Beside the Rising Tide: Inventive Incentive

Despite NASCAR’s off week last weekend, many fairly significant stories broke during what’s normally a quiet time in the sport.

Completely unexpectedly, NASCAR released the 2019 Cup schedule. Typically, that schedule isn’t released until late summer/early fall at the earliest, but for whatever reason, this year (at the request of the somewhat coy series title sponsor?) the schedule was set in concrete before the snowflakes even stopped flying here in the Northeast.

The first thing that came to my mind reviewing the 2019 schedule (with all due apologies to Baba O’Reilly. Pete Townsend et al) was “Meet the new boss, the same as the old boss.” Nope, we won’t get fooled again. Not fooled perhaps, but like Bill Murray’s Phil Connors, forced to endure a repeat of the same thing over and over again. The only significant change to the schedule is to accommodate next year’s later Easter Holiday. (Rather than an off weekend between Martinsville and Texas this year, next year the Easter recess will be between Richmond and Talladega in late April.)

Surely, it’s mere coincidence that NASCAR went with the ultra-early schedule release date despite an upswell in fans asking for (demanding) significant rearrangement and shortening of the schedule, a sentiment also echoed by many of the sport’s scribes. (By way of reminder this year, this column’s somewhat cryptic title (Beside the Rising Tide) is a tribute to Jerry Garcia and the Dead tune “Uncle John’s Band” with the line “Got some things to talk about, here’s beside the rising tide.” I’ve got some stuff on my mind which I share with you, and you in turn let me know what you think of what I think or if in fact I do indeed think and I take that into consideration for future columns cause it’s a buck dancer’s choice my friends, anybody’s choice, I can hear your voice.”)

So, while NASCAR likes to say that they listen to their fans apparently what they hear when fans suggest change is “Yada, yada, yada.” We know what’s best for you. We know what you like. Shut up, buy your tickets and some T-shirts. There is no man behind the curtain. If you don’t eat your meat you can’t have any pudding. How can you have any pudding if you don’t eat your meat?” (Yes, that’s the third classic era rock band I’ve tried to work into this column. I’ll stop now.)

Also of note, Tony Stewart and the Ward family have reached a settlement in the wrongful death suit Ward’s parents filed after their son died after being hit by Stewart’s car while Ward was stalking across the track to protest the Cup champion having wrecked him. As I see it, there’s no winner in this situation. A young man is dead and his parents and friends remain heartbroken. No amount of money will change that, so it’s time to move on. The terms of the settlement were not made public but will be a matter of public record after the next court hearing April 12^th.

In lesser news, Kurt Busch said he’d like to return to Stewart-Haas Racing next year. I would like to have my natural hairline back. He probably will remain with the team. It is highly unlikely my hair will grow back.

Another story involving Anheuser-Busch and their sports marketing strategy got less notice. But like a flight instructor radioing that he though he saw a Japanese plane in the skies over Hawaii the morning of December 7^th, 1941, I have a feeling this could change everything or at least radically revamp how NASCAR Cup teams are funded in the future.

Anheuser Busch doesn’t just sponsor automobile racing. They also sponsor MLB’s Los Angeles Dodgers, the NBA’s Minnesota Timberwolves, and the NFL’s New Orleans Saints among others. (And A-B recently returned to title sponsorship of the Busch Pole award.) In fact A-B’s sports marketing expenditures are second only to Coca-Cola and slightly ahead of Pepsi. (and we’re talking significant chunks of change here. Those three companies spend 360 million, 350 million and 265 million dollars respectively on sports marketing.)

The old business model of sports sponsorship was that both parties would agree to a set amount of dollars prior to the season. If the team did well, the monies spent were worth it. If the team did poorly, often that money seemed wasted. Under the new form of sponsorship A-B will incentivize their spending. For the stick and ball sports winning games, making it to the playoffs, advancing through the rounds of the playoffs and competing for or winning a championship could all trigger financial bonuses. Conceivably a Cup team could get bonuses for top-10 finishes, top-5 finishes and of course wins. Naturally there’d also be bonuses for making the playoffs and advancing through the rounds. A Cup championship would likely earn a huge bonus. Finishing 13^th in the points? Well not so much.

