The Frontstretch: Burton Once Again A Victim of Corporate Insanity by Tommy Thompson -- Tuesday February 6, 2007

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Burton Once Again A Victim of Corporate Insanity

Thompson In Turn 5 · Tommy Thompson · Tuesday February 6, 2007

 

Jeff Burton, veteran driver for Richard Childress Racing, may be feeling a little singled out by corporate America as it becomes more and more likely that he will lose his primary sponsorship from Cingular Wireless through no fault of his or his team. The latest saga in Burton's sponsorship woes centers on AT&T's recent acquisition of BellSouth/Cingular and the assumed changing of the Cingular identity logo to reflect AT&T's ownership of them. NASCAR, as part of their series sponsorship agreement with Nextel Wireless, had agreed contractually that no teams may acquire sponsorship from companies competing with Nextel. Or, as in the #31's case, change their sponsor’s name.

Cingular Wireless and Penske Racing's driver Ryan Newman's wireless telecommunication sponsor Alltel were originally ‘grandfathered' in with 2004 when the series sponsor switched from Winston to Nextel. However, at that time AT&T, who had provided limited sponsorship to BAM Racing and the #49 driven by Ken Schrader in 2003, was not allowed to expand their sponsorship, as they had intended for the following season. A fact that perhaps Burton can find solace in. That decision undoubtedly was devastating to the small, sponsor-challenged organization.

Many in the NASCAR community believe that Nextel and NASCAR have overstepped their bounds in disallowing any coveted and lucrative sponsorship opportunities to team owners. On the other hand, it is important to understand the reasoning behind the prohibition on new and/or reorganized Nextel competitors from using the Cup series arena to sell their wares through team sponsorship. And of course with most things NASCAR these days…it's all business.

In 2003, Nextel, at the time ranked as the fifth largest wireless company, entered into a bidding contest against some much larger and much more financially solvent companies for the rights to sponsor NASCAR's top racing series. Names such as Bank of America, Visa, FedEx and yes…even AT&T were rumored to be vying for the very expensive advertising rights. In a surprise to many in the financial world Nextel won the rights to the series name with what is considered the largest sports sponsorship in history. Nextel committed to more than $70 million a year for ten years. Not only an unimaginable amount for a company of their size, but a clear indication that they were willing to gamble, in a big way, their future business success to that of NASCAR's.

In return for the gargantuan sponsorship Nextel made no secret of the fact that for $700 million dollars or more, they would expect to be the only wireless communication company allowed to advertise in the series. This became problematic, as both Alltel and Cingular were already established team sponsors, and in the end the sanctioning body and the new prospective series sponsor compromised and agreed to allow the two competitors to continue their involvement, but only as it stood at that time. If either company merged with another competitor of Nextel's, they would not be allowed to advertise the change at the track.

The reasoning behind Nextel not wanting an open-door policy in the Cup series extended to its competitors is sound. They have paid profusely to have NASCAR Cup racing as their advertising platform. It's their show for the next ten years. It makes no sense to allow others, intent on gaining market shares from them to pay only $15 million dollars a year for a team sponsorship and be afforded an opportunity to share advertising space with them at the track…and in victory lane.

In hindsight, Nextel agreeing to allow Cingular to continue on as a team sponsor must have been cause for considerable consternation this past season. Cingular Wireless, who bought AT&T Wireless in 2004 (not to be confused with the later purchase of BellSouth/Cingular by AT&T), positioning them as the #1 wireless provider, was allowed to continue their partnership with the #31 team due to the fact that their name and product logo had not changed. However, the 2006 season saw Burton and the Cingular team often running near the front or at the front during races, and in the Nextel Cup point standings. The dramatic improvement in the Cingular team performance also resulted in considerably more valuable on-camera advertisement opportunities during the Nextel Cup races. Certainly, Nextel's biggest fear during negotiations with NASCAR on allowing other wireless providers to continue in the series had reared it ugly head. And had Burton's performance not have trailed off during the latter half of the Chase to the Nextel Cup, Nextel could have found themselves in a very embarrassing and absurd predicament…presenting the Nextel Cup to their #1 business rivals.

What effect the buyout of Cingular by AT&T would have on Cingular's NASCAR sponsorship was known by AT&T at the time the takeover was being negotiated. Nextel's exclusivity agreement had been well reviewed by AT&T at the time that they were disallowed a full primary sponsorship of BAM Racing for 2004. Conversely, the BellSouth/Cingular executives were equally aware of what such a merger of the two companies would mean in terms of continuing to advertise in Nextel Cup. But when one considers that BellSouth/Cingular cost AT&T a reported $67 billion (that's billion with a B), there was probably very little concern expressed about a paltry stock car sponsorship going by the wayside.

