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June 19, 2007
Playing big-business hardball
By DAVID GREEN
You just knew we hadn't heard the last of it when that circuit judge ruled that Richard Childress could, indeed, put AT&T logos on the No. 31 Chevrolet driven by Jeff Burton. Sure enough, the other shoe dropped on Sunday, when NASCAR filed suit seeking $100 million in damages -- and the right to kick out or deny access to any of the competitors of Nextel, the Cup Series title sponsor.
All this stuff is far, far above the realm of an avid race fan/part-time journalist/high school English teacher. This is big business. The dollar figures are in numbers I can't even imagine, never mind count, keep up with and balance.
So, that leaves me and much of NASCAR Nation, those who are not accountants or corporate lawyers, to just evaluate this situation from our perspective here at the Poor House.
Frankly, I have no prediction about what's going to happen. I have no idea whether NASCAR's claim that it granted such exclusivity to Nextel will stand another test. That it failed to pass muster the first time around doesn't really mean very much.
I have no idea whether AT&T's claim that it has the right to sponsor the RCR Chevrolet is legitimate, either. The fact that it has been awarded that right is history, and now another court test awaits.
I do happen to have some opinions on the matter, for whatever they may be worth.
I think, with all the revenue streams it has and with the enormous wealth it has accrued, NASCAR needs Nextel less urgently than Richard Childress Racing and Team Penske need their sponsors. What NASCAR's suit seeks to do, effectively, is terminate those deals RCR has with AT&T and Penske has with Alltel.
I have to question NASCAR's judgment in granting such absolute exclusive rights to one corporate entity. I mean, it's not exactly the same as McDonald's having a relationship with Coke, where the consumer is actually limited in his choice of beverage. And heck, even in that example, the consumer can get his Big Mac to go and enjoy it with the Pepsi or Sun-Drop that he can buy at the next-door convenience store.
Looking at it from the opposite point of view, is it really necessary to have such exclusivity in order to make the decision to sponsor the Cup Series a good idea? Is the exposure your company gets from just being the title sponsor not enough? The signage, the identity that (unlike all event sponsors) you are guaranteed to have hyped by the television networks and used by just about all print and online writers except Mike Daly?
I have a racer's mentality, so I think Nextel's demand not to have to compete in this particular microcosm of the marketplace at large is cowardly. If they don't think they can compete, why race at all? Do they think race fans won't know about alternate telecommunications services if AT&T and Alltel are kicked out of the Nextel Cup Series? Do they think their services and products are inferior and therefore don't want them compared side by side anytime they can avoid it?
The suits in high-rise offices won't read this anyway, but if they did, they'd chuckle about how naive this avid race fan/part-time journalist/high school English teacher is.
But where I come from, and here in small-town middle America where I live, one of the most important aspects of a business plan is to establish a rapport with the customer. The best way to do that is by demonstrating character, integrity and good will. Make your profit in a way that satisfies the customer, not by heavy-handed manipulation or exploitation of your competition.
That's probably out-of-date thinking, but it's how I feel. There may be some people who relish this high-stakes tussle in a courtroom, but I'm guessing most NASCAR fans find the whole matter pretty darned distasteful.
June 19, 2007 | Permalink
Comments
David,
I think NASCAR and NEXTEL are making a mistake of monumental proportions. Even should they succeed in their lawsuit, they lose. NEXCAR becomes a villainous Snidley Whiplash. Tying fair Nell (played by Jeff Burton)to the RR tracks and running off with the loot. No matter what they do after that, they will always be villains. Money grubbing thieves afraid of competition. As you say, a fans only recourse might be to just go next door and shop. I still get my gas at Shell after Sunoco's little hissy fit. And, I'm pretty sure I can do without a NEXTEL phone plan.
Personally, I've never been a fan of NASCAR being controlled by a corporation. It's as if they've become a property of NEXTEL (or insert sponsors name here)and that speaks of improper influence. Yes, other sports, receive tons of money from corporations. But, the "N's" in NFL, NHL and NBA do not stand for Nike, Nabisco and Nokia. NASCAR needs to get their eggs out of the single sponsors basket and get multiple sponsors paying less.
A side benefit, IMO, is we can remove (Sponsors name)CUP and rename it to the William France Cup to give it a touch of history. And, to honor the sports founder and son.
