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Column: Furniture Row shows NASCAR teams’ precarious sponsorship situations

In the wake of Furniture Row Racing’s announcement it will shut down after this season, there was a telling quote team president Joe Garone gave to the Denver Post.

“There needs to be a runway when a partner leaves,” Garone said, referring to the loss of a sponsor. “… Had 5-Hour (Energy) not quit, we’d still be racing. That’s the truth. They did (quit) and we weren’t able to replace them.”

Though Tuesday’s news was a shock in many ways — after all, when was the last time the defending championship team announced it was ceasing operations? — it also exposed a situation many NASCAR teams are facing.

What happens when a major, big-money sponsor leaves in 2018? In an era where the cost of running a championship-caliber car has wildly outpaced new sponsorship revenue, teams have built themselves a house of cards to try and keep up with their rivals.

A decade ago, it was fantastic for NASCAR and its teams when major corporations or brands wanted to throw $25 million a year at race cars. Many of them did, and NASCAR was flourishing at the same time.

But companies aren’t spending that way these days, and they haven’t been for awhile now. So when a high-paying sponsor exits the sport — even if it’s “only” $10 million compared to the budgets in the spending heyday — that can be a fatal blow to a race team.

The reality is exactly what Garone said: There’s no runway if something goes wrong. If a major sponsor leaves a team, the chances of finding a replacement are about the same as landing a passenger plane on a cliff without going over the edge.

In that case, there are two options: Spend way less money — which means no more wins or competitive finishes — or call it a day and go home. That is, of course, unless the team owner is a super rich dude with disposable income.

That used to be Visser, but after burning through tens of millions and finally getting sponsorship to fund the team, he couldn’t go back. Not after winning a championship.

There are more teams than not in Furniture Row’s position — the teams who rely on sponsorship to survive and don’t have a billionaire to fall back on. As such, those teams could find themselves in the same situation: One sponsor decides to leave, and that could be it.

I’m not trying to be an alarmist here, but here’s an example: What if FedEx pulls out of racing at some point? Do you think the No. 11 car can find sponsorship at the same level? Maybe, but…

Look, I understand being jolted by the Furniture Row news. It’s a serious situation. But if this is really a wake-up call for you, then you either haven’t been paying attention to what’s happening in NASCAR or you’ve been in a bit of denial about it.

Either way, nothing is going to change at this point. I highly doubt teams are going to agree to some sort of spending cap, and NASCAR can’t take costs out of the sport fast enough. So this is the reality.

Where does that leave things now?

For one, questions about where Martin Truex Jr. and Cole Pearn will land next season — while interesting and relevant — don’t speak to the big picture.

After all, if there are no race teams, there’s nowhere to race. The current team model in NASCAR is broken — and has been for some time now — and everyone can only hope the Furniture Row news is an isolated case due to unique circumstances rather than the start of a frightening trend.

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Martin Truex Jr.’s future with Furniture Row Racing remains unsettled

It’s still not clear what team Martin Truex Jr. will race for next year, which is quickly becoming one of the season’s most surprising subplots.

Truex is the defending Cup Series champion and has already won four times this season, so performance clearly isn’t an issue. And yet, here he is in mid-August — the traditional heart of Silly Season — with no contract for 2019.

So what gives?

“Right now, we need sponsorship,” Truex said of Furniture Row Racing. “That’s as simple as it gets. So it’s hard to say. Is there a 50 percent chance we get that in the next couple weeks, or is there 100 percent or 2 percent? I don’t know. I can tell you everything really is based upon that.”

No. 78 team sponsor 5-Hour Energy announced it was leaving the sport in July, which means Furniture Row must find a replacement (all indications are team owner Barney Visser feels he’s spent enough of his own money funding the team in the past) to be paired with Bass Pro Shops.

Truex said it was “hard to put a number” on the chances he’d be back in the 78 car next year, which speaks to the complications of the economic climate in NASCAR. While NASCAR continues to promote the positives about the state of sponsorship, the reality is Truex and seven-time champ Jimmie Johnson both need new sponsors for 2019.

And without a replacement sponsor, it’s hard to sign a driver to a new contract. After all, where would the money come from?

“I’m starting to hear rumors,” Truex said in acknowledging the growing Silly Season talk about himself. “That’s kind of how it works in this sport. I’ve been in this position before.

“I’ve got a great team. Barney has done a lot for my career and it’s something we all want to keep going. We just need a little bit of time to let the dominoes fall in place and see if we can keep it going. If not, I have to figure it out from there.”

