NASCAR, Business Models and Growth

I have long admired many things about Nascar and the France Family that owns it. I think they are phenomenal at PR and very, very good at fan(customer) retention, among other things. Although starting very much through humble, boot strap efforts(like most successful businesses) 60 years ago, Nascar became quite sophisticated at linking drivers/corporate brands and fan affinity. With the help of strong television partners(ESPN really did the heavy lifting), great promotion-oriented business partners in the tracks(owned primarily by either SMI or the France Family through ISC) and a disciplined approach to honoring the traditional rules and spirit of William France, Sr; Nascar grew at a remarkable rate and became a legitimate, national sport. However, this editorial is not dedicated to "back-slapping" the guys and gals from Daytona. I'm here to share my thoughts on why Nascar is losing speed and how it can rev back up again. Though growing up in North Carolina, I'm not a true fan of the sport. I'm more of a "stick and ball" guy, but I've been to a few races and I know more than my fair share of passionate racing fans. What I know about the sport mostly comes from what I know about the business of sports after twenty years in the industry. In complete candor, I also must admit I did quite a bit of homework about eight years ago when the company I worked for was consulted to help an organization called TRAC(Team Racing Auto Circuit).

TRAC was one of the best sports business ideas I have seen, and trust me - I have seen a lot of them. I eventually became its COO for a period of time after helping the founders develop a strong business plan and secure capital. Don't just take my word for it, check with Carl Scheer, Robert Wussler, George Bodenheimer, Humpy Wheeler, Cale Yarborough, Ed Hinton, Joe Lecesse, Jay Klompmaker, Chuck Jarvie, Hank Jones, David Falk, Erik Spanberg, Bruton Smith, Charlie Bradshaw, Rick Flair, Bill Riley, etc... They were all there, in some form or fashion, when the start-up league was launched in 2001. For those of you who didn't here about it or don't remember it(probably most of you), here is the basic proposition: Combine the best attributes of traditional, full-fendered, oval track auto racing with the best practices and structure of major, professional sports leagues and you get the Team Racing Auto Circuit(TRAC). Unlike Nascar, the team owners were buying an equity stake in the league when they acquired their team. Unlike Nascar, the owners were business partners with the league and with the tracks, much like any NFL owner who manages and promotes his events but usually doesn't own his venue. Unlike Nascar, cost control for the owners was a major concern and creating a profitable, ever-increasing asset for the primary risk-taker was one of the league's major objectives. Unlike Nascar, which relies on individual driver affinity, TRAC tapped into the regional affinity of sports fans and racing fans by creating a local team, which consisted of three cars and three drivers and a point system that allowed there to be a team and individual champion for each race and the season. From an owner and corporate sponsor perspective, this was essential. As we have seen recently, drivers, owners and sponsors can quickly be put asunder and the fan equity remains with the driver. There is nothing wrong with that - the drivers operate in a free market system. They take huge risks and they should be rewarded commensurately. The problem is that the other interested business partners lose. Good businesses operate within the construct of multiple "win/win" alliances. When too many partners lose, the business can't survive. What happened to TRAC? Well, like many businesses, teams or families...failures are more often a product of internal forces than external ones.

So, why should anyone care about Nascar's business model? After all, aren't they virtually unopposed in the US motor sports industry with little competition and huge barriers to entry? The answer to the latter is, "yes." The answer to the former is simple. Over the past four years, Nascar television ratings have fallen 21%. Advertising expenditures on Nascar broadcasts were down 16% last year. Track attendance fell for the third straight year. Sponsorships of teams and the league are going away or cutting back significantly. Team owners are closing down shops, auctioning parts or looking for buyers at alarming rates. This is not a result of the weak economic conditions of today. This started many years ago. Because the business model is based on corporate sponsors footing the bill for operating costs, the biggest sponsors are aligning with the best drivers and the haves(big race teams) are clearly pulling way ahead of the have-nots. Owners don't have the proper diversity of revenue streams and the economic interests of the league and owners are not aligned. Owners need a share of the tickets and television. How does Nascar share revenue? The market needs to grow. It has stopped growing. It grew for a while in size. Through the opening of new tracks in new regions of the US, more people with similar demographic profiles came to the sport, but Nascar needs to grow in diversity. I'm talking about economic, educational, regional and ethnic diversity. To really grow, a business must make itself attractive to newer and wider audiences. Don't think of it as dividing the pie; think of it as making a bigger pie. Brian France is capable of doing this. I don't know him personally, but I'm told he is a very bright, forward-thinking executive. By chance, if you read this Brian, consider the Team-Racing concept. Tapping into regional fan loyalties, giving tracks more events, creating more compelling content for television partners and attracting well-capitalized, sports-owners will work. I'm not proposing that you scrap the current model and adopt 100% of TRAC's concept. That is not feasible or necessary. Nascar is still the best motor sports business. However, the time to make strategic moves is when you're on top. It's the difference between proactive and reactive. I do think adopting several of the concepts would be prudent. Perhaps you even consider creating a "developmental" league that lets you do some experimentation and refining? The tracks need the content. The owners need the upside. The sponsors need the ROI. Nascar needs to start growing again. You have plenty of smart people there in Nascar, but if you need a consultant...I'm open to discuss it.

