The Frontstretch: The Three Musketeers, Part II: Can Track Consolidation Be Stopped? by Tony Lumbis -- Wednesday July 14, 2010

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Editor’s Note: For Part I of Dollars And Sense, please click here to read.

Yesterday, we talked about how Sprint Cup’s three remaining independent tracks: Pocono, Dover, and Indianapolis are surviving in the face of overwhelming competition from Speedway Motorsports, Inc. (SMI) and International Speedway Corporation (ISC). Nowadays, those two corporations control 31 of the 36 Sprint Cup dates … but it wasn’t always that way. Smaller corporations like Roger Penske’s owned California and Michigan, while men like Clay Campbell, Bob Bahre, and Paul Sawyer controlled legendary venues at Martinsville, New Hampshire, and Richmond, respectively.

But from the purchase of North Wilkesboro in 1996 through SMI’s buyout of Bahre just two and a half years ago, a wave of consolidation has overwhelmed the racetrack industry. Most fans have watched nervously, worried about their favorite’s future, while asking a simple question: Why?

Mike Tatoian, the Executive Vice President of Dover International Speedway, believes that it is all about different business philosophies and how you want to represent your numbers. “If you have some well-performing tracks and some that aren’t performing well, you can weld them together so you can enhance the tracks that are underperforming,” he said. “We [at Dover] don’t necessarily believe in that thought process. At the end of the day, we believe that tracks really do have to perform on their own and pull their own weight.”

Whether it’s the Monster Mile of Dover pictured above or the powerful ISC tracks of Daytona or Talladega, everyone’s got the same problem these days: empty seats.

That philosophy likely led to Dover’s sale of Memphis, discussed in Part 1 yesterday. But whether you agree with the “bigger is better” philosophy or not, one cannot deny that this ownership structure is here to stay for the foreseeable future among NASCAR venues. Many have expressed concern that ISC and SMI have a monopoly in the sport, with a failed lawsuit by former Kentucky Speedway ownership insinuating they’re squeezing out competitors.

Ironically, those working for the three independent tracks are not among those concerned parties. Indy Motor Speedway CEO Jeff Belskus believes that he has just as good of a partnership with series officials as the “big two.” “I believe that the SMI and ISC contingent probably have a louder voice than we do as well as more contact points,” he admitted. “But that being said, we enjoy a very good working relationship with NASCAR and they are responsive to our needs. There are some inherit disadvantages to only having one track, but I think that is more an economics of scale issue, not a NASCAR issue.”

Tatoian is more focused on presenting a product at Dover rather than who is running his competitors. “One thing that I’ve learned over the three and a half years I’ve been involved at the track is that we are sellers of a product that we don’t control,” he explained. “At the end of the day, it’s our responsibility to resell NASCAR’s product, however they decide to operate. It’s not like the NFL, MLB, or NBA where each team gets a vote. We, as track promoters, don’t get a vote, so it is our job to try to sell tickets and sponsorship and keep our tracks healthy.”

What about Pocono’s longtime owner, “Doc” Joe Mattioli? He not only doesn’t have a problem with the ownership structure, he welcomes it. “If ISC or Bruton Smith want to pick up ten or 15 tracks, I don’t have a problem with that,” he said. “To me, all of our tracks are not competing, they are helping each other out. The more fans they build, the more they spread, and we all benefit.” In fact, Mattioli applied the same theory when ISC was planning to build a track right in his backyard, just two and a half hours away in Staten Island. “If they put a track in New York City, it would bring in new fans,” he exclaimed. “We’re the closest track to them, so when they want to see another race, we are the most logical place to go next.”

Indy CEO Jeff Belskus squashed any rumors before they start, making clear the legendary speedway is not for sale.

Looking at the landscape today, a tough economy combined with declining revenues mean building new racetracks won’t be in the cards for awhile. That leaves these three the last of a dying breed, but the way their executives see it, they won’t be changing structures anytime soon. “It’s not for sale,” stated Belskus when questioned on IMS’ future. “I get that question regularly, but the Hulman George family is committed to this organization and business.” In fact, the CEO is more concentrated on bringing the fans back to the track. “We want to get back to a sellout situation for all of our events. I hope that we can continue to improve our processes, the way we operate, and continue to provide an enjoyable experience. Specifically regarding NASCAR, we knew adding it to the schedule would be a positive thing from an ROI perspective, and it has exceeded expectations. So we’re not going anywhere.”

Doc Mattioli feels just as strongly about his track staying within the family. “Nobody can sell the track because I put it in a trust,” he said. “Some have offered to purchase the track from me in the past; they assume just because we’re independent that we’re struggling. I even got an offer for $400 million a few years back. But I told them no. I definitely feel comfortable with the decision I made.”

Tatoian is not quite in the same position as Belskus and Mattioli to be giving the same guarantee about Dover, but he still feels pretty confident that things will not change in the near future despite the his track constantly appearing in the rumor mills. “I can’t say what will happen year-to-year because I’m not in the position to guarantee that,” he admits. “Anything could happen at any time. But as much as I know today, me personally – and I’m not on the board nor am I the CEO – we’re staying independent, and we’re going to work hard to move in the right direction. I think rumors take off because today’s technology makes it easy. But people are just wasting their time if they believe them.”

So while Bruton Smith and the executives at ISC continue to wheel and deal, adding tracks to the Sprint Cup schedule at the expense of others, there are three venues that they will not be able to impact and if Tatoian, Belskus, and Mattioli have anything to say about it, things will remain that way for years to come.

In the age of multi-million dollar bank mergers and large Fortune 500 chains wiping mom and pop shops off the map, it’s easy to believe that bigger is better. However, a look into NASCAR track economics paints a picture where independent facility owners are actually very similar to their corporate counterparts, especially when it comes to fighting against simultaneous downturns in both the economy as well as the popularity of the sport. Remember those facts next time a report of a sale comes up in the rumor mill, because when you get down to the bottom line, there’s really no reason for any of the three to give up their status as the last independents standing.

Contact Tony Lumbis

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