Furniture Row issued a statement to SportsBusiness Journal earlier this month saying “not fielding a team in 2019 is not an option.” But until a new sponsor is found, there seems to be an unknown about what the future looks like.

All of it has likely caught even Truex by surprise. As recently as July, a confident Truex indicated he and the team weren’t in a hurry to get a deal signed.

“It’s not really a pressing issue for me,” he said the week after 5-Hour’s announcement last month. “I know what the team wants. I know where we’re all at. It’s not like I’m nervous they’re going to sign somebody else or I’m going to be searching for a ride. It’s nothing like that. It’s more just trying to focus on racing and feeling like it will get done when it gets done.”

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News Analysis: 5-hour Energy leaving NASCAR, Furniture Row

What happened: 5-hour Energy, one of the main sponsors for Martin Truex Jr. at Furniture Row Racing, announced it would be leaving the team — and the sport — at the end of this season in what it termed a “business decision.”  5-hour joined Truex’s No. 78 this year after being the full-season sponsor on Erik Jones’ No. 77 last year. Prior to that, 5-hour was linked with Clint Bowyer during his time at Michael Waltrip Racing and HScott Motorsports (2012-16).

What it means: Even winning at a frequent rate doesn’t ensure continued sponsorship anymore. Truex is coming off a championship season and has been one of the “Big Three” drivers with four wins already this year. And yet, for whatever reason, 5-hour decided it was time to spend its marketing dollars somewhere other than NASCAR. That’s a discouraging sign, especially since Monster won’t be the Cup Series title sponsor for much longer and thus would have freed up 5-hour to go wherever it wanted.

News value (scale of 1-10): Seven, for a combination of reasons. Truex is a big-name driver losing a big-name sponsor, for one. But it’s also newsworthy that yet another major sponsor is departing from NASCAR after spending a couple hundred million dollars in the sport over seven seasons at the Cup level. It’s yet another punch in the gut for those hoping NASCAR’s slide will end soon.

Three questions: Can Furniture Row find a replacement, or will team owner Barney Visser have to put his company on the hood again? Does this end the speculation Furniture Row could re-expand to a second car next season? What does it mean for NASCAR when a company stops spending its money altogether instead of just staying involved at a reduced commitment level?

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News Analysis: Monster Energy extends NASCAR Cup sponsorship for one more year

What happened: After months of speculation, NASCAR and Monster Energy announced a one-year extension of the Cup Series title sponsorship. Monster’s deal was up at the end of this season, but it will now run through 2019.

What it means: Monster seemed to have all the leverage after reportedly requesting two extensions on its decision deadline. It already had the Cup Series sponsorship at a steal of a price in the original deal (at least compared to Sprint) and since has spent parts of two seasons as a relatively quiet sponsor. When NASCAR and Monster first announced the deal in December 2016 at a hastily arranged news conference in Las Vegas, there was talk of a culture change and injection of Monster’s youthful, “fun” approach into all things NASCAR. But that hasn’t happened. Today’s NASCAR is the same as it was when Sprint was around, and aside from a Monster display area and Monster girls in victory lane, the sponsor has had little impact on NASCAR itself. Nevertheless, it was crucial for NASCAR to try and extend the deal, because the optics would have been terrible had there been yet another title sponsor change after just two years. At this point, the value of the naming rights themselves seem diminished compared to a decade ago, which could be why NASCAR told reporters it is looking at a different model starting in 2020. It might just be better to try something else than to engage in an annual dance of will-they-or-won’t-they when it comes to signing a new deal, and that seems to be the direction NASCAR may go.

News value: Six. It’s above average because it’s the series title sponsorship, but there’s a lot of fatigue around this story since it dragged on for so long. It would have been much bigger news at this point had Monster decided not to come back, because NASCAR would have been in a real bind.

Three questions: What was the holdup in signing the deal that prevented Monster from meeting the original deadline last December? What other options would NASCAR have had if this deal hadn’t been worked out? Will Monster do anything to increase its role, or will its investment stay relatively the same over the remaining two seasons of its sponsorship?

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Economics could push veteran drivers out of sport early, Denny Hamlin says

While there’s definitely a lot of merit to the young driver movement in NASCAR, there’s a flip side to the trend that has a big dollar sign attached.

Denny Hamlin, while acknowledging the influx of young talent into the sport, said hiring young drivers may not be what teams would prefer to do.

“It’s a shame the teams are not in a position to just put in who they want — put in the best guy available,” Hamlin said Friday during an appearance at the Indianapolis FedEx hub. “You wish the teams could operate and say, ‘You know what? We want this guy. We don’t care how old he is. We don’t care whether the sponsor likes him, because we have enough money in our company to field the car.'”

