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NASCAR Sprint-Cup Series
CUP: Gold Brickin’ At NASCAR Tracks?
From the Monday morning crew chief...
Jonathan Ingram  | http://www.RacinToday.com  |  Posted February 01, 2010   Charlotte, NC
The checks which NASCAR Sprint Cup drivers receive in Victory Lane will be shrinking this year. (Photo: LAT Photographic)

I guess I’m stuck between a rock and a gold brick when it comes to the announcement by NASCAR that it’s cutting back on the race purses.

I’ve said all along during the Great Recession that the Sprint Cup teams will manage to get the cars around the track without 200 employees per entry. Last year at least one team managed to be competitive all season long and hover around the top 35 with only 10 full-time crew members and a crew chief.

I wasn’t advocating layoffs and firings, rather a realistic approach to a sport that had become bloated by financial largesse.

With last week’s announcement from NASCAR that purses are being cut, I now find myself defending the teams, in no small part because the reduction in their income will mean fewer new hires and possibly more layoffs.

I’m not buying the “everybody’s got to tighten their belts” approach.

I’m sticking with the idea that race tracks have been practically minting money since the unified TV deal began in 2001. The only thing driving up the costs at International Speedway Corporation and Speedway Motorsports Inc. – the two dominant players in the NASCAR market – has been spending sprees to expand their racetrack holdings. But even so, I can’t imagine the debt service getting out of hand.

The dirty little secret in the track ownership business came as a surprise to me when I took the annual financial statements of then privately held Charlotte Motor Speedway to an accountant. The track owner was in a divorce proceeding and the statements became public. The gross profit margin at Charlotte was 60 percent and the profit before taxes was 30 percent.

That’s quite high, folks, in any line of business. Or downright lucrative. And those were records from the late 1980’s.

When the TV contract kicked in, a hefty boost in TV revenue was added to the money from ticket sales and sponsorship with virtually no increase in overhead. In other words, owning a track where the Sprint Cup appeared twice a year went from lucrative to incredibly lucrative. No wonder majority SMI shareholder Bruton Smith is always pushing for a second date in Las Vegas.

It’s a funny thing that right before the TV contract went into effect for 2001, there was a sudden “land grab” by ISC and SMI to expand their track holdings. They bought, built and swapped facilities at a rate equivalent to roughly $100 million per Sprint Cup date. I’m not an accounting genius, but I bet those bills were quickly paid down by a surge in money from the TV contract, which is directed primarily to tracks (65 percent), then the purse (25 percent) and to NASCAR (10 percent) on a per event basis.

I might wager the same lucrative TV contract was the incentive behind the expansion in holdings by publicly held ISC and SMI. (Let’s not dally on the subject of purchases being made by ISC in an advance of a policy shift by NASCAR, which involved two companies under the same ownership. It wasn’t monopolistic, because SMI did the same thing. It was just, as they saying goes, convenient.)

Even before the Great Recession, I argued that ticket prices were too high. They were high because fans were willing to pay the freight, often thinking that much of the cash went into the race purses. Well, if the profit margin at tracks was as high as 30 percent before the TV boom, a lot of the cost of tickets was going into the pockets of promoters. Sponsors were paying the purses.

Nice work if you can get it. But as is inevitably said, those who take the risk and have the wherewithal and vision to build and maintain tracks should profit commensurately. If so, they should suffer if they paid too much for their facilities in anticipation of a rich TV contract and with only a blue sky economy in mind.

The racing fan has been gouged all along – and long before improvements in a lot of facilities. Now that the Great Recession has hit, fans have realized the prices are too high. Tracks have come to the same conclusion in trying to keep their facilities full by lowering ticket prices, which also helps the ancillary benefits of concession and souvenir sales.

I suggest the tracks sustain lower ticket prices if they would like the important backdrop of full grandstands during those lucrative TV telecasts and cablecasts. On the other hand, deciding that promoters need to maintain their extremely lucrative margins at the expense of teams, as NASCAR has done, is a form of profiteering in gloomy economic times. And it’s bogus.


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Jonathan Ingram

RacinToday.com

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