At the Indianapolis Motor Speedway last July, the parking lot was filled with excited Nascar fans chugging beer, roasting pigs and exchanging drivers statistics.
But in an office inside the racetrack, the scene was far from celebratory. Executives of the Big Three Detroit automakers told Brian France, the Nascar chief executive and chairman, that they planned to cut their investments in the sport sharply in the 2009 racing season.
Since then, Chevrolet has said it is cutting back on advertising and sponsorship deals with 12 tracks. Ford is trimming Nascar spending by 20 percent, and Chrysler by 30 percent.
The economic crisis is going to hit all sports. Every team should operate under the worst-case-scenario assumption, says Michael E. Rapkoch, founder of Sports Value Consulting, based in Dallas. Many sponsors contracts that are up for renewal this year or next probably wont be renewed. For the long-term contracts, I wont be surprised if they try to get out of them through bankruptcy or some other way.
Nascar, which relies on corporate sponsorships more than other sports, is particularly vulnerable. In the 2008 racing season, 400 companies put up more than $1.5 billion to sponsor races, cars and drivers. About a third of that was provided by auto companies, which are now struggling with the economic downturn, if not possible bankruptcy.
Automakers arent the only ones pulling out. Longtime sponsors including Kodak, Texaco and Dominos Pizza are abandoning Nascar. Even Craftsman, the Sears brand that has been the title sponsor of the truck series since it started in 1995, is cutting its ties.
Many of the major sponsors pulling back have been involved in our sport for decades, Mr. France says. Theyre making cuts, and were affected.
Its a big comedown for Nascar, which has had sizzling growth over the past decade. A multibillion-dollar TV deal in 2001 helped propel it from a regional sport that drew most of its revenue from sales of tickets and merchandise into a popular franchise with a national following.
TV viewership has slipped in the past year or so, and so has attendance. The truck series official sponsor is now Camping World, the largest retailer of recreational vehicle equipment. Nascar gave the retailer a substantial discount: Camping World will pay approximately $2 million a year, half of what Craftsman is estimated to have paid. While it is gaining as well as losing sponsors, Nascar expects its take from title sponsorships to drop 20 percent next year, to about $150 million.
To avert a collapse of the sport, analysts say, Nascar must push through sweeping changes to its business model, like reducing sponsorship rates, cutting back the number of races and trimming the distances of some of them. For example, a handful of premier races would run the traditional 400 or 500 miles, but the rest would become 200- or 300-mile events.
Some analysts say Nascar should take cues from the N.F.L. and explore placing sponsor dollars in an official pool, with each team receiving an equal share. They also suggest a salary cap.
Mr. France has announced that there will be no preseason and in-season testing at its tracks next year, saving teams an estimated $1 million a car. He is also toying with the idea of cutting back the number of team members who can come to the races, which would save each team an additional $500,000.
In hindsight, Mr. Frances broadcast deal, which brings in about $500 million a year, may be the main thing that saves Nascar from ruin.
Weve got to work hard and be willing to sacrifice, says Jeff Burton, the driver. Were going to definitely struggle next year and the following.