Posted by: Keith | Jun 19, 2007 6:45:33 AM
Keith, I like your Dudley Do-Right allusions. "The Rocky & Bullwinkle Show" was, if not my all-time favorite cartoon, at least one of my all-time favorites. I also like the idea of a classy, non-commercial name for the championship trophy.
Posted by: David Green | Jun 19, 2007 7:04:07 AM
I've never seen a company sue another company for losing a lawsuit before. Incredible.
Posted by: Kurt Smith | Jun 19, 2007 9:03:53 AM
By the way, great points David, and no, it isn't outdated thinking. It's actually "original" thinking.
Posted by: Kurt Smith | Jun 19, 2007 9:04:35 AM
Kurt, can you imagine having an english teacher like David.???? and I agree it is original thinking.
Keith, I always wondered why Nextel did some of the things they did, but you make a valid point. It should be know as the
W.C.France Jr Cup.
David, I droped a lot of zeros from the 100 mil. and it still seems imposible to comprehend.
Great Post David
Posted by: Trucker | Jun 19, 2007 9:46:30 AM
The France Family Championship Cup. While Bill Jr was the force that NASCAR the nation attention it has now, Bill Sr started the whole thing. Plus, think of what the wives and children had to give up in order for them to create NASCAR.
Nexcar VS ATT. Ok. Lets see. What does Nextel have to fear from ATT being on the car? What does Nextel have to fear from any other telecom company being on a car. Nextel is only said 150 times during the race! It isn't like they say any other company name more on race day. JESUS!
Posted by: WBinCC | Jun 19, 2007 10:30:11 AM
Let me first, as they say, establish my bona fides: I have been a lawyer for going on 30 years. When I read about round one of the litigation - whether AT&T could brand the 31 car, all my legal experience said, "Heck no, AT&T loses! Slam dunk!" OK, everyone impressed by my expertise? Good.
I have no clue how it will all turn out. To figure that, I'd want to see all of the contracts to see what they say, and I'm not paying to get access to the court website where all the documents are available. There are teams of lawyers who will pore over every comma and be paid $250/hour and up to do so. I'm not doing it for free!
The issue, though, isn't whether exclusivity makes sense. Maybe it does, maybe it doesn't. The problem is that Nextel paid for it and NASCAR agreed to sell it. That was the agreement, and I tend to like the idea that people are bound by contracts. Would I like to see the France Family Cup? Sure I would, but it ain't gonna happen, not when Nextel pays something like $700 mil to have its name on the cup. It's business folks, and it's ugly. Making it even worse for me is that I am a big Jeff Burton fan and don't want to see him with sponsorship woes again.
Let's go road racin'!
Posted by: Doug in CA | Jun 19, 2007 10:51:30 AM
Doug in CA,
But, Doug how does NASCAR regulate independent contractors who have publicly acceptable sponsors? Does NASCAR really want the govt. involved? People hate big monopolies even if they're benevolent. This one is hardly that. Personally, I look forward to when racing isn't controlled by the France family. It's grown beyond being a fairground amusement. You may never hear me say this again but, "Bring on the Govt." The time has come for racing to be the #1 agenda of stock car racing again and not the lining of the France/ISC pockets.
Posted by: Keith | Jun 19, 2007 11:09:11 AM
Hey David,
Seems to me that this would make future sponsors at any level wonder if it is worth the hassel. Time at the track doing promo is one thing. Time in court, would be in quite a different lite where everyone loses.
Heard references of how Nextel has helped Nascar. Bull%$#@. Winston helped bring Nascar to where it is today. This deal is Nascar helping to market Nextel.
Posted by: Larry | Jun 19, 2007 11:31:15 AM
Larry, you nailed it. This is going to chase potential sponsors away in droves...and the smaller teams NASCAR claims to care about will suffer.
Posted by: Kurt Smith | Jun 19, 2007 11:38:01 AM
WB,
No France Family anything. For one, France hasn't supported the US for a while now. And, two, family, makes it sound too Disney-ish. The William France Cup, covers the founder and son.
Kurt Smith,
Exactly. Why bother trying to be a small sponsor when Big Guy just says, "Nope." NASCAR is far from WWF. The racing and the drivers are real. It seems the management and sponsors are the only ones without rules.
