Tuesday, July 29, 2014

Heavyweight Law Firm Belies RTA Goals

Law firm shows RTA head Kauffman is playing hardball
News last week that the Race Team Alliance (RTA) has retained the Jones Day law firm should eliminate any doubt that the RTA is more about making money than saving money.

The day before I left on a vacation to parts of the world where Formula One is apparently the only known form of motorsports, the RTA announced its formation.  Three weeks later, it remains the big news in American motorsports.  I didn’t think much of the idea of an alliance of the nine largest NASCAR team owners at the time, and after catching up on my reading, I think even less of it now.

As I noted before departing, the initial reaction from NASCAR towards the RTA was anything but encouraging.  That seemed to be tempered when Mike Helton extended an olive branch, saying, "I want to dispel the perception of any animosity.  They play an important role in the sport and they deserve to be able to put forward their views. I think they've made clear their intentions are to grow the sport, to make the sport stronger and their ownerships stronger. We have respect for what they do and for their business models."

But Brian France quickly grabbed that olive branch, broke it in two, and tossed it back into the fire.

“Probably the worst thing that we could ever do is to listen to one voice, even if it were a consensus,” France said.  Then things really took a turn.  NASCAR told the RTA any future discussions would have to go through the legal department.  Your lawyers can talk to our lawyers.  Ditto for the International Speedway Corp. 

No big deal, RTA Chairman and Michael Waltrip Racing co-owner Rob Kaufman seemed to indicate.  We’re got a law firm too.  Jones Day.

Except that’s a very big deal.  Jones Day is one the most successful, most powerful law firms in the world.  “The heaviest of heavyweights” one legal firm partner told me.  With 41 offices and an army of 2,400 lawyers around the globe, it is ranked No. 1 when it comes to “Mergers and Acquisitions,” a position it has held for 13 straight years.  Not even Jimmie Johnson can match that.  The firm also lists “Antitrust & Competition Law” as an area of expertise, has a feared litigation practice, and represents nearly half the companies listed on Fortune Magazine’s Global 500 companies.

You get the picture.  These guys play hardball.  You don’t call them to help negotiate hotel room rates.  You call them when you want to buy Marriott and Hilton and merge them together. 

Law firms like Jones Day don’t come cheap.  If the RTA thinks hotel rooms are expensive, wait until they get a look at the hourly rates the firm charges.    Partners bill at more than $1,000 an hour.  Even junior members bill at more than $500 an hour.  When the firm was hired to work on the City of Detroit bankruptcy last year, it burned through its $3.35 million six month budget in half that time and tried to bill the broke city for the overage.   They’re not usually retained by someone looking to save money. 

But then Kauffman knows that all too well.  As the former billionaire founder of the Fortress Investment Group, he worked with the firm many times.

So what’s the RTA doing with one of the world's legal powerhouses?  Kauffman was coy when asked if getting a bigger piece of NASCAR’s new $8.2 billion television contracts wasn’t the real goal of the RTA.

"That's a big obvious issue that's out there that the teams really have no influence or control over," Kauffman said.  "We're going to focus on stuff we can do."

But...

"If someone wants to discuss any big-picture issues, we're happy to discuss and engage in a constructive way."

“We’re very careful with how we do things.”

It’s NASCAR that should be very careful.  The RTA is not messing around.

 
Speaking of hotel rates.  I was amused while reading that Stewart-Haas Racing opened up to the Sports Business Journal about the team’s costs during its trip to Kentucky.  I’ve got news for Gene Haas.  If he thinks Kentucky is expensive, wait until he takes his Formula One team to Monte Carlo.    

Monday, July 7, 2014

Owners Want Their Fair Share -- And a Little More

RTA is a challenge for NASCAR management
At least they didn’t call it Championship Auto Racing Teams.

You remember CART don’t you?  The organization formed by Indy car team owners back in the 1979 that eventually ripped the sport and led to a civil war from which it has yet to recover. 

Is history doomed to repeat itself?

If the announcement Monday by NASCAR’s top nine teams that they were forming a “business alliance” doesn’t concern fans of the sport – it should.  The Race Team Alliance – RTA – is made up of (with their current value as estimated earlier this year by Forbes magazine) Hendrick Motorsports ($348 million), Joe Gibbs Racing ($171 million),  Roush Fenway Racing ($157  million), Stewart-Haas Racing ($148 million), Richard Childress Racing ($128 million), Team Penske ($108 million), Michael Waltrip Racing ($80 million), Chip Ganassi Racing ($69 million) and Richard Petty Motorsports ($48 million).

