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The economic downturn that is rippling through the global economy has already had a huge impact on NASCAR and, unfortunately, is not about to end soon. Nearly all economists predict that the worst is yet to come. NASCAR’s traveling road-show is especially susceptible to the cash crunch because its fans often need to travel long distances to races and stay in hotels near the event. The question that is haunting NASCAR management is not “if” attendance will be down, but “how much.” What’s more important is the next obvious question: If attendance falls, let’s say 50%, does it hurt the spectacle of the race’s TV coverage with empty stands in the camera shots? Because while everyone knows NASCAR attendance is going to fall, the general feeling is that cash-strapped sports fans will stay home and watch the race on TV. The NFL, NBA, and MLB can count on this happening, but can NASCAR?
On one hand, team owners will feel the heat if ticket sales sharply decline. Yet, even here lies opportunity. Television probably will take up the slack. Outlets such as ESPN know that if attendance drops more people probably will be watching live events from their homes, boosting the kind of captive audience that TV advertisers love.
“I explain it to my students in terms of basic economics,” said Sunil Gulati, an economics professor at Columbia who is also president of the United States Soccer Federation. “First off, there is going to be a big effect on sports, no doubt. It is really pretty simple. People are going to have less disposable income and that affects consumption. . . . Sport is not a necessity, it is a luxury. [That means] you are going to go to the ballpark, but you are going to go a few less times, and when you go you are going to buy less, you are going to carry the hat you had for your favorite team from last year and not buy the new one. How can this not have an impact?”
Gulati added that he’s warily paying attention to corporate advertising, particularly ad revenue from the auto industry, which has long been lifeblood for our leagues and teams. Indeed, as the Big Three carmakers beg Congress for a bailout, the auto industry is primed to cut back on ad spending. General Motors plans a rollback of 20%, a spokesman told me last week, partly with cuts in marketing through sporting events.
“This is simply an economic picture” that we’ve never seen before, Gulati said.
Corporations are exploring any and all opportunities to scale back their spending amid a relentless economic downturn. Many of the usual sponsors for professional sports—financial institutions, auto companies and airlines—are either no longer viable, on the verge of bankruptcy, or simply strapped for cash to finance their day-to-day operations.
“What we are experiencing now,” said Sal Galatioto, a sports business investment banker since the late 1970s, “is unlike anything I’ve ever seen in the sports world.”
In recent weeks, Eastman Kodak opted not to renew its 22-year sponsorship deal with Nascar and several Nascar teams have recently begun laying off workers, and just last week the organization banned test runs for cars at some racetracks to help save cash.
Let’s review what is happening in the world today.
- Detroit is seeking a $22.5 billion bailout just to keep the Big Three alive, so subsidizing NASCAR could become part of automotive history.
- Sponsorship dollars are turning into pennies on the dollar.
- NASCAR’s core middle-class fan is running out of the discretionary income needed to fund a stock-car fix. Even during this year’s Chase for the Championship playoffs, there were empty seats.
Which might explain why NASCAR teams are laying off workers this week – as many as 1,000 across the sport.
The truck and Nationwide Series are being hit particularly hard. At least two of the Big Three manufacturers are pulling their support of the truck series – pickups aren’t selling these days.
And smaller teams in the Sprint Cup series are finding themselves endangered. Shortly after DEI and Chip Ganassi merged, the parties announced layoffs totaling almost 200 workers.