Posted by: Keith | Jun 19, 2007 1:01:49 PM
I rather agree with Doug in CA's original thought. Nextel has lined NASCAR's pocket with naming rights of the series and was given an exclusive right. When Winston named the series, I don't remember any sponsors not under R J Reynolds corporate umbrella, namely Marlboro.
That having been said, I think that Cingular, having been taken over by AT&T should be allowed to remain on the 31 car as AT&T unless the exclusivity clause expressly forbids it (takeovers & mergers). Nextel having joined Sprint has no problem saying Nextel-Sprint during the telecast.
I agreed with the previously stated opines that: 1. Its above my altitude and pay grade, and 2. it will make all sponsors shy about doing business with any part of NASCAR, teams or the sanctioning body.
The blood is now in the water and the damage has been done. It will remain a lasting memory with those empowered to spend large amounts of money on behalf of their corporate bosses and perhaps NASCAR of the last 15 years is on the way out.
Posted by: Fred | Jun 19, 2007 1:09:55 PM
I am corrected. Nextel paid 70, not 700, mil. Fred, like you, this is way over my pay grade! For me racing is fun, and I don't want to spend hours reading contracts and contract law here - better to speculate and gossip with no basis for my opinions. You get what you pay for! (BTW, Fred, I don't recall seeing you here before, and compliment you on a superb debut. Hope we see you often.)
Keith, I agree that DRIVERS are independent contractors with their teams, but am not so sure about the technical nature of the relationship between, say, Roush Racing and NASCAR. I assume that somehow NASCAR has certain rights regarding participation - your car has to be up to par, you can't have porn sponsors, etc. As was pointed out by Fred, no other cigarette sponsored a car during the Winston years.
Finally, this is a significant round of litigation. There's a lot at stake. Keith, you say you look forward to the day when the Frances no longer run NASCAR. If that happens, the future of NASCAR will be as David Poole suggested: franchises. It's the model is just about every other major sport. And racing is the product, not the purpose. The purpose is profit, be it for a family (NASCAR), a corporation (Yankees/GE), or shareholders. NASCAR is structured much as it was in the 50s and 60s, but time is marching ahead. Will that ancient model survive?
Posted by: Doug in CA | Jun 19, 2007 1:55:31 PM
David:
I agree with most of what you said, except the fact that all sponsorship does NOT stop at signage. Todays sponsor is looking for business-to-business sales, not always business to consumer.(Case in point: How many of us(fans) bought CATEPILLER heavy equipment last week? Still wonder why they are in CUP?)
Also, NEXTEL has a lot of spectator products it hawks at races to the fans that any wireless company could compete with, so NEXTEL DOES need exclusivity--at least on race day sales of that type of stuff. I don't know how many millions it would take to create and market, say the raceday scanner, but they'd lose their shirt if every brand were allowed to come in and sell one. (I don't know whose product the scanner is, just using it to make my point)
Thanks for letting me put in my two cents.
Posted by: Coffee | Jun 19, 2007 2:32:43 PM
Doug in CA,
This franchising thing could go many pitchers, of the golden brew, into the night. Other sports are city based. NASCAR, has no such alligence. Other racing venues, whether I like them or not, are not controlled by a dynasty. Drivers and crewmembers, who maybe aren't in the elite group, might deserve compensation for years of service rendered. NASCAR should think of these things before they act rashly.
Doug, (and you did say ancient model) from when the first cavemen raced the first stone wheels in Gowandaland (which later became Daytona...(it was a 500 roller...called at 375 for a T-Rex on the course)), the point of racing has been racing...yeah, if ya made some bucks, good on ya. Then, all hail TV. TV expands the sport but needs money. Sponsors have money. TV controls the sport. Sponsors control TV. Sponsors control the sport.
I don't care if they lose every sponsor they have...I like racing! If a bunch of guys/gals want to throw themselves around at illegal speeds we'll find them.
Posted by: Keith | Jun 19, 2007 2:40:58 PM
Coffee,
Exclusivity should be at the track as far as products sold/shown. And, NEXTEL, should be boomed from every loudspeaker as often as possible. But, how does, or should it affect, free trade and competition? Does the Cingular car make me want their plan? Hell no. The way our drivers change paint schemes I'd be buying gas, tools and have to re-enlist. It's paint on a car and NEXCAR made it bigger by bringing it to the foreground.
Posted by: Keith | Jun 19, 2007 2:52:23 PM
As our own Shirley B. pointed out, the excluvisity rights with Winston were something that NASCAR worked out because they needed Winston at the time. The sport wasn't raking nearly the bucks it's raking in today.