Forbes estimates the average operating profit of those teams last year at more than $6 million, up 5% from 2012.  Apparently that’s not enough.

The RTA announcement says it is out to "harness the combined purchasing power and scale of the teams' operations to drive efficiencies in costs."  Better rates for hotel rooms has been cited as one area were the organization hopes to save money.  If hotel rate efficiencies is what they want, they should call William Shatner at Priceline.

No, the RTA isn’t about saving money.  It’s about making money for the team owners. The reality is that many of the teams no longer have complete control of their financial destiny.  MWR, RPM, even Roush Fenway, are now controlled by outside investors and venture capitalists. 

The RTA has its eyes on a much bigger prize, the $820 million worth of checks from Fox and NBC that NASCAR will begin cashing next year when the new television contracts go into effect.  Currently the tracks receive 65 percent of the television dollars, the teams 25 percent and NASCAR pockets 10 percent.  Don’t feel sorry for NASCAR, however.  The tracks are owned primarily by International Speedway Corporation, like NASCAR, controlled by the France family, and Speedway Motorsports, controlled by Bruton Smith and family.  But the tracks have been suffering from free-falling drops in ticket and concession sales, and will be loath to give up much of their share. 

And that’s where the RTA comes in.  No one seems to be willing to settle for the same piece of a much bigger pie.  They want a bigger price of that pie too.  The RTA has been formed to make sure the big owners get their share and hopefully a little more.  And presumably for all teams.  The RTA says one of its first orders of business will be to bring other teams into the alliance.  Hope so.  I guess they couldn’t find Tommy Baldwin, Bob Jenkins, Frankie Kerr, Barney Visser and others in Daytona.

The timing of the RTA announcement is interesting, coming two days after Brian France’s annual midyear talk with the media at Daytona.  During the session France was asked if he was “contemplating any changes to the percentage allocation of TV money as far as distribution to tracks and teams or distribution among the three national series.” France said “We are looking at that because we start, of course, a new TV agreement beginning next year so naturally we are rethinking that a little bit, and in particular with the Nationwide teams.  But that'll be something that we will consider and we will look at to make sure that the appropriate values are where they need to be.”  No mention of the owners.

It’s no accident the RTA is being fronted by MWR co-owner Rob Kauffman.  No way they wanted a Roger Penske or Chip Ganassi, CART Founding Fathers and among the first to jump ship when things went bad, out front.

You remember Kauffman.  The former venture capitalist with a personal worth estimated at $1.8 billion according to Forbes.  Same guy who refused to dip into his own pocket to keep Martin Truex Jr. in a MWR car after the team’s fiasco in Richmond cost Truex his NADA sponsorship. 

While comparisons to CART are natural, Kauffman says the RTA will more closely resemble the Formula One Constructors Association or FOCA.  And that’s supposed to put us at ease? 

Unfortunately, the comparison to FOCA may be an apt one.  The group of F1 race team owners was headed by Bernie Ecclestone, who negotiated billion dollar television contracts for the sport and his companies.  But F1, like all of racing, has fallen on tough times of late and FOCA and Ecclestone are at the center of battle between the have and have not teams.  He recently said he hoped one team would fail.  Ecclestone himself is the center of a bribery trail that may cost him his job.  Still, Kauffman says the RTA isn’t interested in the television contract money – at least not yet.

"We're going to focus on things we can do ourselves and doesn't require a lot of outside help," he told the Associated Press.  "Some of those topics are behind our control. If some of those stakeholders want to have conversations, we'd be happy to do that."

The RTA says it was formed “with the encouragement of NASCAR.”  But the sanctioning body was scrambling on Monday to meet with manufacturers and discuss the announcement.  NASCAR’s own statement didn’t sound very encouraging and seems to question the need for a RTA.  To keep a low profile, it was attributed to Brett Jewkes, vice president and chief communications officer.

We are aware of the alliance concept the team owners have announced, but have very few specifics on its structure or purpose. It is apparently still in development and we're still learning about the details so it would be inappropriate to comment right now. NASCAR's mission, as it has always been, is to create a fair playing field where anyone can come and compete. Our job is to support and strengthen all of the teams, large and small, across all of our series and we'll continue to do that. NASCAR is a unique community with hundreds of stakeholders. They all have a voice and always will."

