Dollar Signs
Stock car racing people like to call their NASCAR Winston Cup cars “200-mph billboards.”
For sure, they’re cash cows.
Racing is expensive, very expensive, and those 200-mph billboards are what bring money--as in horsepower--to the teams in what has become America’s fastest growing sport.
Whoever said, “It takes money to make money,” might have had motor racing in mind. The question, “How fast do you want to go?” is answered by another, “How much money do you have?”
The car that wins today’s Daytona 500, an $8-million race that is the most important in the 33-race Winston Cup series, will be supported by a budget of $6 million to $10 million. That’s what it costs for top-of-the-line cars today, cars fielded by Ray Hendrick (Jeff Gordon, Terry Labonte), Richard Childress (Dale Earnhardt, Mike Skinner), Jack Roush (Mark Martin, Jeff Burton), Robert Yates (Dale Jarrett, Kenny Irwin), Roger Penske (Rusty Wallace, Jeremy Mayfield) and Joe Gibbs (Bobby Labonte, Tony Stewart).
“If you’re not spending close to $10 million, you’re not likely to be winning very often,” said Don Hawk, president of Dale Earnhardt Inc., and the man who finds the finances for Childress and Earnhardt.
“Money isn’t the only ingredient, but without it, lots of it, it’s almost impossible to run up front. Look at what happened last year. Hendrick and Roush cars won 23 of the 33 races.”
And costs are escalating at an alarming rate. In 1992, the late Alan Kulwicki won the Winston Cup championship with a $2-million budget. Most estimates of Hendrick’s budget for Gordon’s national championship car are in the $10-million range but some NASCAR followers say it may be as high as $12 million.
Whatever the figure, the evidence of sponsorship dollars is everywhere.
“We’re privately owned corporations and we sign confidentiality agreements with all major sponsors,” Hawk said. “But it’s safe to say that the top five teams are very well heeled financially.”
All of the contenders have one major sponsor, DuPont Automotive Finishes for Gordon, GM Goodwrench for Earnhardt, Valvoline lubricants for Martin . . .
Those major sponsors account for 60%-70% of a team’s sponsorship income. In some cases, particularly for middle-of-the-pack teams, a single sponsor may foot 90% of the team’s expenses.
That would have the major sponsors coughing up $5 million to $7 million to have their names in big print on the sides of their cars and on the chest, collar and sleeves of their drivers’ uniforms.
Associate sponsors, such as Coca-Cola, AC Delco and Team Realtree on Earnhardt, or Pepsi and Quaker State on Gordon, help up the ante on successful teams.
“To build a winning team, you need three major ingredients--people, equipment and money,” Hawk said. “You can’t do it with only one, not even with two, you need all three.
“Look at Gordon, his team has [crew chief] Ray Evernham and the Rainbow Warriors crew [their multicolored uniforms match Gordon’s multicolored car], the best in the garage area, they have the fastest and most reliable Chevrolet on the track, and they have great finances from DuPont.
“You couldn’t do what they’ve done with just a great driver, just a great car, or an open pocketbook. You must have all the elements meshing. I liken a winning racing team to a Rubik’s Cube. All the pieces must fit, and be in the proper place.”
Money comes from four primary sources--sponsors, endorsements, purses and bonus prizes, and equipment manufacturers.
In most professional sports, agents and athletes battle over money with team owners, but most Winston Cup drivers and owners operate as partners.
“When I negotiate an endorsement contract for Dale, like Coca-Cola for instance, I write Richard [Childress] into the contract too,” Hawk said. “Or if it’s the other way around, I have Dale get a share of what Richard brings in. Most teams operate in that way. It tends to keep everyone happy.”
Purse and prize money comes largely from R.J. Reynolds Tobacco Co., whose Winston brand name has helped finance NASCAR’s growth since 1971.
This year, RJR will put up more than $11 million for Winston Cup competition. That accounts for a $5,010,000 point-fund bonus, $1,338,000 in purses for two races--the Winston, NASCAR’s version of an all-star game, at Charlotte, N.C., and the Winston Open, a preliminary to the Charlotte race--and $5 million in Winston No Bull 5 bonuses in conjunction with today’s Daytona 500, the Las Vegas 400, the Coca-Cola 600 at Charlotte, the Mountain Dew Southern 500 at Darlington, S.C., and the Winston 500 at Talladega, Ala.
Although Sports Marketing Enterprises, which operates RJR sports promotions, will not disclose figures, the amount of money it spends probably doubles the prize fund, what with cross-promotions at every race that include show cars, the new Winston Thunder Theatre that shows IMAX-style racing pictures, signs and a six-man marketing and public relations team headed by Cliff Pennell.
The growth of Winston’s involvement has matched that of NASCAR. In 1971, when the cigarette brand became the first major non-automotive sponsor in the sport, the point fund was $100,000. Richard Petty claimed the champion’s purse of $40,000, presented at the Plaza Hotel in Daytona Beach.
The 1999 champion is guaranteed $2 million at the NASCAR Winston Cup awards banquet at New York’s Waldorf-Astoria Hotel in December.
Gordon’s $9 million in earnings last year came largely from Winston.
For seeing their decals on the sides of cars, or patches on drivers’ uniforms, manufacturers supply free equipment. And that can be lucrative. For instance, Snap-on Tools provides all the tools used on Earnhardt’s cars, a value of more than $1 million.
