SMI's Bad Day Sheds Light on Sponsorships
On the same day that Speedway Motorsports Inc announced a Q2 $22 Million loss, one of its biggest clients, Lowe's, confirmed it would not be coming back as title sponsor of the Charlotte Motor Speedway. The street took notice as SMI's stock was off 5% on the day. While SMI does not break out sponsorship revenue specifically, some interesting tidbits from the 8-K.
On long term contracts:
Many of our sponsorships and other corporate marketing contracts are for multiple years, which helps provide revenue and other financial stability. We believe the attractive demographics surrounding motorsports and our premier markets, where we own first class facilities, continue to provide substantial opportunities for increasing our number of longer-term sponsorship partners and commitments.
On Lowe's CMS naming rights:
The Company’s naming rights agreement that renamed Charlotte Motor Speedway as Lowe’s Motor Speedway is presently scheduled to expire in the first quarter 2010. The Company has been informed that the facility naming rights agreement will not be renewed, although negotiations for an enhanced company-wide marketing agreement are ongoing. The expiring agreement provides significant contracted revenues, and there can be no assurance the Company will execute any agreements on acceptable terms. Upon contract expiration, the Company expects to incur costs for renaming the speedway facility, and associated promotional signage and materials, and remaining merchandise inventory, if any. At this time, the Company does not expect these costs to have a material adverse effect on the Company’s future financial condition, operating results or cash flows.
On sponsorship inventory:
All of the Company’s 2009, and most of its 2010, NASCAR Sprint Cup and Nationwide Series event sponsorships are already sold.
On team sponsorship:
Certain NASCAR Sprint Cup and Nationwide race team owners have recently announced difficulties in securing adequate sponsorship funding for this and possibly future racing seasons. It is believed that these difficult economic and market factors are resulting in delayed decisions regarding race team sponsorship by certain current and potential new sponsors. Without adequate sponsorship funding, some team owners could decide not to operate, participate in fewer races, or operate fewer racecars for multi-car teams. A reduced number of racing competitors, particularly popular drivers, could lessen on-track competition and the appeal of racing. Also, new or changed racing teams could be formed with drivers that generate less fan interest or race less competitively. These and similar factors can affect attendance at NASCAR Sprint Cup and Nationwide racing events, as well as corporate marketing interest, that can significantly impact our operating results.