So far only Kauffman is talking, but another theory is that Penske and Ganassi are the driving forces behind the RTA and that the alliance serves as a warning shot across Brian France’s bow to keep his hands off open wheel racing.  The France family already controls stock car and sports car racing in America.  Flush with cash from the television contracts, so the theory goes, France could easily add IndyCar and even the Indianapolis Motor Speedway to his empire.  Penske and Ganassi want to avoid that at all costs.

Not sure I buy into that theory.  Again, the RTA is not about saving or spending money. 

It’s about making money.

 

 

 

Saturday, July 5, 2014

Is Qualifying Now The Show? Maybe in F1

Gilliland on Daytona pole after bizarre qualifying session 
So there I was on Thursday and Friday watching qualifying for the NASCAR races at Daytona and the Formula One race at Silverstone, England.    There for a moment, flipping channels, I thought I was flipping between parallel universes.

At Daytona, packs of driver crept around the track at half speed in an embarrassing game of cat and mouse, worthy of F1.   Meanwhile, at Silverstone, three exciting sessions were playing out, capturing the drama F1 qualifying has been known for since it first tried knockout qualifying several years back, a format that has since been adopted by first IndyCar and this year by NASCAR.  With mixed results.

Rain played a role at both tracks.  In England, where it is seemingly always raining, teams scrambled to mount dry, wet and intermediate tires depending on the rapidly changing track conditions.  At Daytona, rain curtailed and ended qualifying sessions.  At Silverstone, Lewis Hamilton made the mistake of not running hard until the very end of the qualifying session.  After turning the fastest laps all day, he saw himself fall to sixth on the grid after five drivers went faster on the last lap.

No such excitement in Daytona where everyone seemed to rather watch than run.  The restrictor plate tracks are certainly not the place to showcase NASCAR’s version of knockout qualifying.  There were a few moments of excitement, such as when Kyle Busch led the Joe Gibbs Racing Nationwide team on a fast lap only to be balked and nearly wrecked by a non-qualifier.  But mostly it was sitting and watching.  And watching.

As a result, David Gilliland is on the pole for the Coke Zero 400.  Reed Sorenson is second.  Followed by Landon Cassill and Bobby Labonte.  Good for them, but not exactly household names.  Jamie McMurray, who had been fastest in the first practice session, will start 36th.  Kyle Busch will start 39th.  Joey Logano, who has done pretty well under the format in general, summed it up.

“That was pretty dumb,” he said.  “It is very difficult to figure out what is going on there. Before you know it, you are stopped on the racetrack and asking yourself what you are supposed to do.”

NASCAR needs to do something about the qualifying format at the restrictor plate tracks before the next one at Talladega, before it becomes a complete farce.  If it hasn’t already.  Maybe cut the sessions to 10 minutes.   Force everyone onto the track at the same time if that’s what you’re looking for. 

One final note.  You can count on F1 qualifying being more exciting than the race.  And you can count on the Coke 400 is more exciting than the qualifying.  It has to be.

Friday, June 27, 2014

NASCAR Continues Uphill Battle

Goodbye Home Depot, thanks for the ride
Despite all the efforts to reinvigorate NASCAR’s Sprint Cup series, there are a number of signs this week that the series continues to face an uphill battle.

First, count the number of cars in Saturday night’s Kentucky race.  That’s right, only 42.  For the first time since the last race of the 2001 season, a Sprint Cup race will not have a full field of 43 vehicles.  And even that was an anomaly; the race being run on Thanksgiving weekend after 9/11 had interrupted the season and one team having already disbanded.   Prior to that it was 1997 at Talladega, when the 43rd spot was reserved for former champions and wasn’t needed.  The last time a Cup race started without a full field was Dover in 1996, 18 years ago.

The situation is partly the result of Randy Humphrey Racing taking a break, it says to improve team performance.  After finishing last at Pocono, Humphrey decided not to go to Sonoma and probably won’t be at Daytona next week.  It was masked last week by the entries of several road race ringers at Sonoma and Daytona typically attracts a few extra cars, so it might be a short term situation.  Humphrey says it’s not a matter a finances, but more a matter of getting the right people in the right places.  He hopes to return for the Brickyard 400, where several other teams will field additional cars and pretty much assures a field of 43.

NASCAR says “the current 43-car field in the Sprint Cup Series has evolved over the years, yet it’s not necessarily a magic number." I guess I’d rather see a smaller field than a couple start-and-park fillers.  Still, it’s not a good sign for the series. 

Then there were the indications this week that longtime Cup sponsor Home Depot will leave the sport at the end of the year.  The orange Home Depot car has been a fixture at Joe Gibbs Racing for 15 years and was the primary sponsor of the No. 20 car for virtually every race as recently as 2011.  But that sponsorship has been winding down in recent years, while Dollar General has increased its support. 

