BY ZAK BROWN, FOUNDER & CEO, JMI International
Posted At : March 1, 2013 11:14 AM | Related Categories: News & Info, 2013
At JMI, we have made the economics of motorsports sponsorships our business for nearly two decades. In the late 90s and early 2000s the discussion around North American motorsports, especially NASCAR, indicated its success was unstoppable. Fast forward 10 years and find that the reporting on the economics of our sport has done a 180 – teams can’t find sponsorship, series are struggling to stay afloat and the American public has lost interest in racing. The truth can be found somewhere in the middle of these two narratives.
What we have witnessed over the last ten years isn’t a failure of motorsports, it’s not the ‘fall of NASCAR’ or the ‘blunders of IndyCar,’ and it’s certainly not the well running dry. This is a shift in consumerism – attribute it to changing technology and the economy – the way people consume information and spend money has changed dramatically over the past decade. As a result there has been a shift in how series and teams do business, there is a marked difference in how they seek fans and there is a change in how brands, like our clients, spend against and use racing assets.
We have been through an economic downturn; let’s not lose sight of that. Fans have less dispensable income and as a result we have seen a dip in ratings and attendance but the decrease is marginal – NASCAR is still the second most watched spectator sport in North America with average attendance of 100,000 fans and an average race viewership of 5.8 million. Most professional sports in America, minus the NFL, have experienced a decrease in attendance, ratings or both.
Networks still value, and pay top dollar for, those numbers; that helped NASCAR secure a major deal with Fox and IndyCar land a valuable deal with NBC Sports. NASCAR’s renewal was certainly a positive sign for North American racing; Fox renewed their deal early, marking the first increase Fox has paid in more than a decade for its NASCAR rights upping the purse to $300 million in 2015.
It’s not just about television and live attendance anymore; those are just two pieces of the puzzle – nearly one out of four avid fans follow NASCAR via a mobile device. This allows fans to ‘watch’ the race when they can’t watch the race and it is impacting how brands, race series and teams are seeking fans. A fan can easily keep up with race action, and get exclusive information, via Twitter. Social media offers direct interaction with fans; many brands would argue that is something that you can’t get with a television audience. That is why so many brands in motorsports are shifting their focus to social media and mobile marketing.
With fans’ time at a premium every series has worked to make their product better and give more options with which to consume their product. NASCAR used this time to prepare for the future; they have organized and adjusted. Merging the American Le Mans Series and the GRAND-AM Rolex Sports Car Series was a move that demonstrated market knowledge and foresight. The world of American Sportscar racing was divided; by consolidating the two series NASCAR will be able to provide a better fan experience – upgraded tracks and improved starting grids – and with fan interest comes network contracts and sponsorship dollars. IndyCar made several bold moves in order to jumpstart the series’ popularity – big payouts, double headers, new venues – all in an effort to gain more of a limited resource, fans’ time and attention.
All racing series have succeeded in offering sponsorships that go beyond a logo on a car. Official league partnerships, race entitlements and business-to-business opportunities have continued to trend in popularity for corporations. While the media may not perceive an official partnership as ‘sexy,’ most brands who have had the benefit of the status will confirm an extremely high ROI. There is a reason that racing series continue to find new categories of official partnerships – it’s what brands want. It offers a way to be embedded in the product and it gives the opportunity for corporations to display how their product or service works.
With some brands seeking a reduced spend and series-based partnerships, many teams have experienced a changing set of needs from sponsors. Sponsors are becoming more selective in how and where they spend their marketing dollars and the assets that brands seek are not the same as they were 10 years ago. Brands want teams that have a digital presence and drivers who have high social media value. Savvy brands look to be a part of the race weekend through social media, regardless of whether or not they have a paint scheme in the race. Teams are having long-term sponsors scale back. The brands that reduced and the brands that are new are sponsoring in chunks and demanding more access from the teams. So teams now have to find more sponsors while adding an increased set of capabilities and assets – that’s not easy.
Will the economic outlook for North American motorsports improve? Many view the return of Formula 1 as proof that it already has. We may never see the type of numbers prevalent in the late 90s and early 2000s. The barometers of success will come in the form of higher digital engagement, increased presence of global brands ala F1 and increased assets offered by teams and series.
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