Sponsors Running on Empty

When it comes to stars in auto racing’s firmament, they don’t come much brighter than Jeff Gordon.

And when it comes to sponsorship, and the dominant role it plays in racing, Gordon is a perfect example.

Born in California, raised in the shadow of the Indianapolis Motor Speedway and groomed from his youth to win the Indianapolis 500, Gordon, a successful young driver of midget and sprint cars, couldn’t land a ride with an open-wheel team in the early 1990s--in large part because he had no sponsor to bring with him.

So Gordon went where his oval racing talents could serve him best. He went stock car racing in NASCAR.

Then, a few years later, Tony George, perhaps spurred by Gordon’s departure and envisioning a less expensive brand of open-wheel racing for home-grown drivers than existed in the foreign-driver dominated Championship Auto Racing Teams series, formed the Indy Racing League.

George’s creation split the open-wheel audience--and it split the sponsors. It is a split that is felt today more than ever.

This week, for instance, it was reported that car owner Roger Penske, one of the founders of CART and a force in the organization for more than 20 years, was awaiting word from his primary sponsor, Marlboro cigarettes, on whether he would be racing next season in CART or the IRL.

If, as expected, Marlboro directs Penske to the IRL, he will be free to seek another sponsor for a team in CART as well--but there is no guarantee that even he, an icon in open-wheel racing, will come up with one.

These days, everyone in open wheel auto racing is finding blank checks harder and harder to come by.

Five teams in CART went the first half of this season without outside primary sponsors.

In the last three years, Dan Gurney, Cal Wells, John Della Penna and Dale Coyne have left the series as team owners, for reasons largely sponsor-related.

No longer does one see a Castrol car with Gurney’s famous Eagle nose cone. Budweiser, Valvoline, McDonald’s and Telefonica all pulled their sponsorship money out of the CART FedEx Championship Series, which races this weekend at California Speedway in the Marlboro 500.

It isn’t only CART teams struggling in the quest for corporate sponsors. George’s Indy Racing Northern Light Series--the IRL--has run with its share of unpaid-for sidepods. At this year’s Indianapolis 500, all but two cars in the 33-car field were sponsored. But two weeks later at Texas Motor Speedway, with only 24 cars entered, seven cars were unsponsored and another team didn’t show up for lack of sponsor funds. In fact, Dick Simon’s team didn’t race again.

The dot-coms filled the void for a while, but those days are over.

No doubt about it, said Bob Reif, former chief marketing officer of the IRL, “There’s too much product. There needs to be one series.”

But the reality is that there are two series, and for better or worse, that’s what team owners, fans and corporate heads must deal with.

“It’s tough enough to sell motor racing sponsorship, period, let alone have to sell the [particular] series,” said Mike Held, former CART and Winston Cup team owner with Robby Gordon who has brokered deals between race teams and sponsors for a decade. “There’s too much confusion in the marketplace between CART and the IRL.”

So, if sponsorship was a problem in 2001, what does the future hold?

“We’re certainly going into harder economic times, where companies are finding it harder to turn a profit,” said Gil de Ferran, who last weekend clinched his second consecutive CART title in one of Penske’s Marlboro cars.

“It becomes even more important that we have one single vision so that we don’t split the investment available for this type of sport. The economic environment today is certainly different from what it was in 1997-98. It’s even different from what it was two months ago.

“Maybe in booming economic times we had an opportunity to establish two series, but I’m afraid that window is closing fast.”

In the nearly six years since the IRL ran its first race, George’s plan has succeeded somewhat. It is, indeed, cheaper to compete in the IRL’s all-oval series, which allows some teams to exist without a corporate cash cow. Though the IRL retained racing’s crown jewel, the Indianapolis 500, CART retained most of the stars and many of the top sponsors. That could change fast, however, especially if Penske defects to the IRL.