Of course losing Cingular is a significant event for Richard Childress, though he has indicated that he has alternate sponsorship in the wings. And no doubt Nextel's position of not allowing any other wireless communication companies sponsorships limits other owners list of potential sponsors. NASCAR has to be cognizant of this when entering in to such agreements. And there is reason to believe they are, at least in part, evidenced by their lobbying a $700 million dollar sponsor to grant an exception to Alltel and Cingular during their high-stakes 2003 negotiations for a series sponsor.

But still Jeff Burton does seem to have been a victim of weird corporate shenanigans more than the law should allow. It was in August of 2004 that Burton left Roush Racing and the #99 Ford due, in part to another rejection by NASCAR of a sponsor for his racecar. At that time Burton had been competing for the most part without primary sponsorship for an extended period of time. Crown Royal and its parent company Diageo had a deal with Roush on the table that NASCAR nixed due to their longstanding policy of not allowing "hard liquor" sponsorships. Though within weeks ISC, owners of Daytona International Speedway and "kissing sisters" to NASCAR accepted Crown Royal as a track sponsor, the new "official whiskey" of the track, if you will…

At the time, NASCAR honcho Brian France was asked about the reason behind not allowing Roush the sponsorship, and he said, "“There’s a lot we have to consider before we just throw out a 30-year policy. And that’s what we did consider. We looked at all of the circumstances that we thought Roush could provide. They did a nice job of laying out some things in the end. We think the timing is just not right now, and we’re going to leave it at that and we’ll review it down the road.”

Well, about five months later the cherished 30-year policy was out the door, and Crown Royal joined Roush Racing. But too late to help Burton, who by then had moved on to Childress, and eventually the Cingular #31 ride vacated by then Childress driver Robby Gordon.

Still, you can't help but be sympathetic towards Jeff Burton in all this corporate madness. But through it all Burton has never lashed out concerning his undeserved misfortunes, instead he has continued to conduct himself as the consummate professional that he is.

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Bill B
02/07/2007 06:31 AM
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You have a point with Crown Royal sponsorship but I can’t figure out why everyone is so bent out of shape over Nextel’s insistence that no other competitors be allowed as sponsors (except those grandfathered in). What baffles me is the fact that no one seemed to care when Winston had the same exclusivity clause in their contract. Ever try to buy a pack of Marlboros at a track during the Winston Cup era? How is this any different? If you weren’t complaining then about Winston you shouldn’t be complaining now about Nextel. They put a lot of money into sponsoring the series.

Bill
02/07/2007 07:33 AM
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Nextel’s position on this matter is understandable. NASCAR, however, had no business allowing such a clause to be included in the sponsoring agreement. This is just another prime example of NASCAR talking out of both sides of their mouth.

One side says that running a NASCAR Nextel Cup team is ‘Free Enterprise’. That means the teams are able to run their teams how they see fit and any team is allowed an attempt to race at any time. This includes the manner in which a team is financed. Then, they turn around and tell the teams wanting to secure sponsorships that certain sponsors are not allowed to be on your race cars.

As long as it is beneficial to NASCAR, it is all okay. But, when something comes in to provide some ‘competiton’ it isn’t. I think this sitaution may turn around and bite them in hind end.

DC
02/07/2007 09:22 AM
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I agree with Bill. While a contract is a contract, NASCAR should have WALKED AWAY when Nextel insisted on a no-compete clause. What complete BS. Teams live and die based on large sponsorships. To exclude ANY of them because of the series sponsor is absurd. Shame on NASCAR for allowing this. At the very least, they should have allowed teams like Cingular/Burton to morph. The telephone industry is constantly changing. Hell, Nextel was bought by Sprint last year and may change the name of the series!!! This is a disgusting clause that needs to be eliminated the next time series sponsorship is up for grabs.

Bill B
02/07/2007 10:40 AM
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Once again I ask, why was it OK for Winston to have guarantees of exclusivity (no banners, race sponsorships, etc. for any competitors) at any NASCAR events or tracks? Why wasn’t anyone complaining then?

mike
02/07/2007 11:13 AM
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i wonder if nextel has ever considered the fact that i for one was considering switching to nextel but since they dont believe in competion or free enterprise i think i will look to another provider

mike
02/07/2007 12:44 PM
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What if Honda would’ve paid 700 million to sponser nascar. Would we still have Chevy,Ford,Dodge and Toyota? Just wondering

Steve
02/08/2007 06:33 AM
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One point everyone reporting on this topic fail to realize when they say Cingular was purchased by AT&T. Cingular was a joint venture between SBC and Bellsouth. SBC bought AT&T. When AT&T merged with Bellsouth the 2 parent companies of Cingular became one and Cingular was no longer a joint venture and is now wholly owned by AT&T. When the true story is told it paints a much different picture of AT&T’s role in this. I look at it as they have been part of it all along and only a name change is taking place from Cingular to AT&T.

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