The Frontstretch: Court Decision Good For AT&T…Maybe Not For Racing by Tommy Thompson -- Tuesday May 22, 2007

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Court Decision Good For AT&T…Maybe Not For Racing

Thompson in Turn 5 · Tommy Thompson · Tuesday May 22, 2007

 

U.S. District Court Judge Marvin Shoob's eleventh-hour ruling that allowed AT&T to display their company logo on the Richard Childress Racing No. 31 Chevrolet, piloted by Jeff Burton in Saturday night’s Nextel All-Star Challenge, has put NASCAR in a tenuous situation. The ruling has now prompted Sprint Nextel, NASCAR's Cup series sponsor, to join the legal wrangling to exclude the competing telecommunications giant from being able to continue to display the AT&T "globe" logo indefinitely. Both NASCAR and Sprint Nextel have a significant stake in prevailing in their attempt to exclude AT&T from participating as a team sponsor in the series.

In a Frontstretch column in February of this year, I wrote the following in an article titled Burton Once Again A Victim of Corporate Insanity:

"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 is that an unimaginable amount for a company of their size, but also a clear indication that they were willing to gamble, in a big way, their future business success to that of NASCAR.

It appears that Nextel's management has made a number of good business moves, culminating in their acquisition by Sprint Corporation in 2005. The newly formed company is expected to eventually operate simply under the name Sprint, and the merger of the two wireless companies solidified them as the No. 3 wireless provider in the United States. But previously, Cingular Wireless purchased AT&T Wireless, a merger of the No. 2 and No. 3 providers, creating the largest cellular provider in the country. That’s all the more reason for the Sprint Nextel managers to not want to compete with them at the track.

As I wrote in my February commentary, Nextel management was always upfront as to what they wanted from their sponsorship of the NASCAR Cup Series during their negotiations to become the title sponsor.

“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.”

NASCAR's last minute negotiating with prospective sponsor Nextel in 2003 to "grandfather" Alltel and Cingular was a good faith effort to protect both RCR and Penske from having their primary sponsors disallowed in 2004. Ironically, that intervention by NASCAR on the owners’ behalf has now came around to bite them. In his ruling, Judge Shoob writes, “Sprint Nextel knew that its exclusivity was going to be impaired because it agreed with NASCAR in the Nextel Sponsorship Agreement to grandfather in certain competitors.” To paraphrase, if I may…No good deed goes unpunished!

Nothing surrounding last weekends legal maneuvering has changed my opinion that Sprint Nextel's stance in disallowing the change of logos on the No. 31 Chevy is anything but understandable. As I wrote in last winter's article, "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."

It is apparent that the ruling has heightened the Nextel Cup Series title sponsor’s concern as to the legal validity of their agreement with the auto racing organization. Though the temporary ruling allows for the RCR entry to display the AT&T signage prominently on their racecar, Nextel has now entered the legal fray, supporting NASCAR and pleading their own case that more than $700 million in sponsorship fees entitles them to considerably more protection than Judge Shoob believes is appropriate. But in the end, I look for Sprint Nextel to attempt to void their sponsorship agreement with NASCAR if their joint legal appeals prove unsuccessful.

A pullout of the Sprint Nextel sponsorship would certainly result in a fair amount of anxiety for the sport. In a prepared statement following the court decision to allow the displaying of the AT&T branding, NASCAR, through its Public Relations outlet, issued the following statement:

"It is important to understand that Sprint Nextel is a cornerstone sponsor that benefits the entire industry by way of its contribution to the championship points fund, technology bringing fans closer to the sport, and its massive marketing and advertising campaigns." And that is true enough. From all indications, the title sponsor has lived up to its expectations and has accomplished a near seamless transition after taking over from longtime Cup supporter R.J. Reynolds and the Winston brand, a company that likewise had negotiated exclusionary clauses in their agreement with NASCAR to assure that no other cigarette competitors were allowed participation in the series.

Sprint Nextel has no interest in gambling on the possibility of having to award the Nextel Cup to their largest business rivals, AT&T. Winston, the title sponsor for more than three decades, never had to have the Marlboro Man prance around Victory Lane, hoisting the Winston Cup above his head; Nextel shouldn’t be allowed to suffer the same fate with its changing landscape of cell phone competitors. If this decision is allowed to stand, replacing Sprint Nextel will become considerably more difficult of a task for NASCAR than they experienced when Winston left the sport. Not being able to allow protection from business competitors in return for the title sponsorship will greatly reduce the value of such a business venture, and, in so doing, reduce the financial well being of the series as a whole.

NASCAR is walking a tightrope throughout all of this, as they, in essence, compete against team owners for sponsor dollars. They have not always been prudent in their exclusionary agreements with smaller associate-type sponsorships, and they cannot, on one hand, operate a racing series that requires their participants to attract large corporate contributions, and, on the other hand, issue wholesale exclusions of those very companies. However, in consideration of the huge contributions required of the title sponsor, certainly some accommodations are reasonable.

