Forbes' findings - there's always been a parity gap - just the names change over the years.

Teams and money are bigger today, and it is true that the cost of entry has skyrocketed, but teams that were factory backed have been trouncing the others almost since NASCAR was established. The first Super Team was probably Carl Kiekhaefer's in 1955. Until the mid-1980s you’d only expect four or five teams to really have a shot to win; since then it’s averaged ten to fifteen. The market hasn’t morphed into a relative oligopoly – it’s always been that way. More TV and social media coverage just makes it seem bigger, although that has also opened the door for more corporate sponsorships spread to almost every team.

It is detrimental that the sanctioning body (NASCAR) is competing with teams for corporate sponsorship. Not mentioned is that track owners (especially ISC and Speedway Motorsports) are doing the same thing, and that NASCAR deals create lock-outs for competing corporate sponsors. For example, when RJ Reynolds (Winston cigarettes) was the Cup Series sponsor your car wasn’t allowed to advertise any other cigarette manufacturer. Just try showing up to a Sprint Cup race with Verizon on your quarter panels today.

The biggest problem with NASCAR is its top executives don’t get it. The founder, Big Bill, was a racer. Bill Jr. worked at and promoted tracks before becoming President. Brian stayed in the corporate offices. Big Bill and Bill Jr. hired people who had boots on the ground; Brian hired yuppie friends. The flavor has been lost and too much effort has been spent to court casual fans. Couple that with decades of failing economy and you have empty seats. That’s what Forbes should be focusing upon – not just measuring today’s version of parity gaps. But again, they’re more yuppies that “don’t get” racing.
 
ToyYoda said:
Number of different champions in the last 10 seasons of each sport:

NFL - 8
NHL - 8
College Football - 7
College Basketball - 7
MLB - 6
NBA - 5
NASCAR Sprint Cup - 4
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Even F1 has had six different champions in that time span.
 
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