Farmers, Entrepreneurs and the Lessons of a Dad

I'm a southerner. I grew up in North Carolina. My family roots go back to the mid-1700's and I am quite familiar(I know how to use a hoe, a maul and how to grind sausage) with the agrarian ways of my ancestors. In fact, from my father all the way back to Dr. John Pritchett (Planter, Chemist, Patriot), we Pritchetts have toiled in the soil. Though, I do it today in my own suburban yard as a form of cathartic relief from my business life. It's a small way to keep the link to the earth that I feel in my bones. Don't get me wrong, I never wanted to be a farmer. I did the math at an early age and decided I was going to do something else for a living. However, I will say that some of the most important lessons in my early life came at the side of my father as we worked the land. Trust me, farmers know a level of work ethic that is virtually unmatched by any businesses I have ever seen. Farming, before government subsidies, was the essence of being an entrepreneur. Here is why.

Farmers have to get up early and take advantage of the daylight. As most farmers know, "burning daylight" is a sin. The same is true for entrepreneurs. A "first mover" position is critical to most successful business ventures.

Farmers have to adapt to the changing weather. No matter how much we might try (even with help from the Farmer's Almanac), we just can't predict the weather. The same is true for entrepreneurs. No matter how solid the business plan, market conditions change and businesses need to be nimble and adaptive.

Farmers treat their neighbors, suppliers and "hands" well. You never know when you might need to borrow a tractor, a ton of fertilizer or a bushel of beans. The same is true for entrepreneurs. Treating suppliers, community cohorts and employees well will build up a reservoir of good will that you may need to tap one day.

So, using a little "plain speaking" here, the message is simple. Get in early; Be prepared for anything; Treat people with respect. May your corn be sweet and your profits even sweeter!

Taxes, Self-Reliance and Conservatism

Tax Day is here. If you did it right, you don' t owe the government anything. Regardless of your payment on the 15th, we're all paying more than our share. In fact, Americans are paying more than ever. Cost of Government Day (COGD) is the date of the calendar year on which the average American worker has earned enough gross income to pay off his or her share of spending and regulatory burdens imposed by government on the federal, state and local levels. Cost of Government Day for 2008 was July 16. Working people had to toil on average 197 days out of the year just to meet all costs imposed by government. In other words, the cost of government consumed 53.9 percent of national income. Wait, it gets worse. The 2008 tax code was part of the "lower taxes" administration. You don't think the present administration is going to reduce the cost of government do you? Steve Forbes - where are you when we need you?

Friedrich Hayek's economic ideas - belief in smaller government, lower taxes and free markets - are the roots from which fiscal conservatives bloom. The concept is so remarkably simple. Reduce the tax burden on producers and watch how revenues to governments grow. It is not a mathematical theory or postulate. It is something for which the "null hypothesis" has been eliminated(researchers rejoice). I met with an executive of the NC Chamber of Commerce today and was disappointed, but not surprised, by the rapidly increasing cost of doing business in The Old North State. We are making ourselves less attractive to private businesses every time we allow the trial lawyers and unions to drive up the costs of doing business here. As the CEO of a private company that filed tax returns in over 40 states today, I can tell you it doesn't take long to tell which states are business-friendly and which states are taking the short-term approach to increasing revenues. In the Tarheel State, we need get back to our conservative roots - work, family, self-reliance, enterprise, personal responsibility...and a welcoming spirit - driven by a lower cost of living and a pro-business environment. If we don't reverse this course soon, we'll be known as the Garden State South...and not just because of all the NJ students at Duke!