And while the open-wheel organizations were feuding, NASCAR’s Winston Cup series accelerated into the stratosphere. NASCAR television ratings routinely quadruple those of the open-wheel races. Gurney said the term “divide and conquer” came to mind. Open-wheel auto racing divided, NASCAR conquered.

The “glamour” of open-wheel racing has faded since the split. A recent ESPN poll asked racing fans to name their favorite type.

NASCAR led the way with 58.1%, followed by the drag racing in the National Hot Rod Assn., 11.6%; the IRL, 8.4%; motorcycle racing, 8%; Formula One, 7%, and CART, 2.2%. CART ranked behind “no preference,” which got 3.2%.

Even if there is confusion in the marketplace--Do you know whether you’re an IRL or CART fan?--the open-wheel groups combined total ranked behind NASCAR and the NHRA.

“For there to be less confusion, there needs to be one dominant series, and it’s not going to be a formal unification,” said Bob Beasley, IRL director of team marketing services who acknowledges that many fans don’t know that Michael Andretti races in the rival CART series. “It’s going to be survival of the fittest. Open-wheel racing is a little more sexy and a little more fun than fender racing, and we feel when we reestablish that position, we’ll attract sponsors and partners. The burden is on us, whether it’s open-wheel racing [as an entity] or the IRL, to raise the value of our property to make it attractive to sponsors.”

And, despite economic downturns and internal squabbling, racing remains a viable option for companies looking to promote their brands. According to figures compiled by IEG Inc., which tracks corporate sponsorship in sports, entertainment and charitable causes, the estimated total of sponsorship dollars in auto racing in 2000 was $1.350 billion.

Golf reached $788 million, professional sports leagues $555 million, Olympic teams and competitions $496 million, and tennis $336 million.

NASCAR’s piece of the pie was $558 million--more than the NBA, NFL, NHL and major league baseball combined. CART and its related properties accounted for $492 million, the IRL $143 million, and the NHRA, $35 million.

But, says CART team owner Pat Patrick, “Every time you have a recession like this, the first things that go are airplanes and race cars.”

Patrick will race two cars carrying the Visteon logo this weekend, but only Roberto Moreno’s is sponsored. The logo on Jimmy Vasser’s is a courtesy to Visteon for its longtime support.

Sponsorship and budgets on an individual race car vary, from $3 million for a lower-end IRL team to $14 million for a turbocharged car in the CART series. Wells’ sponsorship goal, if he was to continue in CART, was $14 million, but he couldn’t reach it through a combination of primary and associate sponsorships. Instead, he now owns the Tide-sponsored car in Winston Cup, with a budget of $10 million-$12 million.

“Sponsors are the lifeblood of motorsports,” said William Chips, editor of the IEG Sponsorship Report. “If teams don’t have sponsors, those teams are going to fall by the wayside.”

Della Penna, a former CART team owner, knows that all too well. “By splitting the series, we’ve diluted our audience; that’s made it difficult,” he said. “A lot of pretty important sponsors have left the series, Budweiser, Valvoline, Pennzoil, LCI. Those sponsors have not been replaced, and I think it’s because there hasn’t been a compelling reason to be involved. It doesn’t pay the dividends they’re looking for.”

The two sanctioning groups are so far apart, it’s hard to imagine them under one umbrella. CART is publicly owned and must answer to shareholders. It prides itself on its diversity of tracks, from superspeedways to street courses, and its cast of international drivers. It also has a global schedule, having competed this season on four continents. Its new television contract for next season involves buying time on CBS and controlling the telecasts.

The privately owned IRL is trying to grow outward from the Midwest, and March 24 will race in California for the first time, at Fontana.

It runs primarily with American drivers exclusively on American ovals and has aligned itself with eight tracks controlled by International Speedway Corp., the company owned by NASCAR’s France family. It is less expensive to compete in, has the Indianapolis 500, and a solid television package.

Many observers agree that the IRL recently has emerged with a clearer definition of its identity.