Sponsor decals don’t always involve team products, however. Earnhardt raises 32,000 chickens on his 400-acre farm in Moorseville, N.C. A poultry processing company, Pardue, provides the chicks and buys them when they’re grown, so there is a Pardue decal on Earnhardt’s car.
Earnhardt’s endorsement portfolio was worth $15.5 million last year, according to Sports Business Journal. Forbes estimated Gordon’s at more than $8 million. Those don’t include their salaries, which are said to be about $1.5 million, or their race winnings.
So, lots of money is coming in. But much of it goes out just as quickly. Sometimes in surprising ways.
A set of decals for one car costs about $1,500. Applying them all, making sure they are in the proper place and alignment, can take half a day.
For enterprising sponsors, that--along with a check--is only the beginning. Not everyone goes home happy.
There were 59 cars here hoping to get into the Daytona 500, nearly all with substantial sponsorship. Only 43 cars will start, however, which means that 16 sponsors went home empty-handed.
Sometimes, it can be one of the biggest spenders. That hurts NASCAR, which would prefer to see 43 well-funded cars show up and keep the big-bucks sponsors happy.
Tabasco pepper sauce came in last year, spending close to half the product’s marketing budget on a car driven by Todd Bodine. The parent McIlhenny Co. committed to entertaining corporate clients and grocery distributors at 14 races. Infields were marked by red and green Tabasco hospitality tents.
Bodine failed to qualify for the 1998 Daytona 500 and after qualifying for only 14 races, was let go. In a confusing change of team ownership that soured McIlhenny officials on the deal, Tabasco withdrew its lucrative sponsorship and dropped out of the sport.
“We can’t let situations like that happen,” said a NASCAR executive who asked not to be identified. “Tabasco will probably never come back and when they came in, it looked like they would become a major player.”
Home Depot, the world’s largest home-improvement retailer, is making its debut today, but unlike Tabasco, is already successful. Sponsoring a car owned by former NFL coach Joe Gibbs, its orange and white No. 20 will start on the front row with Stewart, a veteran driver but a NASCAR rookie. It is the first time in 41 years that a driver in his first Winston Cup race will start on the front row at Daytona.
“If we could have written a script for Home Depot, we couldn’t have done any better,” said Dick Sullivan, who put the package together.
“We intend to make a total commitment to NASCAR. We will build three 53-foot rigs, the largest on the road, to carry our message to our more than 700 stores. At as many as he can make, Tony will be there to sign autographs and sometimes talk to our guests.”
Home Depot will distribute 80 million advertising inserts featuring Stewart and Gibbs’ Pontiac, reaching 80% of U.S. households. In a cross-promotion with Coca-Cola, Stewart’s likeness will be on thousands of vending machines at Home Depot stores.
“With this campaign, the Home Depot offers NASCAR tremendous exposure to current fans and potential fans in hundreds of markets nationwide,” said George Pyne, vice president of marketing for NASCAR.
In marked contrast is the first venture of rookie driver Stanton Barrett into Winston Cup racing. A former Hollywood stuntman, Barrett formed a team with a budget of $2.5 million to $3 million, found a sponsor in Heritage Consumer Products Co., bought a used Chevrolet race car for $75,000 and hoped he could qualify for one of the 43 spots in today’s race.
He couldn’t have come any closer without getting in. After driving with the lead pack in the early going, Barrett finished 16th in one of the twin 125 qualifying races--but only the first 15 in each make the 500.
“It’s disappointing, but we came down here with a new team and new sponsor to learn all we could,” Barrett said. “You put an extreme amount of pressure on yourself, and that just makes it worse. These are an elite group of drivers. This is where you want to be. Now we’ll start looking at Texas [the Texas 500 at Fort Worth on March 28].”
With his limited budget, Barrett plans to enter only 16 races, among them the Las Vegas 400 on March 7 and the California 500 at Fontana on May 2.
Between now and then, the disparity between the top teams and those underfunded will grow.
Teams such as Barrett’s, for instance, test only at open tests conducted by NASCAR. The well-funded teams can afford to test more often, but at a cost. When Childress Racing went testing last month, the bill was $200,000 for room and board for two drivers and 26 employees, two 18-wheel transporters and two private airplanes.
“It’s amazing how much it costs to go racing, but it’s also amazing how many people want a part of drivers like Earnhardt and Gordon, and now Earnhardt Jr.,” Hawk said. “In any given week, I have four or five new opportunities for business to look at, and I get literally a hundred or more offers a month from people who want to market souvenir items.”
Dale Earnhardt Jr., who has yet to drive in a Winston Cup race, recently received a $50-million personal-services contract from Budweiser to drive one of their sponsored cars for five seasons, starting in 2000. Dale Jr. won the Busch Grand National championship in his first full season and will drive in five Winston Cup races this year.
Not every team steps up and takes available money, however.
To qualify for the Bud Shootout, a Daytona 500 preliminary event, a driver must win the pole at a Winston Cup race--and carry a Budweiser decal on his car. Team owner Richard Petty said he did not want any beer signs on his Pontiac, so even though John Andretti won the pole at Atlanta, he did not race in the Bud Shootout, which paid the winner, Mark Martin, $108,000.
But as Hawk said, money alone does not make a winner.
Car owner Felix Sabates says he has spent about $8 million a year since jumping into NASCAR and his cars have not won a race since 1995.
“You can go through money very quickly in this sport,” he said.