The Frontstretch: The Three Musketeers, Part I: How Independent NASCAR Track Owners Survive by Tony Lumbis -- Tuesday July 13, 2010

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The Three Musketeers, Part I: How Independent NASCAR Track Owners Survive

Dollars and Sense · Tony Lumbis · Tuesday July 13, 2010

 

As the 2011 NASCAR Sprint Cup schedule begins to take shape, fans begin to see firsthand how owning a contingent of race tracks can allow one corporation or one man, even, to control how they view the sport they love. Attendance at Atlanta is down? No problem, we’ll replace one of its dates with Kentucky. Not happy with how the local police are treating you in New Hampshire? Well, they’ll do it our way or we’ll give one of its dates to Las Vegas. These are the thoughts that have been most likely going through the mind of Bruton Smith, chairman of Speedway Motorsports Inc. (SMI) over the past few months. While Smith effectively controls the fate of seven tracks on the Sprint Cup circuit and one hopeful (Kentucky), another twelve facilities are also controlled by just one entity, International Speedway Corporation (ISC).

That may certainly make it seem like the entire Sprint Cup schedule is in the hands of just a handful of people. However, there are a few holdouts that remain – just three, to be exact, forming the minority backbone of the schedule. Pocono Raceway has been independently owned since the Cup Series started racing there in 1974. Another Sprint Cup mainstay, Dover International Speedway is owned and operated by Dover Motorsports, Inc. The third venue, short on stock car history (1994) but long on prestige is the famed Indianapolis Motor Speedway (IMS), which is owned by Hulman and Company.

The Monster Mile of Dover remains just one of three independently-owned tracks on the circuit, joining Pocono and Indianapolis on what’s been a rapidly-shrinking list over the past decade.

These tracks may be on the endangered species list in terms of ownership structure in NASCAR, but that doesn’t mean they are necessarily at a disadvantage. “From our perspective, whether we operate independently or with other tracks, we all have the same challenges with battling the economy and bringing back NASCAR fans,” explained Mike Tatoian, who has served as the executive Vice President of Dover Motorsports, Inc. since 2007. “I don’t think operating independently provides all that much of a difference from the other tracks.”

Jeff Belskus, who was named CEO of IMS in July, 2009 after Tony George relinquished the position, also faces the same challenges that Tatoian and company deal with, although he has an advantage that the other two independents do not – The Indianapolis 500. “The Indy 500 absolutely drives our revenues each year. Having said that, we love the Sprint Cup Series here, it’s an important event for us.” Even one-hundred years of racing heritage does not exempt this crown jewel from the economic times, though. “Unfortunately, what’s happened to us here is that our attendance at the Brickyard 400 has been declining as a part of the overall trend,” explained Belskus. “The 2008 race, with the tire issues we had here seemed to have accelerated the decline, combined with the economy on top of that.”

Pocono Raceway, which is not a part of a holding company, appears to be in the best shape of all three, despite nearly declaring bankruptcy over 20 years ago. “We don’t have any problems,” proudly declared Joseph “Doc” Mattioli, who has been the patriarch of the track since it opened 1971. “We don’t owe any money to anyone.” This may come as a surprise to some, as Pocono has not been excluded from the troubles that both the sport and the economy have experienced, illustrated by the empty seats seen at the venue’s two events. So how is the Mattioli family sitting comfortably while others in the sport are frantically cutting expenses? “We had many good years when all the seats were sold. We put that money away, and we began carrying large balances in reserve. We invested well,” explained Mattioli.

In fact, Pocono’s unique financial position has allowed them to be a rarity on the circuit in another way in that until 2008 (when the second event became the Sunoco Red Cross 500), they have operated without a title sponsor for both their events since the mid-‘90s. Mattioli stated that the track was in such good financial position that they could afford to wait until the right opportunity to present itself, such as the one with Gillette, which sponsored the June event for the first time at the Pennsylvania track earlier this year. “We didn’t exactly go looking for sponsorship; it came to us with Gillette. The money was very good, and it was a first class company. With the way the economy has been and the empty seats that resulted from it, we felt it was time,” said Mattioli.