Tobacco companies are prohibited from advertising on television, so auto racing is an attractive medium with its adult audience. In CART, four cigarette brands sponsor seven cars.

Three of those brands--Marlboro, Kool and Player’s--support two-car teams. Target department stores and Pioneer Electronics also sponsor two-car teams, which means that for most of the season, only nine other companies worldwide were committed to primary sponsorship--typically at around $8 million--in a series that races in seven countries.

Two of those nine sponsors, Tecate and Herdez, are from Mexico, and avex Group is from Japan. One of the remaining American sponsors, Kmart said it is leaving the series as a primary sponsor after 15 years with owners Carl Haas and actor Paul Newman.

“With a new CEO, there is often new direction [which was the case with Kmart],” said Ralph Hansen of Pegasus Promotions, whose task it is to replace Kmart. “It’s not typical for a racing relationship to last this long.”

Even roaring NASCAR is beginning to feel the pinch. Five sponsors among the 46 regulars on the Winston Cup circuit are leaving after this season.

“The rising cost of NASCAR is taking effect and it’s becoming a crowded marketplace, so it’s harder to distinguish yourself,” said Bill O’Neil, senior manager of marketing/promotions for CMG Worldwide, pointing to CART’s Target and the IRL’s Purex sponsorships as two companies that actively marketed their role in motorsports and benefited by not jumping on the Winston Cup bandwagon. “At the time of the split, a NASCAR sponsorship was $5-6 million for a primary sponsorship. Now it’s $12-13 million. That great value you had before doesn’t exist anymore. It’s harder to get exposure unless you’re a top team.

“With so many people in that sport, companies will look to do something else because it’s not new anymore and everyone else is doing it. If the open-wheel guys can resolve the split to some degree, or bring some stability to the sport in general, sponsors are looking for that opportunity.”

At the moment, they seem to be looking harder at the IRL than CART. Red Bull, an energy drink popular in Europe, has announced that it will sponsor Eddie Cheever next season in the IRL.

Hollywood brand cigarettes is staying in open-wheel racing, but moving from CART to IRL, as Marlboro is strongly considering..

“We feel the IRL has a great future,” said Mark Hulit, consumer marketing director for Souza Cruz, the parent company for the Brazilian Hollywood brand of British American Tobacco. “The series is very professional, cost-effective for sponsors, and it is carefully planning for the future. And, the series continues to develop and strengthen with each season under the leadership of Tony George.” Recent terrorist attacks have had an effect on racing too. One CART team said that before Sept. 11, three companies were considering primary sponsorship but since have backed out.

CART took a step toward possible unification--and lowering the cost for teams--by changing from turbocharged engines to normally aspirated 3.5-liter engines similar to those used in the IRL, which should create savings that can be passed on to sponsors. That change, effective in the 2003 season, riled engine manufacturers, however, and at the moment CART has no engine commitments beyond next season.

Della Penna also said CART did its teams no favor by waiting until Aug. 16 to announce its television package. And, unlike the IRL, CART still has not announced its schedule for 2002.

“It’s difficult to go to a sponsor and do a presentation if you have nothing to sell,” Della Penna said.

And these deals, involving the kind of money they do, are not made overnight.

“Sponsors are pretty savvy at what they do, and they recognize that we’ve lost some fans,” said Ron Richards, CART’s group manager of corporate communications/marketing. “Our challenge is to find out how we can turn it around, make it a positive experience for sponsors and provide them value for their dollar.”

By purchasing broadcast time on CBS, CART may be able to address that issue.

Rick Galles, who owns two sponsored cars--one of them Al Unser Jr.’s--in the IRL, said there’s a need to find companies that have not traditionally been involved in auto racing. When Budweiser was an associate sponsor for his car at the Indy 500, he asked how often the brewery was approached.

“They said they get 60-70 presentations per week,” Galles said. “It just goes to show how many people are trying to find money.”