Valvoline Makes Racing History - Brief Article

THE BUSINESS OF NASCAR changed tremendously in late August when longtime sponsor Valvoline broke through what trace was considered a glass ceiling. For the first time ever, a consumer products company is now a team owner, as Valvoline has become a part-owner of MB2 Motorsports' No. 10 Winston Cup Pontiac driven by Johnny Benson. Valvoline also remains the primary sponsor of the team, which has been renamed MBV Motorsports, for the next three seasons.

Valvoline's decision, if successful, could easily become a trend. As an owner, the company will have much more of a voice in the operations of both the team and the series. Not only will it be able to better control its message and exposure as a sponsor, but it also will have a say in the bigger picture of NASCAR's actions. Plus, with the way the sport has been growing lately, who wouldn't want to own a piece of the action?

"Newly formed network broadcast alliances, new tracks in major markets, and expanded marketing opportunities all but guarantee a new growth curve for the sport," says Valvoline senior vice president of worldwide marketing Steven Kirchner. "That's why Valvoline wanted a bigger stake in Winston Cup racing. What better way to be more involved than by becoming an owner?"

One potential drawback is that a company like Valvoline has no experience as a NASCAR team owner, but this transition will certainly be eased by MBV Motorsports' other owners. And Valvoline certainly has much to offer, by way of its years as a sponsor. "They bring a lot of marketing experience to the table," says current MB2 owner Nelson Bowers.

Both within and outside motorsports, sponsors may soon see that becoming a team owner has its advantages. However, in no other sport are sponsors as closely aligned with a league and its teams as in auto racing. "We looked at other team ownerships in baseball, football, and Formula One," says Valvoline president Jim O'Brien. "Over time, economics of the sport drive you to the point of getting more of an equity stake than what it is you're trying to do [as a sponsor]."

With sports leagues now signing more and more lucrative television contracts, CART may soon have the opportunity to strike it rich as well. The series' current deal with ESPN provides $5 million a year, as each of its 20 races is broadcast on either ESPN or ABC, but the contract expires at the end of the 2000 season. ESPN has a window of exclusive negotiating rights with CART, and the network has expressed an interest in keeping the rights, albeit for a modest fee, which, surprisingly, would be OK with CART in return for better worldwide promotion.

However, in order to help land the best deal possible, CART has hired heavyweight SFX Sports Group to help in its negotiations. SFX Sports Group has previously negotiated TV contracts for a number of other sports entities, such as the NHRA, NTRA, Supercross Motorcyle events, and US Ski Team races.

"SFX brings a great deal of expertise to the table, and we believe they will play an integral role in building our television package, both domestically and worldwide," says CART vice president of broadcasting Keith Allo.

A class-action lawsuit filed against 21 auto racing companies in March 1997 recently was settled, and thousands of race fans will benefit. The suit alleged that companies selling souvenirs at NASCAR tracks engaged in price fixing that led to inflated prices. The $11 million settlement includes a condition stating that none of the companies, including International Speedway Corp., admits guilt, but consumers are now entitled to approximately $5.7 million in cash and $5.8 million in coupons for future purchases. The Website stockcarnotice.com is helping people apply for participation in the settlement.

Formula One owner Bernie Ecclestone recently showed once again that he has absolute control over the European-based racing series. In July, Formula One's General Assembly governing body voted to extend the length of Ecclestone's ownership of commercial rights for another 100 years, through the end of 2111. For the 100-year extension, Ecclestone will pay the relatively modest sum of $316 million, which is estimated to be about one year's worth of revenue for his Formula One Management holding company.

Although the vote was apparently overwhelming in favor of selling, not every F1 member was thrilled by the outcome. "Those rights are worth billions over the long-term," said one member in a London publication. "We're concerned they've been sold to Bernie for nickels and dimes."

For comparison's sake, NASCAR's latest television contract provides $400 million per year to the series, and the UK's Premier league recently sold its soccer broadcast rights for $800 million per year over three years.

The market for driver endorsements is still strong. Jeff Gordon, the sponsorship king of NASCAR, has entered into a lucrative five-year contract with PepsiCo. The new deal, which will succeed Gordon's current contract, includes all three of Pepsi's divisions: Pepsi Cola, Frito-Lay, and Tropicana. Gordon's No. 24 Chevy will feature, a Pepsi paint scheme for two Winston Cup races next season, which will mark the first time in 18 years that the softdrink maker has a car in the series.