Hamlin said that because current teammate and free-agent-to-be Matt Kenseth is currently looking for a job despite still being at the top of his game.

“Without a doubt, Kenseth would be in a top-notch ride with a top-notch team if the business of NASCAR was run like that,” Hamlin said. “But it’s just not anymore. It’s tough to make money (for) these teams, and they need those sponsors to be OK with the drivers. … Kenseth, on talent, deserves to be in the sport for a fair amount of time.”

Veteran drivers, of course, demand a much higher salary than young drivers who are just happy to have the opportunity at the NASCAR Cup Series level.

Hendrick Motorsports hired unheralded Alex Bowman to replace Dale Earnhardt Jr. in the No. 88 car, Erik Jones will replace Matt Kenseth at Joe Gibbs Racing and Daniel Suarez replaced Carl Edwards this season.

So is Hamlin, 36, worried his driving days might end prematurely after seeing Kenseth and Greg Biffle pushed out of rides while in their mid-40s?

“Not as long as I have this company behind me — I don’t think so,” Hamlin said with a smile, motioning to a FedEx jumbo jet over his shoulder. He added: “I know my years are probably numbered and I probably know as far as I want to go.”

Denny Hamlin walks by a FedEx plane during a visit to the company’s Indianapolis hub on Friday. (Photo: Jeff Gluck)

 

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NASCAR Marketing Strategy: Comcast Xfinity

This is the first in an occasional series about how NASCAR sponsors are using their marketing opportunities in the sport. Up first: Xfinity, which relaunched its Xfinity Stream app this week and is making a big push to get the word out. Matt Lederer, Comcast’s executive director of sports marketing, spoke on behalf of the company.

What do you see as the identity of the Xfinity Series, particularly in light of fewer Cup drivers being able to participate in the races this season?

We love this idea of “Names Are Made Here.” We love not only the format changes, but some of the driver restriction changes. We want more Xfinity drivers hoisting the trophy in victory lane, because we think that’s good for the sport.

We’re excited Stewart-Haas is bringing in a full-time Xfinity car, Junior (Motorsports) is expanding to four full-time Xfinity cars. We knew making those changes were all going to be steps in growing more drivers into the series. I’d expect we’re going to see more Xfinity drivers in victory lane this season.

How does the Dash 4 Cash idea fit into what you guys do, and why is it so important to you?

What Dash 4 Cash provides is the ability to focus on four Xfinity drivers in those weeks — so it supports the “Names Are Made Here.” Even if the guy doesn’t get into victory lane, that allows you guys (in the media) and the networks to focus in on someone whose name is being made.

Also, we get a lot more brand mention and visibility on those weekends. The idea of the Xfinity Dash 4 Cash is good exposure for us.

Lastly, the drivers like it. They really do. And they’re so good to us, we want to make sure we do something for them.

What’s your strategy in how you talk to NASCAR fans?

We like to have a brand voice of being the host. The Xfinity brand, if you’re a customer, you’re going to use it hundreds of times a day — whether it’s the Wi-Fi, whether it’s TV, whether it’s your phone (with the streaming app). What we want to convey is we’re NASCAR fans, too. We want to host you on a great adventure, and that adventure is going to include all of our products.

We’ve had a three-year strategy, and if anything, we’re ahead of where we wanted to be. Everyone said, “The fans are going to know you, they’ll love you, they’ll be loyal to you.” They have, and now we’re going to take that love and hopefully turn them into customers. But we’re not changing anything about the way we talk to NASCAR fans.

What’s something you guys have done that worked better than you thought and something that didn’t work as well as you thought?

The Comcast Community Champion Award that we give out at the end of the year has been amazing. We were given — as part of our sponsorship — the right to brand an award. Some sponsors do a great job. So how do we stand out? How do we break through?

The way it’s morphed into something amazing has probably been my favorite thing to work on as part of this partnership. We try very hard with our company brand to be a human brand and a compassionate brand. The attention and overwhelming outpouring of emotion we get for that award, I never anticipated it.

As far as the other part of the question, we love to do retail store appearances, but we’re still getting better at those. What we’ve learned is in order to really maximize those is we’ve got to get the outreach out there earlier that, “Hey, Brennan Poole is going to be in the Richmond store on Wednesday.” So how do we leverage our radio assets? How do we leverage our TV assets, our print assets to make people aware? So getting ahead of that is going to help us do those things and make them better.