Dismal fiscal news coupled with fan unrest is painting an austere future for raceways and Dover Motorsports Inc. The company's annual report shows a $5.6 million loss and stock below $2 with its president blaming the economy. However, at the same time NASCAR experts point to factors beyond consumer spending.
There’s just over a month to go until the spring race weekend at Dover International Speedway and tickets still are available. Seats that sold out months earlier in past years could be vacant when the green flag drops.
While that might be good for race fans who decide to head for Dover at the last minute, it’s just the latest in a string of bad news for the track’s parent company, Dover Motorsports Inc.
Since last spring the company’s stock has fallen more than 74%, and in January, the company reduced its dividend to 1 cent per share, down from 1.5 cents in the previous quarter.
Days after the dividend cut, the company announced it had reached a deal to sell its Memphis Motorsports Park in Tennessee for $10 million cash, a deal that is expected to close this week.
With its stock slipping below $2, the New York Stock Exchange, in late February, threatened to de-list Dover Motorsports because of low market capitalization.
In March, the company released its annual report for 2008 and posted losses in excess of $5.6 million, after earning a $3.7 million profit in 2007. The report also showed Dover Motorsports wrote down the value of several of its properties to the tune of approximately $12.8 million.
The company cited declining admissions at all four of its tracks — Dover, Memphis, Gateway International Raceway outside St. Louis, Mo., and Nashville Superspeedway in Tennessee.
Dover Motorsports President Denis McGlynn blamed the losses on the slumping economy.
“We’re in a business that’s totally reliant on discretionary spending and it’s no surprise to anybody, with the economy being in the cycle that’s it’s in, discretionary dollars are not as fluid or as plentiful as they were a number of years ago and we’re starting to see the reaction in the number of people showing up at the gates,” he said.
McGlynn said ticket sales for this year’s races are down a significant percentage from last year.
“Right now we’re off double digits, low double digits, and I expect we will be for the duration of this economic cycle,” he said. “It’s been tough.”
But others say there’s more to explaining the tracks’ worsening fiscal situation than just a drop in consumer spending.
“It’s quite clear that the economy is obviously affecting NASCAR and all its various venues, but there’s discontent in NASCAR nation,” said Dr. Jon Ackley, an associate professor of management at Virginia Commonwealth University in Richmond, Va.
Ackley studies the business of NASCAR and said race rules introduced over the last few years have had a negative impact on fans’ impressions of how exciting the races are. Namely, the introduction of the so-called Car of Tomorrow, which has made races safer but also diluted competition, according to some fans and drivers.
“When you factor in the discontent of fans, their lack of enthusiasm for how racing is being done, and the economy, it has a dramatic impact,” he said. “Even before this all hit the fan, last year we were seeing TV ratings going down, several tracks not selling out and when you throw the economy in on top of that, I think there’s a decline.”
McGlynn concedes that NASCAR may have slighted its fans.
“I can certainly understand how the real grassroots NASCAR fan who was a Ford fan, a Chevy fan or Pontiac fan or whatever, they initially became fans because that was the car that their favorite driver drove,” he said. “The word you hear a lot is we have these pretty boy drivers who are now corporatized. They’ve got their Pepsi in their hands and their sunglasses on all the time and it’s all about the sponsors and it’s less about the racing. If it wasn’t a business, I’d be totally buying into it.”
Ray Wert, editor of the automotive news blog www.jalopnik.com, said the culture of NASCAR has changed to the point that some die-hard fans feel alienated.
“The Car of Tomorrow today is not making fans real happy, it’s kind of dumbed down the races a little,” he said. “There’s a reason Roman citizens went to see gladiators fight. When you pull out some of the danger, the response is never going to be positive. We like to see people achieve greatness through danger and when that’s lost it starts to look more like a bunch of rich kids squabbling about who has the most expensive cars.”
Ackley thinks the tracks could do more to help their own situations, in spite of whatever unrest may be circulating among NASCAR fans.
“I think it has to be a multifaceted approach,” he said. “They have to consider what their ticket prices are, what they’re going to be charging concessionaires that are trying to make a buck off the crowd. You can’t keep charging exorbitant rental fees for the week.
“There has to be a recognition that when I go to the track on Friday for the weekend, I want something to do instead of sit at my campsite and drink beer. There needs to be some entertainment.”
But Wert said tracks are in a precarious position because they fear not only for their gate sales but for the future of the product they sell. With Ford, Chrysler and GM on shaky ground, stock car racing could look very different in the near future, he said.
“I think there’s a level of inflexibility that’s occurring because there is a fear that things are going to get much worse,” Wert said. “I think that there’s a desire on the part of the tracks to bring as much revenue as possible right now. There is an inflexibility on ticket prices that is discouraging people.”
McGlynn said his company already offers comparatively low ticket prices.
“A number of years ago we got concerned that we were pricing people out and we made a conscious decision to keep certain sections of our grandstand at what I would call a base price and that’s $55. Some of the big tracks are making a big deal out of dropping their ticket price from $120 down to $70 or $50. Well we’ve been doing that all along,” he said.
Instead of relying on lower ticket prices, McGlynn said the strategy for attracting fans is to give them what they want: more of a connection to the sport and the drivers.
“We’re trying to reconnect the fans with the competitors, which is one of the hallmarks of why NASCAR was successful in the beginning. We’re trying to reestablish that link,” he said. “You’ll see more opportunities whether they’re autograph sessions or special Q and A periods or appearances … anything we can do to try to give the fans what they really want most, which is face time with the drivers.”
But whatever tracks do to boost ticket sales in the slow economy or attempt to ease relations with jaded fans, there’s a consensus that NASCAR’s popularity is leveling off.
The money-making machine that kicked into high gear in the early 1990s and generated consistent 3% to 5% yearly profit growth for more than a decade is not sustainable, Wert said.
“The pendulum has swung in the opposite direction,” he said. “There’s been a high level of expectation in increasing profits, there was a desire to continue those numbers and that’s not going to happen.”
McGlynn agreed that the race business is changing.
“The growth pattern that NASCAR enjoyed was not sustainable. It has to level off at some point,” he said. “I think it’s changed. I think it’s not necessarily a lack of excitement, maybe fans have gotten their expectations up way too high.”
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