Monday, September 24, 2007
Now, of course, NASCAR has taken off to become the fourth sport of America -- taking out hockey as well as golf and tennis for attention in America. Unlike most sports industry models, as Ross and Szymanski point out, NASCAR is organized more like McDonalds: the participants or the owners of the vehicles or tracks do not control NASCAR; NASCAR is its own separate entity.
In The 200-MPH Billboard: The Inside Story of how Big Money Changed NASCAR, Mark Yost has written a description both of that transformation of NASCAR into a unique business model, and its ability to sell the sport to other businesses. The early chapters tell the story of the Bill France family and its building of the sport's economic model. While it seemed natural that these teams would be sponsored by the makers of automobiles or the parts inside them, it took the vision of France and a few others to see the possibility of using the cars themselves as a means to market other products.
First came Junior Johnson and RJ Reynolds. Still reeling from the decision in the late 1960s that cigarettes could no longer be advertised on television, RJR had an advertising budget with no place to spend it. At the same time, NASCAR was struggling to replace support from the automakers. Yost describes the decision as "the most momentous business decision in the history of NASCAR." Not only did the Winston Cup come into existence in 1971 and RJR funded a $150,000 purse for the Talladega 500 that same year, but RJR was able to convince other corporate entities to join in advertising. Each looked up into the grandstands, says one historian in Yost's book, and saw their customers. And the advertisers saw it in their own interest to help NASCAR create a more uniform feel for their racing venues and their cars. In short, the days of lugging your vehicle to the track and hoping you won enough money to afford gasoline for the drive home were over.
Yost details the expansion of the sponsorship base through the middle of the book. Much like baseball's expansion of advertising from beer and tobacco to credit cards and shaving products, NASCAR's success required them to grow from tobacco, beer and automotive products. By the mid-1980s such brands as Folgers, Tide and Crisco were being advertised by NASCAR vehicles and drivers. Such sponsorships reinforced the need for a uniform, well-regulated competition in NASCAR, which the industry's corporate structure permitted.
The latter half of the book focuses then focuses on case studies of this business model. I found the story of Texas Instruments' use of NASCAR to push its DLP technology for wide-screen television the most interesting of these. Not only did TI create demand from fans and viewers of NASCAR events on television -- the people most likely to buy HDTV -- but they also created events with Circuit City that could help get the latter to push their version of HD in a very crowded market. There are several such B2B stories in the book, which is an aspect of NASCAR sponsorship that has few parallels in the major team sports.
Yost concludes by looking at the challenges NASCAR faces and whether the sport has peaked in popularity and profitability. It's a fair question, though Yost speculates greatly in the last few pages in ways that lead one to think he sees growth still. As NASCAR has 70 Fortune 500 companies as sponsors, it would be hard to bet against it.
Cross-posted at The Sports Economist.