Let me try to put this in simpler terms. I start a company called South Coventry Widgets. You come to me looking for a job. Because I am a far-sighted employer with a near pathological need to be liked, I start you and all my assembly line employees at 15 dollars an hour. You’re welcome. Your job consists of assembling eight parts into a widget. You screw, glue and press those parts into place to make the widget. Based on my research, a typical employee will be able to assemble ten widgets an hour. At that pace I make a decent profit and can meet payroll every week.

But you possess unusually good manual dexterity and a strong work ethic. As such you can typically assemble 12 widgets an hour. So I give you a dollar bonus for every widget over eighty you assemble in an eight hour day. Thus, you make more than the guy at the work station beside you who spends all day yakking with his wife on the phone or out on the loading dock on smoke break. But, if in an attempt to make even more widgets an hour and make more money your work gets sloppy, that’s not doing either of us any good. I’ve predicted the average worker will produce one widget that won’t make it through quality control and has to be scrapped for every 50 widgets she or he produces. If you go above that 2% scrappage rate for the week, you lose a buck for every additional junk widget you make. If you get your junk rate under one percent there’s another buck per unit under the limit. That seems fair. Better work and more output brings a financial reward and in the end ultimately you decide how much you make.

But there are other incentives of which perhaps you are not completely in control. As a progressive business owner, I have a profit figure in mind for the year. If I exceed that profit goal I give some of the excess back to my employees. My ability to get our product into the big box stores, market it online or advertise it to increase consumer demand is outside your job description. If I do well at those tasks, we all do well. If I do things poorly, we all suffer. Hopefully everything goes well, I make good money, you make an honest living and everybody is happy until the Chinese slap a retaliatory tariff on our widgets, costing us our biggest market, we go out of business and every one of us is on the dole with our 401ks in a tailspin. But I digress.

Likewise, not all factors that might boost a team’s sponsorship amounts or trigger bonuses are not within a team’s control. TV ratings and live attendance at races have been cited as potential factors in sponsor bonuses or even penalties. A-B or any sponsor can decide what sort of ratings they are hoping the sport will draw and adjusting their dollars spent to that level. In the end big companies don’t sponsor NASCAR teams just to get to hang out in the garage area and get some free diecast cars and T-shirts. The ultimate goal is to put the company’s name and logos in front of as many eyeballs (attached to potential consumers naturally) as possible. As a side benefit it is hoped that those consumers will purchase the product over a competitor’s because the company is involved in NASCAR races. There was once a huge correlation between sponsors in NASCAR and sales to race fans who were said to be hugely loyal to those companies. Today, well not so much. (Though I do still in fact buy Folgers coffee because they sponsored Tim Richmond three decades ago and I switched from Budweiser to Coors Light back when they sponsored Bill Elliott. Who was later sponsored by Budweiser as well.)

For newer fans, the longtime standard by which sponsorship dollars have been calculated is by Joyce Julius minutes. The firm reviews the broadcast footage of every Cup broadcast in obsessive detail. They note how long each sponsor’s name is shown clearly and in focus during each the event. Sponsors can then calculate what it would have cost them to run ads during the same broadcast against the cost of sponsoring their driver and team during the event. If the exposure they got costs less than what it would have cost to run an ad they made out on the deal. If not, well, then they didn’t. Ideally of course, a sponsor would like their driver (and their logo) to get more than their fair share of coverage. But if one team, sponsor and driver gets more than his share of exposure then someone else had to get less than their fair share. I’d say it’s like gambling but it’s damn hard to pump several hundred thousands of dollars in change into a slot machine.

Again, there’s only so much a driver or team can do to raise TV ratings. If NASCAR insists on running a preponderance of races on 1.5 mile cookie cutter tracks which tend to produce little action fewer fans are going to tune in and those who start watching the race may turn it off before it is over. And going by next year’s schedule NASCAR is married to those cookie cutters especially since a lot of those tracks have the France family name on the mortgage.

The TV networks also have what I consider an undue influence on how good or bad the quality of any race is perceived. If FOX and NBC insist on gimmicky coverage following only the storylines they develop prior to the event, that’s not good for anyone, not the network, not the sponsors not the drivers, not the teams, and certainly not the fans. If those broadcasts irritate the fans more than they inform them and enrage them more than entertain them it seems natural the TV ratings will be poor. If Richard Petty bought millions of fans into the sport, assuredly Darrell Waltrip has driven many more millions more away in concert with his half-wit brother. Boogity, boogity, boogity, boys; where’s the damn mute button?

