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As Growth Stalls, Nascar Changes Gears

Dave Caldwell,|Special to CNBC.com
Monday, 30 Jan 2012 | 1:11 PM ET
Nascar
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Nascar

Until about a year ago, Jo Ann Jenkins, the president of the AARP Foundation, had been searching hard for someone, or something, to bring more awareness of what the organization considers to be a serious and overlooked issue. According to the foundation, 9 million elderly Americans are hungry.

The foundation settled on an unlikely front man: a 40-year-old millionaire with only a sprinkling of gray hair and still several years from retirement, who has two young children and belts himself into a 3,500-pound stock car and drives it much faster than 10 miles per hour.

The AARP paid an undisclosed fee — probably in the tens of millions of dollars — to Hendrick Motorsports to paint “Drive to End Hunger” on the Chevrolet raced by Jeff Gordon, four-time top-series champion, for 22 races each in the 2011, 2012 and 2013 seasons.

“It helped us reach people we wouldn’t have been able to meet through community activities throughout the country," says Jenkins. “There isn’t a bigger audience than we know of than the Nascar community."

That community appears to have dwindled during the economic downturn. Attendance has only held steady or has slipped at most tracks. Most notable among them is the Indianapolis Motor Speedway, which hosts a mid-summer race, the Brickyard 400, that drew an estimated 138,000 last year, about half of the 270,000 that attended the race in 2007.

Nascarreported an 8 percent increase in the Sprint Cup Series television ratings in 2011 compared to 2010, but viewership for several marquee races was down, including the Daytona 500, which drew 15.8 million viewers a year ago, compared with 17.8 million in 2008.

Nascar's eight-year, $4.48-billion television contractwith Fox, ESPNand Turneris to expire at the end of the 2014 season, but the organization and its race teams have already altered the way they do business. Corporate sponsors, more important to the sport than gasoline, are being recruited harder, and from a wider spectrum.

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“I think we’ll continue to see what I call nontraditional sponsorships happening within the sport,” says Steve Phelps, Nascar's chief operating officer. “It’s a changing business model for us.”

Until recently, teams secured most of their sponsorships from automobile-related industries (Gordon’s primary sponsor had been DuPont, which makes automobile finishes) or from manufacturers of products on the shelves at a Wal-Mart , like beer, soda pop or snacks.

The late Dale Earnhardt raced Chevrolets that were all painted black and carried his sponsor’s name,GMGoodwrench, splashed across the hood.

The enduring economic downturn has left some racing teams struggling to maintain corporate backing to help cover what sources say could be $15 million to $20 million a year in operating costs. Several teams have had to scale down their operations, even folding or merging.

Along with the AARP Foundation, Quicken Loans and Freescale Semiconductor were among first-time sponsors last season.

Moreover, stock cars like Gordon’s are now carrying more corporate sponsors; Phelps says the number is at a record high.

Phelps says sponsors have discovered they can deliver their messages just as effectively by taking smaller wedges of the pie.DuPontkeeps an associate sponsorship with Gordon’s car, and the AARP Foundation is not the main sponsor of Gordon’s car in 14 of 36 Sprint Cup races.

Ben Schlosser, the chief marketing officer for Richard Childress Racing, one of Hendrick Motorsports’ top competitors, says RCR’s racing programs will have an unprecedented 40-plus sponsors in 2012. Each of the three Sprint Cup teams fielded by RCR has three sponsors.

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“Companies have gotten smarter in the downturn, doing more with less,” Schlosser says before adding, “The complexity has gone up, but financially, it’s the way that we make it work.”

Nascar, long regarded as America’s monument to gas-guzzling, noise-making, exhaust-belching excess, is even making a concerted effort to go green, introducing Sunoco E-15 ethanol fuel into its top three series last year.

RCR recently re-signed a pushing-the-envelope associate sponsorship for the Nationwide Series car raced by Austin Dillon, Childress’s grandson: American Ethanol.

“We’ve really gone after those nontraditional categories,” says Schlosser. “That’s the landscape we’re in today. At some point, there will be a tipping point, where there won’t be the success we’ve had before.”

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