We need to be diligent about not getting lulled into thinking that all of these fees and taxes (federal, state and local) are necessary to improve our lives or the lives of lower-income people. We have enough data over 235 years to know that more money does not correlate to better results when the bureaucracy of government collects and redistributes. I am a conservative because I reject that concept. I choose to take an optimistic view that all of us, given the opportunity, can build our own wealth by actively participating in capitalism. I reject the "one-size-fits-all" model of government and place my trust in each individual to make decisions about the services they receive. Citizens need the freedom to self-govern. The opposite of self-governance is dependence. Dependence is the absence of freedom. Freedom is what beats in the heart of every human.

Golf, The Masters and Capitalism

Watching "The Masters" over the last couple of days got me thinking about azaleas, capitalism and gentlemen. Professional golfers are my favorite pro athletes by far. Why is that? Because they compete in one of the only major sports that doesn't use a socialistic design to ensure outcomes for athletes. Pro golfers don't get salaries and the PGA doesn't constantly tinker to achieve "parity." You can't guarantee outcomes - only opportunities. The pay in pro golf is in direct proportion to a player's willingness to practice, train (body and mind), prepare and compete. Win or make cuts and you earn; miss cuts and you find a new profession or become a teaching pro. Every week, their score determines their pay. They can decide not to play in a particular tournament or to play in every one, but the decision and consequence is theirs. No team plane takes them to a tournament; no hotel rooms and meals are arranged and paid for them; no trainer wakes them up and tells them where to be and at what time; it is the ultimate in personal responsibility.

Many people believe pro golfers were born with a silver spoon and therefore haven't really "worked" to earn their economic status. Kind of the way many liberals believe high-earners and achievers somehow found their success on the backs of others rather than through schooling, dedication, sacrifice, discipline, talent and time. Let me suggest two names... Arnie and Tiger. Arguably, two of the best players in the history of the game and two of the biggest earners, too. Both of them were raised in working class families, not in posh neighborhoods with annual European vacations. They took advantage of their opportunity. They proved that in this country you have the opportunity to do and be just about anything...if you are willing to put in the work and take the risk. You know what else? Pro golfers and the PGA and other professional golfing organizations are the biggest contributors to charity in all of professional sports. It isn't even close. More proof that private enterprise and private citizens do wonderfully important things without government assistance.

Finally, I like pro golfers because they understand the sport is essentially based on rules and they depend on each other's personal character and devotion to honor the game. The sport doesn't need referees. Players call penalties on themselves. It is a beautiful example of an efficient, free, market system. The players respect the game, they respect the men who came before them and they respect the amateurs and fans who keep the sport healthy. They wear their shirts tucked in, their hats on straight and they shake hands with their competitors at the conclusion of the match. America's children could learn a lot from that. As for the azaleas, I planted seven new ones in my backyard this morning.

Blackberrys, e-mail and twitters

I'm a busy, senior executive who depends on a blackberry to stay connected and to conduct business any where and any time. That sounds free and liberating, huh? Nope. It is actually more counter productive and debilitating than you might imagine. Because we have come to rely on e-mail and text messages as instant communication transmission methods, we are now slaves to the devices because the sender assumes the receiver is simply waiting by the device to read the message and respond. No chance the receiver is in a meeting, reading a document, on the phone or, heaven forbid, trying to think and plan strategically. I just read a great quote from Jack Nicklaus on the subject. When asked if he used a blackberry, Jack replied, "No, everyone I know who has one is a slave to it. That's why I have a secretary." If it were up to me, e-mail would only be used to transport attachments - no multi-paragraph rants or chains of dialog and I would make hitting "Reply To All" a federal offense. If something is very important, pick up the phone. If you need to document your communication, type a letter and attach it. We could all use the practice of writing a solid, well structured letter now and then. One of the biggest weaknesses I see in young employees today is the inability to write letters. We are losing the art and the science of formal writing. Don't get me wrong, short, purposeful bursts of text (to let your wife or daughter know you are at the game or to ask your husband to pick up some diapers or to tell your friend to meet him at Jim's at 6) are a good use of the technology and have their purpose. However, if I have learned anything in the past twenty years of business, it is that the tyranny of the immediate is our daily enemy and it can fool us into thinking that filling the day with activity is the same as accomplishing our goals. We need the discipline to disengage, to be still, to think, plan, write and discover. If we are constantly in immediate transmission/reception mode, we'll fail to do anything more than survive. We'll be slaves to the here and now. Success in almost anything requires the discipline to sacrifice the small, short-term gains for the large, long-term ones. So, I 'll bet you know by now what I think of Twitter. It's just not that interesting.