Certainly they had to foresee giving such rights to Nextel as a potential problem, with two cars in the series having cell phone service providers as sponsors? They had to know this war was coming.
Posted by: Kurt Smith | Jun 19, 2007 3:29:37 PM
Exclusivity, sorry. It's a weird word anyway.
Posted by: Kurt Smith | Jun 19, 2007 3:30:28 PM
Doug in CA - I like you had a desire to actually view the court documents and was stymied by the the cost to do so.
Sad because it would aid in clearing up what I feel is (possible) mis-reporting by the press.
Every article on the NASCAR counter suit says they are also attempting to have Alltel removed as a sponsor also.
When NASCAR and NEXTEL walked down the aisle together (and France Jr. caught the bouquet) they agreed to limit other telcoms ability to sponsor cars in the Cup Series. As part of the agreement Altel’s sponsorship of the #12 was grandfathered in and remains a sponsor to this day.
Something smells and its more than bad reporting or the presence of too many on expensive retainer fees. (sorry Doug in CA)
That said this is what I wrote back in March when the Robby Gordon/Motorola bruhaha started:
What happens to the NEXTEL Cup Series in 2008? Will it be the Sprint Cup? The Sprint-NEXTEL Cup? The Sprint, formerly known as the “NEXTEL Whine,” Cup?
The point being because of a corporate merger Sprint feels no remorse in sending NASCAR’s premier series ass over tea kettle by forcing a change to the entire marketing campaign. And France Jr has cast off his normal dictatorial nature and has laid down like an obedient puppy.
Oh, and did I mention the subject merger occurred long after the NEXTEL contract was agreed to and signed.
This arm chair lawyer sees that as an out. Assuming someone had the testicular fortitude.
NEXTEL, their new corporate minders Sprint and their bevy of overpriced shysters need to be told in no uncertain terms… screw off.
Settle the Burton issue, even if they have to stick on the AT&T logos on the #31, and the Motorola logos on the #7 themselves and let the shysters do what they do best, collect retainer fees and question why the defendants and judge are wearing the same tie.
Follow that up with announcing drivers during the 2008 season will be vying for the 2008 Bill France Championship in honor of the sports roots. And as quickly as possible commission a new championship cup along the lines of the NHL’s Stanley Cup.
It would include an actual “cup,” not something that looks like the survivor of a mid-western tornado and a list of all past winners of the championship and updated with each years winning driver and team.
If Sprint doesn’t like it, screw’em. Let’em they can take their cash somewhere else. There are other Fortune 500 companies that will step into the breech.
Posted by: marc | Jun 19, 2007 4:35:48 PM
All of these posts make me sad in a way. When I was a kid I'd go to games in Boston with my father and enjoy the games a lot. A couple of years ago I went to an LA Dodger game and was so nauseated by the commercialism that I swore I'd never go to another pro baseball game. Ads all over the walls; ads in the on-deck circles; silly promotional contests between innings; ads on the carts driving pitchers in from the outfield. Ads changing on the scoreboard, along with the stupid things telling us how to cheer. It's the same with pro basketball and it's sickening. (I do go to two NBA games a year because I have had season tickets for years and now my seats are so f---ing good that I CAN'T give them up!) It just gets harder every year to keep the focus on the game itself due to all the distractions of business, contracts, etc. The "Aaron's Lucky Dog." Barf.
I just repeat to myself that once the green flag falls, NASCAR racing is still great, but it gets harder and harder to feel that way when this wonderful blog is talking coporate contract law. I'd rather talk about where Kyle Busch will go and how Montoya will do this weekend.
Let's go road racin'!!!
Posted by: Doug in CA | Jun 19, 2007 4:51:19 PM
Wow. Excellent feedback to this one, even though I wondered whether it was too esoteric to generate much input when I filed it. Thanks to all who posted -- particularly Doug in CA, who has the legal expertise I do not.
I do agree with Doug that legal agreements ought to be binding. I was thinking all along that it's probably too late to fix what I perceive to be a big mistake -- that being the granting of such sweeping rights as Nextel seems to believe it has been granted.