The move hardly comes as a surprise to JGR and shouldn’t interrupt efforts by the team to put Carl Edwards into a fourth Toyota next season.  It probably says more about the changing national economic landscape when Dollar General replaces Home Depot as the primary sponsor, but again, it doesn’t look good for the sport to lose another big brand name.  Or maybe Home Depot just got tired of losing to Lowes every year. 

Finally, ESPN announced that NASCAR Now, recently kicked off the airwaves by World Cup Soccer coverage, has been cancelled altogether.  ESPN promises “to present the race telecasts at the same high level fans expect from ESPN for the remainder of our final season,” but it seems strange the show that has aired for eight years would be cancelled just as the network gets ready to pick up its portion of the season.  

When ESPN lost out in the bidding war last year to the Fox and NBC sports cable networks, many wondered what impact it would have on future NASCAR coverage.  Despite the denials, this is just the first step.  Don’t expect to see the next Sprint Cup champion hosting SportsCenter anytime soon.

Not all the news is bad this week, however.  Caterpillar, another longtime brand name sponsor, announced it is re-upping with Ryan Newman and Richard Childress Racing.  Newman and Caterpillar are a good fit and the move should help solidify things at RCR, which has struggled much of this season. 

And TNT actually showed a slight increase in viewership of last week’s Sonoma Cup race while going up against ESPN’s World Cup coverage, although it fell in the ratings. 

But hey, more eyeballs are more eyeballs. 

Monday, June 16, 2014

NASCAR's Have and Have Nots

JJ is one of the "haves"
No need to wait until halfway through the NASCAR Sprint Cup season to judge which teams have it and which teams don’t.  Only a few do.  Most don’t. 

After 15 races it is becoming increasingly apparent who are the haves and have nots.  The ones with Hendrick cars and power have it.  Those without, don’t.  Everyone who doesn’t is fighting for second place – or more likely, fifth or sixth. 

All four Hendrick Motorsports team cars finished in the top seven Sunday at Michigan, Jimmie Johnson taking the checkers there for the first time at the track.  The team now has six wins for the season – and five straight, including three of four by Johnson.

Contrast the performance of Hendrick cars and Chevrolet engines with that of Ford’s previous lead team, Roush-Fenway Racing.  The entire Roush team was a lap behind the leader before the Michigan race was half over; on a track RFR had considered its own private playground.  Meanwhile, the Fords of Roger Penske are about the only cars capable of challenging the Hendrick boys at the moment.  None of the Toyotas scared the leaders.   

If the Chase was to start tomorrow, Jeff Gordon, Johnson and Dale Earnhardt Jr. would enter at one-two-three.  Six of the 16 cars would be affiliated with Hendrick.  That number could easily grow with a couple of breaks.  Kasey Kahne, whose performance some have questioned this year, scored his fourth top-five finish and is now 19th in the point standings, closing in on a place in the Chase. Jamie McMurray is another spot back and also closing.  Kurt Busch, back in 26th, has a win in the bank.  We could easily have half the Chase field powered-by-Hendrick.

The dominance of the Hendrick teams has been so complete; other teams are back in the game of scrambling for points.   When the new Chase format was introduced prior to the start of the season, most figured it would take a win to make the Chase.  Not anymore.  Finish in the top 16 in points and you’re in.

Some, including Brad Keselowski, are indicating it’s simply a matter of better engine performance, saying the Penske cars have an aerodynamic advantage.  But it would be a mistake to simply write the Hendrick cars off as more powerful.  At Michigan, Johnson not only outran and outdrove competition, Chad Knaus outthought them.  Johnson thinks it’s all that and more.

“Honestly I think what's working for us is the amount of time we have together,” Johnson said.  “We've lost races together.  We've lost championships together.  And certainly we've had success.  But 69 wins and six championships out of 13 years of racing is a pretty small percentage.  Some of the losses you have are -- you got what you could that day and you went on, but a lot of those losses in there sting, and I think experience through those moments make us stronger and better. 

"Everybody knows about 2005 and the milk and cookies meeting that Rick had with us.  I think from that moment on, we were able to be more comfortable, oddly enough, in our own skin, and as a part of team 48.  Nobody is going anywhere.  We're in this thing together, and we are team 48."

 

Tuesday, June 10, 2014

Life After NASCAR

Rallycross has run at Irwindale short track outside LA
There is life after NASCAR.  Just ask Scott Speed, Nelson Piquet Jr. and Travis Pastrana.  They all had a fling with NASCAR, with limited success.  But they’ve found new life in something called Rallycross.

