“You know how to make a small fortune in NASCAR?” a joke among team owners used to go.
“Start with a big fortune.”
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The reality could be even worse–down to no fortune or even into bankruptcy.
Then came the NASCAR popularity boom and the $15 million primary sponsorships.
But now the old riddle is regaining its relevance. The rich are getting poorer.
Consider this:
“It cost me $600,000 to come here,” team owner Ray Evernham said in the garage area at Martinsville, Va., last Saturday. “Three hundred thousand dollars per car, per weekend. Just to race.”
By Sunday night his two drivers, Kasey Kahne and Jeremy Mayfield, had won a combined $162,039. Subtract half of that for the drivers’ share of the purse and Evernham’s winnings come to $81,019.50.
So he left Martinsville $518,980.50 the worse for showing up.
True, Evernham Motorsports had a bad day–Kahne finished 21st and Mayfield 36th.
But consider Roger Penske, the owner with the highest-finishing pair of drivers. Rusty Wallace won the race and $170,998. Ryan Newman finished fifth and won $113,242. That’s a total of $284,240. Give the drivers their split and Penske South took in $142,120.
Evernham is about the average spender among owners, so you figure Penske spent at least $600,000, probably more, to field Wallace and Newman.
So the biggest-winning team of the day suffered an estimated net loss of $457,880.
“All I know,” Wallace said, “is that we’re racing too much for not nearly enough money.”
Hardest hit was the owner of the biggest team, Jack Roush, who entered five cars at Martinsville. Unlike Evernham, Roush doesn’t know his exact numbers, leaving those to his financial officers.
But Roush’s view of the big picture is that currently, all team owners “are in a going-out-of-business plan . . . “
Figure a $1.5 million outlay to race the five cars, and gross Martinsville winnings of $414,695, minus driver shares. Reckon that Jack Roush dropped $1,292,652.50 last weekend alone and it’s no wonder he doesn’t want to know.
This, of course, is where the big sponsorships come in to make up enormous shortfalls.
Trouble is, the sponsorship dollars are tightening while the cost of racing skyrockets.
“We have the graphs, and they’re easy to read,” Evernham said as he made imaginary lines in the air with each forefinger. “Here’s the sponsorship revenue. Here’s the cost of racing. When those lines cross, you’re out of business. And that could well happen in five years if we don’t cut some costs, because I’ll guarantee you everybody’s outlay is growing at a much faster rate than revenues are coming in.”
Because of confidentiality clauses in contracts, Evernham won’t reveal his sponsorship numbers. An educated guess is $30 million, if he’s lucky, for both cars this season.
For 38 race weekends–36 Nextel Cup points races, plus the Bud Shootout in February and the all-star event in May, Evernham will spend at least $22.8 million, probably more, “just to race,” he said.
“That’s not counting my engine research and development, or my No. 91 team (a third car in which veteran Bill Elliott tests experimental parts in selected races, without regular sponsorship).”
Those other costs will come very close to consuming Evernham’s entire budget, with the paltry “winnings” barely putting a dent in the arithmetic.
The lines on the graph have not quite crossed for the owners, but they’re coming closer and closer together.
“Not to say there’s not enough total money flowing through the sport,” Roush said. “And not to say there’s not enough interest, or that this is not the best advertising value . . . the show, and the exposure we’re getting, is wonderful.”
But Roush is worried about where the money is channeled. He fears NASCAR, the corporate entity, is intercepting sponsorship money for itself before it can get to the teams.
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“NASCAR has the `official’ this and that,” Roush said. “Whenever a sponsor is attracted to NASCAR first and gets an official status, he’s much less interested in doing a team.”
A recent check of the logos on NASCAR’s traveling office trailer revealed 38 “official” sponsors of the sanctioning body. But Brett Yormark, NASCAR’s New York-based vice president of marketing, said official sponsors of NASCAR also spend directly with teams, often as associate sponsors.
Gillette, for example, spends “more with the teams than it does with NASCAR,” he said.
But associate sponsorships typically go for about $1 million each–not remotely replacing the $15 million primary sponsorships that keep teams in business.
“As the economy comes back,” said Evernham, “I think the sponsorship stuff is going to shake loose a little bit. But that doesn’t mean everybody’s numbers are going to [return to] $15 million.”
Something has to give, along one or both of the critical lines on the team business graph.
Otherwise . . . well . . . some years ago in a garage area, in a background conversation, a prominent owner–not one of those mentioned above–asked me, “If you were someone interested in acquiring NASCAR, how much would you pay?”
I shrugged. “Oh, maybe $4 or $5 billion,” I said.
“And what would you pay for it, without all these teams?”
I shrugged again. “About 99 cents.”
“Exactly,” he said, and walked away.