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Friday, January 2, 2009

Going smaller, containing costs is the cure for NASCAR’s economic hangover

As 2009 kicks off, many people are no doubt still recovering from their annual night of excess on the 31st. Drinking two dozen beers and several glasses of champagne, and doing God-knows-what afterward, was a blast that night. But Thursday morning, when your head felt like it was being hit by a bag of hammers, you may have sworn under your breath that you'd “never drink again.”

In the case of NASCAR, its hangover is of the economic variety. For most of the past couple decades, with a few minor rough spots, things have been exploding in the sport as far as the economy goes. Everything has been growing by leaps and bounds over the years, from driver and employee salaries to the cost of sponsorship packages and even the cost of leasing engines (the former Ginn Racing team was apparently paying more than $12 million per season in 2007 and 2008 to lease engines from Hendrick Motorsports).

Now, in this latest and particularly extreme economic downturn, even NASCAR is having to cut back. Testing at most tracks has been officially banned, and several high-profile teams are either shut down or have been forced to merge. Many teams are having to cobble together several smaller sponsorship deals, as the old concept of one big sponsor for the whole year is becoming impossible. Layoffs have been rampant this offseason, and more are likely to come if the economy doesn’t get better in a hurry.

The key here is that, unlike us drinkers who usually still go ahead and repeat our excess imbibing the following year (or sooner), NASCAR must stick to its resolution and realize the sport has gotten too big for its britches lately. The dam has burst, and all those years of expansion have led to a setup that is unsustainable in this struggling economy.

It’s widely accepted that for a team to be a true contender, it will need as much as $20 million in sponsorship for the full season. That number is far too high, and is part of the reason so many teams remain without a full year’s worth of sponsorship as 2009’s racing season is oh-so-close to beginning.

Changes need to be made by both NASCAR and the teams to make this sport more affordable for the teams. The biggest thing NASCAR could do is to simply shorten the schedule. I love watching racing as much as the next person, but there are at least a half-dozen tracks that have two race dates and only deserve one or none due to the poor quality of the racing they provide. This has a downside, as cutting back the schedule could create some unemployment in the towns where the tracks are located, but it might become a necessary evil at some point. Also, anything else the France family can do to make that $20 million figure significantly lower will help the teams tremendously.

Within the teams, there is going to have to be some tightening of the belts, as every other company has had to do in America during these hard times. People may have to take pay cuts, and even more may lose their jobs. The sport has become less and less about racers competing on a track and more and more about big money in every aspect. The zeros have been climbing so fast that the real world has finally caught up with the sport. The engine leasing example I previously mentioned is a perfect example of how bloated the sport has become: It’s completely insane that a team has to pay so many millions just to lease decent engines for 3 Cup teams and a Nationwide team.

So as the American public takes a few Extra Strength Tylenol to nurse our lingering holiday hangovers, NASCAR has a bitter pill that it must swallow now and in the future: The sponsorship money just isn’t out there right now, and may not be for a while. So if they want to continue to thrive, the cost to operate a team in this business is going to have to come down.

That may go against the whole concept of the decades-long expansion of the sport, but it’s a reality that can’t be ignored.

1 Comments:

Anonymous Anonymous said...

They DO need to shorten the season, and how's this for PAYBACK: Cut out the races in the states where the GOP senators stabbed the U.S. Auto Industry in the back. A**holes like Richard Shelby in Alabama - Goodbye Talladega race! John McCain - GOODBYE PHOENIX! Etc. Etc......

January 4, 2009 at 2:48 PM 

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