NASCAR, along with its new litigation buddies Sprint Nextel, have filed for an emergency appeal of Judge Shoob's decision with the 11th U.S. Circuit Court of Appeals in Atlanta. As this article goes to press, a hearing is expected at any time. With both AT&T and NASCAR / Sprint Nextel now committed to a legal battle, it is likely, regardless of the outcome of the appeal, that neither party will concede immediate defeat and accept whatever decision is handed down. NASCAR, in particular, is compelled to pursue ultimate vindication of their exclusionary agreements. Sponsors come and go in the sport, yet NASCAR will still remain, charged with continuing to maintain the present funding to finance its growth and steadily increase that funding over time. Without being able to entice series sponsors with the protection that exclusionary clauses promise, the organization will find signing future lucrative deals with corporate America easier said than done.

And that really is not good for stock car racing.

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Doug
05/23/2007 11:52 AM
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RE: AT&T vs. NASCAR and NEXTEL!

This is purely a fault of NASCAR in signing NEXTEL (or any other company for that matter) to an “exclusive” sponsorship deal!

Individual sponsors supply the cars and the drivers! To arbitrarily lock out and exclude advertising competition subverts everything NASCAR has done in the past to attract more sponsors!

NASCAR wants just a chunk of cash in it’s own pocket with total disregard to the rest of the world!

If NASCAR really wants to “grow the sport”, how can they take sponsors to court??

NASCAR is SICK! VERY SICK!

And, in closing, NASCAR is taking the average fan for a ride! The average fan would sort out what company they would give their business to! Competition is what it is all about!

Robert Eastman
05/23/2007 12:28 PM
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You’re 100% correct that at&t’s actions are detrimental to our sport!
AT&T has always been a bully in every area of business they have been involved in! In my own business dealings I have had numerous negative encounters with at&t and try to avoid doing business with them whenever possible. Obviously, many others have had the same experiences and that is why at&t went from being the largest telecommunications company, to selling out to SBC for a paltry sum (relatively speaking) of $17bn, less than 1/2 the price that Sprint paid for Nextel. The fact that a century old company that once had a monopoly and was the world’s largest had to sell for less than 1/2 the price of a “decade old” competitor is testament to the fact that “customers” despise at&t’s attitudes, practices and tactics.
AT&T’s current president stated that when at&t gets control of the internet, companies (& individuals[?}) will have to PAY (big time) to post content on the web. Whatever can be done to limit at&t’s power is best for everyone. I think I will close my last 2 Cingular accounts today, and switch them over to Nextel!

Georgie
05/23/2007 04:10 PM
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I am a diehard Jeff Burton fan and am really disheartened to see him in a situation like this —again— not of his own doing, but Nextel is really pushing the envelope here.

Cingular is no longer going to be a company it is changing its NAME to AT&T not it’s business, company, products, whatever. It is the same company with a different name.

Nextel is losing one phone company going around the racetrack and picking up another. There is absolutely no difference then Nextel being a bully and wanting to force the same company that has rolled around the track for years, out of the sport.

Please.

Raul
05/23/2007 04:37 PM
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Glad to see someone finally putting forth an opinion that isn’t drenched in sentimental emotions.

Thanks for letting the facts speak for themselves. Everyone knew the rules going in, and everyone knows the rules now. Nextel isn’t “Evil” or “Mean”. They’re protecting the rights that they agreed upon when they handed over a huge truckload of money to NASCAR (No $ for the S. They’re a business too) They have earned exclusivity.

Ron Ustoria
05/23/2007 06:37 PM
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Mr. Thompson—You sure like to quote yourself a lot. Must make it easy to do the footnotes at the end of the page.

NASCAR has much bigger problems to sort out besides the offical name of Cingular/AT&T. They are bleeding fans, both at the track and in front of the TV set, losing Busch as a sponsor of their namesake series with no replacement in sight, have suspended the IROC because no sponsor could be found, been chased out of Staten Island, Denver and the Pacific Northwest in their quest to build new tracks, have one manufacturer winning 90%+ of the races, one racing shop the majority of races, a new COT which is complete mystery to most of the racing teams, and a new racing manufacturer who can’t seem to qualify the majority of their cars for any one race. No matter what happens to this case, we all know that next year NEXTEL is going to change their name and the series name to the SPRINT CUP so what is the big fuss? If NEXTEL does leave the series, it won’t be because of the Court’s decision in this case, it will be because the economics of their 10 year, $700 million deal is going sour as NASCAR’s recent growth continues to slump.

It about time NASCAR stopped stealing sponsor money from the teams pockets and using it to line their own! Does anyone besides the France family know where all this money goes? Its certainly not bringing down the cost of racing. My tickets keep getting more and more expensive with each passing year!

T. W.
05/23/2007 10:06 PM
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you know, you never see Budweiser saying, “if that coors car or miller car is on the race track were not sponsoring anything”
Nextel should get over it, fans will buy Nextel if its a good product.

Does it really matter ? Nascar is crafting its own downfall with the COT and all its politics..

Joe
05/23/2007 10:50 PM
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the way i read this:

Nextel merged with Sprint and that was just fine and dandy

btw i agree with the above post
AT&T got Cingular..thats not ok?

riiiigghhtt either make alltel and cingular leave or shut up and live with it Nextel

leo
05/24/2007 10:53 AM
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Tom,
You know what is really funny?
I’ve read plenty of articles about NASCAR the EVIL organization, and thousands of fans bitching how NASCAR is bleeding them and the price of tickets is rising and blaa,blaa,blaa.
The truth is tracks still sell out and NASCAR is laughing all the way to the bank.
If the fans are really sick of it JUST WATCH SOCCER!!!!!!!!!!!!!!!

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