I guess it gets back to the old wisdom versus knowledge argument. Just because you know how to do something and have the capability of doing it doesn't necessarily mean you OUGHT to do it. NASCAR and Nextel, perhaps, should consider this. Even if pursuing this matter is legal (and they have already lost the first round of the test of that question), I really believe it will be very bad for the sport and its image as far as we worker ants are concerned.
Posted by: David Green | Jun 19, 2007 6:12:22 PM
Thanks, David, but my "expertise" lies merely in knowing that a good discussion of this issue requires that we all read the exact language of the contracts in question. Remember my first post - I was 100% sure that AT&T would lose!
A very brief course in civil procedure, though: what AT&T wants is an injunction barring NASCAR from interfering with its right to brand the 31 car. An injunction is contested at three stages. First comes the temporary restraining order, usually heard with only a few days' advance notice. At that hearing, the court sets a date for a hearing on the preliminary injunction - in my state, at least 20 days out, giving everyone time to argue all the issues. Finally, the lawsuit is set for trial and a hearing not only on the permanent injunction, but also on issues like damages, fees, etc. A trial can take a year or more to get calendared, depending on the court, and I have no clue how long it will take in the federal court for the Northern District of Georgia. AT&T has won the first two rounds. Exactly who has to prove what varies a bit from stage to stage.
Every so often I get the pleasure of telling someone, "Y'know what? You signed it. You have to live with it. You made a deal." The NASCAR fan in me is rooting for AT&T because I'm a Burton fan. The lawyer in me almost roots for Nextel and NASCAR.
Posted by: Doug in CA | Jun 20, 2007 1:35:13 AM
Doug, your mixed feelings kind of sum up what a mess this is to everyone who's not particularly interested in the "business" of racing but rather just in the racing. It all brings me back to my desire for a time-travel machine, so we could go back and not make this mistake in the first place.
To all those who have written to compare Nextel's exclusivity to Winston, it is true that there were no Marlboro or other RJR competitor tobacco brands in NASCAR during the previous era, only other Reynolds products such as Camel and the smokeless products such as Skoal. Marlboro was involved in CART and F1 racing, which were considered to be the superior series from a national and international perspective. Winston took the risk of hooking up with the underdog organization, and NASCAR and Winston worked as partners to grow stock car racing, so -- again, speaking as a fan and not as an attorney -- I'd say all was fair.
(I always wanted the Virginia late model driver named Philip Morris (the 2006 Dodge NASCAR Weekly Racing Series national champion) to make it to Cup, though -- just because of the coincidence of a driver with that name competing in the Winston Cup Series!)
I'm not aware that there was ever much of a desire by Marlboro or any other cigarette maker, if any, to get involved in NASCAR. Cup racing's identity was so strongly tied to Winston, that probably would have been viewed as helping to promote the competitor's product.
Nowadays, certainly, everything is different. Nextel hasn't been around long enough to have the same depth of identification Winston enjoyed, and the NASCAR product of today is much more lucrative to any potential sponsor than it was in the days before the 1990s.
Posted by: David Green | Jun 20, 2007 5:57:00 PM
Coffee, your two cents is not only welcomed but appreciated. A few points in response to what you wrote, with my apology for being late in doing so:
I would have no problem with a prohibition of point-of-sale participation by competitors of Nextel at the events of a series sponsored by Nextel. I have no problem with some level of privilege being accorded to the highest bidder.
As for Caterpillar, when those folks came into NASCAR as a sponsor in the 1990s, they made a point of emphasizing the value of the endeavor in building esprit d' corps among employees, in addition to the luxury-box, VIP-schmoozing-at-the-races opportunity for corporate clients.
They acknowledged they are not a consumer-products company, not even in the manner that John Deere was, never mind in comparison to Lowe's or Office Depot or Budweiser. They assured reporters they were not under the illusion that their sponsorship of a race car would cause everyday citizens to rush out and buy bulldozers, but that there were plenty of good reasons for them to sponsor a race team. The fact that they are still involved in the sport more than a decade later suggests they were on target in their thinking.
Posted by: David Green | Jun 20, 2007 6:49:26 PM
Say it isn't so!!!
NASCAR Sprint Cup Series in 2008?????
Of course, it's a two-edged sword - Nextel can change the name even though they're suing against the very same action? Hopefully, the reporter from NASCAR.com has his information wrong....
"Sprint" only brings to mind little cars, not phones, but of course they don't see it that way.
Posted by: SrRaceFan | Jun 21, 2007 12:56:13 AM
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