Auto racing revs up revenues, profits

John W. Schoen Senior Producer • Profile • E-mail

When the green flag comes down at the Indianapolis Motor Speedway at noon on Sunday, some 300,000 racing fans in attendance will be joined by more than 4 million TV viewers watching 33 cars circle the 2.5 mile track at speeds of up to 230 mph. Now in its 89^th year, the Indy 500 has become auto racing’s oldest and biggest event. And the race — along with rest of the sport — has become big business.

“It has a huge economic impact on tourism and entertainment dollars that are spent for hotels, food and travel while people are here for a three- or four-day weekend,” said Greg Schenkel, president & CEO of the Indy Partnership, a local economic development group. Year-round, Schenkel’s group estimates some 400 racing-related companies in the region employ 8,800 people, generating $425 million in wages.

That economic impact has now spread nationwide. Once a regional sport concentrated mostly in the Southeast, auto racing has zoomed ahead in national popularity in the past decade. And as that popularity has revved higher, so have the fortunes of many track owners, drivers and race car owners, as well as the sanctioning bodies that schedule and own the rights to these races.

International Speedway, the largest publicly traded track owner, last month reported first-quarter profits of $41.1 million, up 48 percent from a year ago. Rival Speedway Motorsports Inc. said first-quarter earnings fell 43 percent to $14 million, due largely to a change in race dates for some of the company's premiere events. The company said it’s still on track to earn $2.15 to $2.25 a share for 2005 — up from $1.70 a share last year.

Races are sanctioned by dozens of groups, but the one in the front of the pack — in overall size and growth rate — is the National Association for Stock Car Auto Racing, or NASCAR. Owned and managed by the family of the late Bill France Sr., who staged his first races on Daytona Beach in the 1930s, NASCAR’s three major circuits — the Nextel Cup, NASCAR Busch and NASCAR Truck series — account for roughly half of total track attendance last year.

Because it’s a private company, NASCAR doesn’t release financial numbers. But its success has landed “Big” Bill’s sons, William Jr. and James, on the Forbes 400 richest Americans list, with estimated fortunes of $1.3 billion each. Grandson Brian now steers the company as chairman. Granddaughter Lesa France Kennedy is president of International Speedway, which the France family controls, that owns about a dozen major tracks including the Daytona International Speedway.

Tickets, T-shirts and TV
There are lots of ways to make money driving cars around a track: from ticket sales and corporate sponsorships to “trackside” merchandise — everything from food to T-shirts to souvenir “die-cast” car replicas. But like most sports, the TV rights to events like this weekend’s race make up one of the biggest revenue sources that fuels the sport and funds the prize money for drivers and car owners. (Sanctioning bodies like NASCAR typically take 10 percent of the broadcast revenues, with track owners getting 65 percent and the rest going to pay the prize money for drivers and car owners.)

NASCAR is nearing the end of auto racing's biggest-ever TV deal: a five-year $2.4 billion package of broadcast rights split between NBC and Fox. (MSNBC is a joint venture of Microsoft and NBC.) That TV contract has a lot to do with increased interest in the sport, according to NASCAR spokesman Andrew Giangola.

“Before that (contract), individual tracks negotiated individually with the networks,” he said. “You could have a race on CBS and the next week on ABC and the next week on ESPN. So you lacked the consistency; fans didn’t really know where to find the races. And there was no incentive for the networks really to promote it in a big way.”

Now, with car-mounted cameras and production paced to match the action on the track, national TV coverage has become a key driver of the sports growth, according to Kagan Research analyst John Mansell.

“Part of it has to do with the improved camera work and graphics and the just the overall onscreen quality and experience,” he said.

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