New advertisers, broadcasters, and Toyota will help, but to reverse declining growth what NASCAR really needs is new viewers
A green flag means go this Sunday, Feb. 18, for drivers competing in the Daytona 500. But amid the roaring and smoking of the high-speed, high-performance race cars, NASCAR executives will be looking for something else: a significant rebound in ratings and viewership.
Last year saw a lag in attendance and a ratings downturn that left the sport in need of a comeback season. New high-profile advertisers, new broadcasting outlets, and Toyota's (TM) decision to participate for the first time could make that happen. But to truly attract large audiences once again, NASCAR officials say the sport must strike a balance between catering to existing fans and making new ones.
According to Nielsen Media Research, the sport has had trouble maintaining the phenomenal growth in viewership and ratings that it posted in the late-1990s and early-2000s. Viewership dropped to 7.36 million in 2006, down nearly 10% from 2005. Until last year, the sport had posted significant gains nearly every year since 1998.
However, ratings for the sport's major event, the Daytona 500, were up. The race earned a marginally higher rating than it did in 2005, up to 11.3 points, from 10.9 according to Nielsen. Likewise, household viewership for that event was up 4.6%, to 12.5 million.
Despite this decline, NASCAR officials maintain that the sport remains attractive to fans and sponsors. Steve Phelps, NASCAR's chief marketing officer, says the sport's fan base has grown nearly 20% in the last decade, to 75 million in 2006. NASCAR-licensed merchandise, meanwhile, is worth $2 billion in sales annually. But because it's held privately, NASCAR—an acronym for the National Association for Stock Car Auto Racing—doesn't have to disclose its revenues or operating costs.
Downturn notwithstanding, NASCAR has managed to win new high-profile advertisers this year, including Bank of America (BAC) and Johnson & Johnson's (JNJ) Tylenol. It's also pushing ahead with ambitious new broadcasting ventures, thanks to two new partners: Sirius Satellite Radio (SIRI) and the ESPN network, which is back following a six year absence.
Last year, NASCAR reshuffled its media contracts, ending a deal with NBC and reviving a partnership with the Walt Disney Company's (DIS) television properties ESPN and ABC Sports. For the next eight years, those networks will split coverage of the final 17 races of the Nextel Cup Series. ESPN will be the sole home to the 35-race Busch Series, sponsored by brewery giant Anheuser-Busch (BUD). Fox, TNT, and Speed Channel will also cover a handful of events each.
John Skipper, ESPN's executive vice-president of content, says the company wants to use the new contract to make good on its promises of multi-platform coverage. Its 14 different business units, including two major television networks, radio stations, a magazine, a Web site, and a mobile division, will play host to a spate of content available to fans before, during, and after NASCAR events.
NASCAR made another major media shift, from satellite radio provider XM Satellite Radio (XMSR) to its rival, Sirius. Sirius listeners will be able to tune in to every NASCAR race on the main NASCAR stations, as well as a related talk programs. On race days, Sirius subscribers will even be able to layer the in-car communications of their favorite driver with the main broadcast from the booth. "We're after the core audience, the fanatical fans who will see this programming as must-have," says Scott Greenstein, Sirius' president of entertainment & sports.
Competitive changes on the track are likely to get noticed too. Much as it has in the auto industry at large, Toyota is poised to nab headlines this year as it, for the first time, competes in the Nextel Cup Series and Busch Series racing America's most popular sedan, the Camry. The company has been quietly building experience by racing its Tundra pickup in the Craftsman Truck Series since 2004 (see BusinessWeek.com, 2/13/07, "Toyota Takes Stock in NASCAR").
Last year, the Japanese manufacturer continually made gains in the passenger market while the domestic three struggled. Several times, it was the only major manufacturer to post surging sales at all, while others languished or merely held steady. This year, it will permanently replace Ford (F) as the No. 2 auto maker in the U.S., and could even displace General Motors (GM) for the top spot globally as well (see BusinessWeek.com, 2/13/07, "GM's Design Drive Hits the Road").
Toyota executives say the company began discussing participation in the sport over a decade ago, studying prospects before becoming involved in small regional races in 2000. Now, wholeheartedly embracing the sport, they say it has become not only a source of consumer-oriented advertising but a banner that can be used to rally its growing ranks of U.S. employees.
"Yes, we want to make people feel good about Camry," admits Les Unger, Toyota's national motor-sports manager. "But it's really a platform for talking to the entire Toyota family in the States." The company currently employs about 32,000 workers in its 10 U.S. plants, as well as upwards of 110,000 employees at its Toyota and Lexus dealerships.
But the fanfare of new advertisers, broadcasters, and competition on the track won't mean much if NASCAR can't get back on its feet by finding new viewers. To do that it will attempt to reach Hispanics, international audiences, and causal fans.
Its new media partners play into that plan. Skipper says that ESPN's magazine and Web site will bring in more of the uninitiated 16- to 34-year-old demographic, where NASCAR lags behind.
Hispanics also represent an underserved market where ESPN officials feel there's growth potential. The Mar. 4 Busch Series race held in Mexico City, for example, will be broadcast in Spanish on the main ESPN television network—a first for the station. The introduction of ex-Formula One driver Juan Pablo Montoya, a Colombian native, could also generate excitement.
Jon Ackley, an associate professor of management at Virginia Commonwealth University who teaches a class on the business of NASCAR, says chances are good the new media coverage and expanded focus on new audiences will help the sport get back on its feet. "The bottom line is, NASCAR is a business. And their business is to help the corporate sponsors to do their thing."
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