The one-time dentist turned track owner isn’t about to become complacent, either. “I’m 86 years old, and I’ve been around long enough to know that you’ve got to diversify,” he said. “So we’re trying to diversify into things that are productive. We’re building a solar park which will be one of the biggest in the state. We’ve opened a hotel and restaurant, and we bought a race track in South Boston.”

While Mattioli has the advantage of acting on the business decisions he believes are best for his track and family, the other independents aren’t as lucky. Dover Motorsports, Inc. is a public company, which means in addition to putting a good product on the track, Tatoian and his team need to keep investors on Wall Street happy as well. While he recognizes the position this puts him in, he still believes that making the right decisions for the business will translate into results, profitable results that will please investors. “I think being a public company, there are things that we have to do that a private company, like Pocono, wouldn’t necessarily have to do. I think as long as we stick to what is best for the business, hopefully Wall St. will be happy as well,” he said. “There are a lot of people who you have to appease, and that’s a challenge whether you are private or public.”

One of those parties that have been particularly hard to please is Marathon Partners, L.P., a significant shareholder in Dover Motorsports, Inc. which had recently expressed the opinion that the racetrack could be operated more profitably by SMI or ISC. However, those two corporations have not been faring much better, and Tatoian provided some insight into why shareholders may think otherwise. “At the end of the day, the numbers don’t lie,” he explained. “Our losses may be more glaring than SMI or ISC because we have just the one Cup track where the other two have a blend of several tracks in their numbers. So it’s tough to nail losses to any one track.” While Tatoian respects the opinions of his shareholders that may not see things as he does, he still expresses confidence in the way Dover Motorsports is doing business. “They are entitled to their opinions, but we make decisions based on what we think is best for our shareholders, sponsors, fans and staff. We’ve been around for 42 years, have a strong board that has been around this business and our CEO, Denis McGlynn, has been around for almost as long as the track. Some will agree with us and some won’t, but I don’t know that our situation is any better or worse than anyone else in the industry.”

IMS is also a part of a larger holding company, but they are private and unlike Dover, executives do not find themselves in a position of having to keep shareholders on Wall St. happy. That does not exclude them, however, from having to make difficult decisions to stay profitable. Belskus has had his work cut out for him since talking over the helm last year. “We’ve been aggressive with expense reductions,” he said. “And now, we’re trying to get more aggressive with generating new sources of revenue.” While the CEO and his management team have been trying to address their financial situation the best they can by via expense reductions that are within their control, sometimes it is those things outside of their grasp that make their jobs particularly challenging. “We had Allstate as the Brickyard 400 sponsor and that contract ended; they chose not to renew,” he said. “We want to replace Allstate and for the size and commitment that is, in this economic environment, it just takes some time to find a company that is willing to step up. I’m confident that it will happen, it will just take time.” (Note: At this time, the Brickyard 400 still has not found a title sponsor).

Tatoian and company are no strangers to expense reductions as well after they were forced to make a very public decision to close Memphis Motorsports Park at the end of 2009. Despite the fact that the facility produced some great racing over the years, it simply wasn’t producing the numbers to make it worth keeping in the company’s portfolio of venues. “There’s was great racing both on the oval and the drag strip, but it was really a mixture of things that led to our decision to sell,” said Tatoian. “While it is a decent facility, we just didn’t see the trend we hoped for when we acquired it about 10 years ago. It wasn’t easy, but given the state of the economy and where we were as a company, we decided to cease operations.” Tatoian doesn’t doubt that the facility, which is still on the selling block, will make a great addition for anyone who wants to manage a race track. “Hopefully, someone will be able to recognize that there is still value in the 350 acres that are there.”

A look at all three of the tracks would indicate that there is no clear-cut advantage to being a part of a larger organization such as SMI and ISC. Pocono appears to be in the best position from a financial standpoint, while Indianapolis and Dover are going through the same exact economic pains that the SMI and ISC facilities are facing. So what would explain the trend of ownership consolidation over the past decade? That’s what we’ll explore in Part II of this look at the last trio standing in independent track ownership.

Contact Tony Lumbis

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