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Thompson in Turn 5: Give Credit to Sprint/Nextel in AT&T Sponsorship Resolution

“I hold in my heart the belief that reasonable people will come to a reasonable solution, and hopefully we can get there sooner than later.”Jeff Burton

With a compromise agreement being reached last week that effectively puts to rest the ongoing legal battle between NASCAR, AT&T and Cup Series sponsor Sprint/Nextel, it appears that reasonableness has indeed won out. The topic, though generally considered a “sideshow” to the competition that attracts millions of fans to the sport, was nonetheless of significant importance to all parties concerned. It’s an issue that certainly needed to come to a quick resolution; but make no mistake about it, chalk this one up as a win for AT&T, NASCAR and Richard Childress Racing.

The agreement to put the wireless provider back on the car is perfect timing; it allows RCR to adorn the No. 31 with the contested AT&T logos just as the Chase for the Championship begins. Remaining associated with driver Burton, the company officially changes its branding with this compromise, a move that will be allowed by NASCAR through the end of the 2008 season. However, the agreement will also result in AT&T terminating their sponsorship agreement with RCR some two years early, prohibiting them from further primary sponsorship in NASCAR’s most popular series. It’s but a small concession on AT&T’s part, as they will still have 16 months to use the No. 31 as a platform for advertising their transition from Cingular to AT&T branding – a move that followed the merger of the two companies last year.

But don’t be fooled by an agreement that seems to give a little something to all sides of the equation. The way I see it, AT&T essentially crashed the party and was allowed to get away with it. In a very calculated campaign to discredit NASCAR in the public eye, where right and wrong sometimes can be blurred by ill-conceived perceptions, the notoriously aggressive company simply made a big enough ruckus about the whole thing until Sprint/Nextel and NASCAR relented, just to shut them up. Frankly, the way they went about it was not unlike the toddler that flops onto the floor kicking and screaming, throwing a tantrum until Mom gives in to the youngster’s wants just to quiet the ill-tempered child. And quieting AT&T was of the utmost importance to NASCAR, as their threats of continued legal muckraking, though generally considered becoming more and more frivolous, began to take a serious toll on NASCAR’s ability to sell themselves to corporate America.

Just look at the current state of their number two series for proof. With the departure of Anheuser-Busch from the Busch Series for the 2008 race season, concluding a 25-year sponsorship, the AT&T “sponsorship exclusivity” challenge has crippled the sanctioning body’s ability to attract a lucrative, deep-pocketed series sponsor. It is widely reported that the original asking price of $30 million per year has been reduced by almost half as potential sponsors shy away from any deal in which they cannot be guaranteed industry “exclusivity” in advertising within the second-tier NASCAR division. Like it or not, exclusivity is important to companies who do not want to share their very expensive series sponsorship stage with direct competitors. Once AT&T sent NASCAR to court, that scenario was directly threatened… and many corporations simply decided they didn’t want to be faced with any such hassle.

With that in mind, it has baffled me all along as to how many have seemed genuinely sympathetic to AT&T’s plight, in direct disagreement with both NASCAR and Sprint/Nextel in their efforts to enforce the exclusivity clauses. Can anyone truly say that if the shoe had been on the other foot that AT&T’s position would be any different? Of course not! NASCAR spokesman Ramsey Poston, in statements concerning AT&T’s challenge of the “exclusivity” agreements, echoed my previously stated opinions on the topic well.

“When AT&T merged with Cingular, they knew what the rules were,” Poston said. “They knew they could not rebrand that to AT&T. In the same way, I very much doubt AT&T is going to invite Sprint/Nextel or any other competitor into their exclusive deal for the iPhone, or invite Sprint/Nextel or any other competitor to advertise at AT&T Park, the home of the San Francisco Giants. They understand exclusivity.”

But by throwing a litigation tantrum, and keeping up the appearance of being the victim, AT&T got what they wanted. It’s not what was right or even what they would have necessarily conceded to had the roles been reversed… but they got it anyway.

The kindness through which NASCAR bestowed this agreement becomes even more impressive when you look at AT&T’s past history. The wireless provider was informed in 2005 that they would not be allowed a primary sponsorship with BAM Racing, coming as a result of the newly inked $700 million series sponsorship agreement with Nextel. At that time, AT&T accepted the terms of NASCAR’s “exclusivity agreement” with their telecommunication competitor without so much as a peep. They had no complaints… and why should they? It was a series sponsorship bidding process that AT&T had participated in back in 2003, but they chose to allow Nextel to outbid them for it when push came to shove. That left Nextel with the upper hand in this whole situation, and rightfully so, considering the amount of advertising dollars they are pouring into the sport each year.

As with any such legal spat between businesses, there are always innocent victims. Richard Childress Racing had become nothing more than the pawn in this big-business tomfoolery. Just think of the bind owner Richard Childress was left in. On the one hand, he wanted and needed to keep his AT&T sponsorship, valued at an estimated $15 million a year; but on the other hand, doing so put him in danger to irrevocably damage his longtime relationship with NASCAR. It’s a position I don’t envy, but one Childress at least handled with both dignity and respect for all involved.

Clearly, there is no argument that the turmoil surrounding the No. 31 sponsorship was an unfortunate situation. But as harsh as it may seem, given a choice between the sponsorship of one team and a series sponsorship of more than $70 million annually that contributes to the coffers of all Cup team owners, Childress’s plight should have inevitably taken a back seat to the greater good of the sport.

So, give Burton credit for his faith in a reasonable resolution being reached in this contentious matter; he certainly saw hope where I had not. Though the behind-the-door negotiations will undoubtedly remain confidential, I have to believe that Sprint/Nextel stepped up and became the dealmaker in this landmark resolution. Though it was clear that NASCAR – who originally lobbied Nextel to “grandfather” in these wireless providers in the first place – would welcome this type of solution, I could not predict Sprint/Nextel agreeing to allow the 16-month grace period. Truth be told, they had no reason to allow the AT&T branding on race day after having won their argument in court, except to stop the No. 1 wireless company’s continued harassment of both them and NASCAR before it got any worse.

That’s a key point in this whole theory, for the biggest loser in the whole episode stood to be NASCAR. Had AT&T’s legal wrangling been upheld by the courts and the “exclusivity” allowance eventually been deemed unenforceable, it is reasonable to assume that Sprint/Nextel would have sought to void their sponsorship with NASCAR for breach of contract. This situation would have quite possibly left the Cup Series not only without a sponsor, but having to land a new one without the benefit “exclusivity” to offer a potential corporate partner. It’s a scenario that would have crippled NASCAR in an effort to gain the kind of sponsorship dollars that, as Poston explained, “essentially sponsors every driver. The funds they put into the sport go into the point fund, go to help each race winner and help promote the entire sport through commercials and marketing.”

“That’s all part of the [sponsorship] package,” the NASCAR spokesman continued. “Sprint/Nextel are the ones that have devoted their company and resources to NASCAR, and they benefit every single driver in there. So. that’s why we need to protect the exclusivity of that contract on behalf of the entire industry.”

NASCAR’s statements ring true in this case. Ultimately, it was Sprint/Nextel that held all the cards in deciding whether to allow AT&T to stay at the party uninvited, and they took the high road and agreed to do so.

Good for them!

About the author

The Frontstretch Staff is made up of a group of talented men and women spread out all over the United States and Canada. Residing in 15 states throughout the country, plus Ontario, and widely ranging in age, the staff showcases a wide variety of diverse opinions that will keep you coming back for more week in and week out.

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