As NASCAR enters the 2019 season, the business of the sport is looking to bounce back. (Photo by Sean Gardner/Getty Images)GETTY
If you think about it, some of the most compelling stories in business center on bouncing back from adversity. Steve Jobs turning Apple back around. Lee Iacocca reviving Chrysler. You get the idea.
While NASCAR may not be on the same scale as those two industry giants, they are at one of those rare moments where shifting gears could either blow up the engine or propel them forward.
NASCAR is in a state of transition, and within the next few years, the racing sanctioning body will be within an inflection point for change. Here’s how they plan to address it.
Using Data To Determine The Health Of NASCAR
While it’s steeped in folklore, don’t think that those that run NASCAR are just a bunch of good-old buddies. It’s a multi-billion industry, and as such, goes about business as all good businesses should. But, if I were to try and tie the sport’s racer mentality with the thinking of Wall St., the best way to describe how NASCAR plans to get the sport turned around is to, “Analytics the <expletive> out of it.”
The shift comes from the change in leadership with Jim France ascending into the leadership role and his vision.
“Heading into 2019, our plan is for zero-based budgeting and zero-based planning, meaning just because we did something in 2018 doesn’t mean we’re going to do it in ’19,” said Steve Phelps, NASCAR’s president. “We have to signify change to our industry and we need to make sure we are looking at things through a different lens.”
That lens encapsulates all arms of NASCAR and its interconnectedness. The plan centers on key performance indicators (KPIs) that include fan interest, attendance, television and streaming viewership, as well as overall revenues. The plan is not to be actionable on these KPIs in a vacuum, but work with the teams, and other partners in NASCAR to think differently.
Phelps believes that based on the KPIs through Jim France’s vision, NASCAR gets turned around. The specifics of them will be key to making the vision a reality.
Phelps says that marketing to fans this year will be a different approach. That collaboration within the industry is headed in the right direction. There has been an effort to better driver utilization as efficiently and smartly as they can. And finally, a big focus on the on-track product that will lead into the Gen-7 car that will not only see a body design that harkens more toward designs in the past (something that fans have asked for) but sees elements of cost-containment.
“We’re putting efforts into long-term growth initiatives into things such as schedule, a new sponsorship model, international development, eSports efforts, a larger digital platform, and sports betting around our sport,” said Phelps. “We believe those areas will address some of the areas we’ve had declines in.”
Addressing Economic Parity
While passion fuels racing, at the top levels, the health of it depends on economic viability. Whether that’s low-revenue teams or big, no team likes to lose money as part of any industry. With declines in areas of NASCAR, how do they respond as that effect hits the teams?
“We need to make sure that all of our race teams can compete on the race track as well as be economically viable,” Phelps says. “We are working with our teams on a competitive balance framework that will allow all teams to succeed and win, both on the race track and off. So, we’re always looking at how we can create efficiencies that will allow teams to be more profitable.” He went on to add that those aspects take in things such as limiting on-track personnel; tires and testing; mandating an industry-wide pit gun for tire changes, and; for the Xfinity Series, they’ve worked with a composite body. But it is the future Gen-7 car that Phelps believes the real cost containment will really bear much more cost containment.
Bringing Everything Under One Roof
One thing that has been a challenge, not only for NASCAR, but other sports leagues, is having different business arms seeking the same customers. Major League Baseball saw this problem and by consolidating, it has grown sponsorship deals at a rapid rate. For NASCAR, you have the sanctioning body, the race tracks, the teams, and the drivers, all of which could be vying for the same sponsor. “It creates a bit of sharks in the water going after the same fish,” said Phelps. By consolidating, sponsors will have one place to achieve overarching activation across NASCAR and have it tailored to meet sponsor needs. That’s critical. While the number of Fortune 100 and 500 companies involved with NASCAR has never been higher, the amount being invested has dwindled as companies engage in shorter deals and seek much more information to gauge return on investment.
Tiered Entitlement Sponsor Model
For the first time in 70 years, NASCAR will approach the entitlement sponsor for their key race series under a tier system. Currently, Monster Energy is the entitlement sponsor, but that could change to something closer to how the PGA approaches title sponsorships. This takes place in 2020.
Shortening And Making The Schedule More Exciting
One of the challenges for NASCAR centers on their schedule. Track agreements hem in any substantive changes around where and when races are held until those contractual obligations are up for renewal. The France family’s majority ownership of International Speedway Corp (ISC), as well as Speedway Motorsports, Inc. (SMI), these two control the lion’s share of where the major NASCAR events take place. As a matter of cost containment, and keeping fans focused, talk has centered on shortening the schedule and diversifying it when track contracts expire at the end of the season. While Phelps would not disclose what the schedule length would be, drivers and fans have looked to a more compact and shorter season.
The big change will be around the types of races one could see. The addition of the “roval” at Charlotte was a big success in 2018, and NASCAR is aware of the balance between traditional and differing types of races. Certainly there has been talk of more short tracks and road courses. I ask Phelps if anything as radical as dirt tracks or street courses could be in play. “Everything is on the table,” he says.
For 2019, there will be at least one tweak: the Sonoma race will see “the carousel” added back in, although when asked if “the boot” at Watkins Glen might return (something that’s been talked about for years), Phelps didn’t answer that directly going back to the “everything is on the table” comment, leading one to believe that at least for 2019, it might not be in play.
What will be a balancing act is keeping the tracks that already have contracts from being on the losing end of things. Shortening the season means less revenues for some tracks.
The schedule for 2020 will be announced in April, and is bound to have the most interest in years.
A Mid-Week Race
One of the more interesting changes to the schedule could be the addition of a mid-week race. NASCAR is acutely aware that there is competition for eyeballs on the weekends when other sports compete for interests. Phelps says that NASCAR is looking hard at the possibility.
“The challenge is, our fans not only come out for a day or a weekend, but often an entire week. So, a track where that wouldn’t be feasible is one way to allow us to do a mid-week race.”
NASCAR Going After Betting On The Sport
With the Supreme Court opening the door for sports wagering across the country, all sports are looking to get in on it. NASCAR is no different. There is a serious effort into bringing betting on NASCAR. Phelps said that an important element will be race integrity; ensuring that drivers aren’t throwing races and putting the health of the sport in jeopardy.
NASCAR And eSports
NASCAR already had a heavy investment in iRacing, and that will continue. The addition of 704 Games added 16 race teams and 32 drivers, each owned and operated by prominent NASCAR race teams.
NASCAR Looks To China
NASCAR already has sanctioned series in a number of international markets, including Mexico with races broadcasted in 185 countries and territories. With the growing car culture, NASCAR is looking to place a series in China.
Will It Work?
If nothing else, the changes that are being sought are both near-term and long-term for NASCAR. It’s unrealistic to think that the popularity of the sport will return to its halcyon days of the late ‘90s. But the sport is far from dying. While it is yet to be determined, the change in leadership at the top and using data to monitor how core aspects of NASCAR as an industry is doing, at least they are setting themselves up to be more proactive than what has been seen as reactive in the past. As the 2019 season gets underway, and on the eve of NASCAR’s biggest event in the Daytona 500, NASCAR’s business strategy is at its most-important point. While the industry will see changes in 2019, how it looks at the end of the season in the coming years may be the most critical.