The networks also tend to be self-serving given the billions of dollars they have invested in TV rights. When they start showing the cars of drivers who have also paid for commercials during the race broadcast more than cars which are running well but are sponsored by firms that didn’t also buy ads they turn those Joyce Julius minutes all askew from performance. FOX has been pretty upfront that’s their game plan starting with their first race at Daytona in 2001 when they drew outage with “sponsor-gate” refusing to show logos of cars sponsored by companies that didn’t also buy TV ads. At one point Charlotte promoter Humpy Wheeler threatened to cut the cables to the TV trucks because FOX refused to use “Lowes Motor Speedway” as the track’s name because Lowes was paying the track but not the broadcast network. Dale Earnhardt Jr. was in fact a popular driver but those “Dale Earnhardt Minutes” in-broadcast Nationwide moments were run even if he’ already wrecked out of the race or was running laps down. Perhaps the most cynical race broadcast manipulation of all time involved a race sponsored by Coca-Cola at Daytona in which the presenting network did everything in its power to avoid showing Pepsi-backed cars even though those cars were dominating the race. Others might recall that awful evening as the night of the endless reruns of the KFC “ mashed taters or green beans” commercials.

As far as race teams they might not have a lot of choice but to gamble on the new incentivized style sponsorship. The danger is they go into the season expecting that with bonuses they have this much money to spend on their race team and research and development. If they fail to meet those financial goals they could be in real trouble as far as remaining competitive if not for the rest of the season than for subsequent seasons ahead. Already 1/3 of cars starting each Cup race are basically field-fillers.  Having even fewer competitive teams show up isn’t good for anyone most especially the teams left clinging by their fingernails just trying to get to the next race so their driver can once again go out there and get in the way.

Could such as incentivized improve racing and the fan experience? In an ideal world it might. Already drivers are seeing their base salaries slashed in many cases, which has helped bring new blood into the sport with younger drivers. Right now if a driver wins early in a season he can basically coast and score some top-10 finishes to remain in the top 16 in points to make the playoffs. If that driver needed to make the bonuses for winning races or at least top 5 finishes to supplement his income to maintain the lifestyle they’ve become accustomed to likely they’ll race a little harder, if for no other reason the foreboding that an unhappy sponsor might jettison their backing and leave that driver’s future employment in question. With Lowes having decided to cut ties with seven-time Cup champion Jimmie Johnson at the end of this season it could happen to anyone.

Likewise, drivers might choose to make themselves more available to the fans like the previous generation of drivers did in the past. One metric that sponsors will be looking at is on-line engagement of their sponsorship. If a driver agrees to communicate with fans on-line through social media it might turn casual fans into hard core fans and non-fans into casual fans. (Another aside: Don’t drink the Kool-aid when it comes to NASCAR’s contention that race TV ratings are down because fans follow the sport on social media. There have in fact been efforts to quantify to what degree NASCAR fans are following the sport on-line and the numbers are in fact miniscule. This makes sense to me in that a lot of fans have spent huge dollars on a big screen high-def TV and related audio equipment. Why would they then choose to watch the race on a three inch screen and listen to it through a speaker the size of a penny? Of course NASCAR can trumpet that those numbers are growing exponentially just as a bar band can say that they increased the size of the crowd they drew 100% by selling 50 tickets rather than 25. For a more established band that routinely draws 500 fans to a watering hole it’s tough to double the size of their audience but that doesn’t mean the first band is more popular than the second.)

We’ll see how the incentivized sponsorship deals work out. You’ll know when you see the “We Need Gas in the Rig to Get Home!” Ford running against the “Will Race for Food” Chevy on the last lap things aren’t off to a good start. Now if you’ll excuse me, I have a widget factory to go burn down for the insurance money.

Matt McLaughlin

Matt joined Frontstretch in 2007 after a decade of race-writing, paired with the first generation of racing internet sites like RaceComm and Racing One. Now semi-retired, he submits occasional special features while his retrospectives on drivers like Alan Kulwicki, Davey Allison, and other fallen NASCAR legends pop up every summer on Frontstretch. A motorcycle nut, look for the closest open road near you and you can catch him on the Harley during those bright, summer days in his beloved Pennsylvania.