Speed swept all four of his heat races and the finale in winning the gold medal in the X Games Rallycross this past weekend in Austin, driving his factory-backed Volkswagen from Andretti AutoSport.  Piquet finished third in his factory-backed Ford Fiesta.  Second place went to former X Games skate board champion Bucky Lasek, who was driving a factory-backed Subaru, while Pastrana, another Subaru driver, missed his first X Games finale.  Hyundai and Citroen also back teams.

Do you see a trend here?  There’s a lot of manufacturer interest in Rallycross. That’s because it has captured the imagination of young car buyers.  The same buyers NASCAR and IndyCar have been trying desperately to attract.

Rallycross, which boasts a number of high profile sponsors, including Red Bull’s mega dollars, pits small, production-based cars such as the ones young consumers can afford, against each other in door-to-door racing.  The cars produce 600 horsepower and can accelerate from 0-60 mph in less than two seconds.

While Rallycross, a fan friendly version of rally racing, has been around in Europe for some time, it’s only about five years old in the U.S.  A typical track is less than a mile long, similar to a road course, made up of a combination of pavement and dirt, with ramps and jumps.  It can be set up almost anywhere, on a super speedway, road course or short track.  An event usually consists of a series of short heat races and then a feature event.  Lots of action.  Reminds me of a Saturday night at your local short track.

If you haven’t watched a Rallycross race yet, either on television or in person, give it a chance.  And while IndyCar and NASCAR are being relegated to NBCSports and Fox Sports1 with increasing regularity, you can often find RallyCross on NBC and ESPN.  Maybe those running NASCAR and IndyCar should tune in.

Wednesday, June 4, 2014

NASCAR’s Summer Doldrums

Johnson's dominating Dover win part of summer doldrums
NASCAR’s summer doldrums are in full swing.

I’m sorry, but watching the Dover 4000 was painful.  Okay, it was only 400 miles, but it seemed like 4,000.  Two red flag periods didn’t help.  Not even a couple of naps helped pass the time - or laps.  Every time I woke up, Jimmie Johnson was leading.  Come to think of it, the same thing happened during the Charlotte race.  But at Dover, after Kyle Busch crashed out, the race ceased to be a race.  And from a look at the number of fans in the stands, plenty of people who have been to Dover in the past stayed home this time around, despite near perfect weather. 

It’s barely June and we’re little more than a third of way through the season, but NASCAR is in the midst of its summer doldrums.  I’ve resisted the thoughts in the past, but I’m starting to come around to the idea that the NASCAR season is too long and so are some of the races.  Certainly the string of 600 miles at Charlotte, followed by 400 mile races at Dover and now Pocono, is one of the more challenging stretches of the season.  Even Michigan, which follows Pocono and has been better in recent years with increased speeds, has produced some pretty lousy televised races in the past.

There’s talk again of the NASCAR schedule undergoing a major overhaul next season when the new television contracts come into play.  Let’s hope so.  It’s a once in a lifetime opportunity.  At least an opportunity that won’t come around again for another 10 years.  And if nothing is done now, the opportunity may never come around again.  Rumors include at least one more road race, perhaps midweek night races in the summer, a new track or two and a wholesales restricting of the schedule.

We’ve heard those rumors before.  Let’s hope something actually happens this time.

NASCAR also is facing a value problem.  Some say it costs too much for fans to attend races.  I say it’s more a question of value than cost.  How do you provide more value?  Provide more and better racing.  Not more miles, more racings.  In this regards NASCAR may want to consider something IndyCar started last year.

At about the same time the Dover race was drawing to a close on Sunday, the IndyCar teams were starting the second of two races held over the weekend in Detroit.  Have to admit; at first I was skeptical about the “Duals” format.  But also have to admit the two sprint races, one on Saturday and another on Sunday, with support races both days, provided a whole lot more value than one long race on Sunday.  The teams hate the dual format – especially the week after Indianapolis – because it doubles the workload, but the fans seem to be warming to it.

All three NASCAR series ran at Dover.  The trucks ran Friday afternoon with no one in the stands and only a few more watching on TV.  Why?  Run a 100-mile truck race and a 200-mile Sprint Cup sprint race on Saturday and a Nationwide 100-miler and another Sprint Cup sprint on Sunday.  Might even cut down on the number of Cup drivers who race in the Nationwide series.  And get rid of one of the Dover races altogether.  Pocono too.