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Analyzing dollar figures for NASCAR track owners shows a disturbing trend

Updated on March 6, 2015
Lesa France Kennedy runs the powerful track ownership company International Speedway Corp
Lesa France Kennedy runs the powerful track ownership company International Speedway Corp | Source
At age 88, Bruton Smith remains a NASCAR power as Executive Chairman at Speedway Motorsports Inc.
At age 88, Bruton Smith remains a NASCAR power as Executive Chairman at Speedway Motorsports Inc. | Source

Starting in 2015, NASCAR began a new multi-year agreement with Fox and NBC for broadcast rights of its top three national touring series. Those contracts represented a huge increase in dollars that will trickle down to all involved this year. But as companies close their books and announce their results for 2014, it's worth examining the financials reported by the three major track ownership groups that sponsor NASCAR races. The trends are startling and NASCAR may find itself forced to act against itself to save itself.


Before reading further, I would also recommend another article; “Financials show NASCAR's profit model is changing”. While written in 2013, the column was an in-depth look at attendance figures and how they factor into NASCAR's income from 2007-2012. Unfortunately, NASCAR stopped reporting individual track attendance in 2013 so I was unable to compile similar data this time around. But anecdotal evidence plus casual observation show those trends continue to this day and make the information there just as important today.


Second, all of the data listed below is public knowledge. The three major ownership groups are the NASCAR-controlled International Speedway Corp.; Speedway Motorsports Inc.; and Dover Motorsports Inc. All are publicly traded companies who report their financial numbers to the Securities and Exchange Commission on a quarterly basis. Each also submits an annual report summarizing their income and expenses for the year and those reports can be read in detail through Yahoo! Finance or any number of other similar sites. Meanwhile, numbers from Pocono and Indianapolis are excluded from this evaluation as both are privately owned and their numbers not readily available.

First, a look at the overall revenue and profit numbers reported by the three companies.

Gross revenue breakdown by company

(click column header to sort results)
Company  
2012 Gross Revenue  
2013 Gross Revenue  
2014 Gross Revenue  
% Change 13 vs 14  
% Change 12 vs 14  
Speedway Motorsports Inc.
$490.16M
$480.65M
$484.31M
0.76%
-1.19%
International Speedway Corp.
$612.37M
$612.64M
$640.94M
4.62%
4.67%
Dover Motorsports Inc.
$46.75M
$46.14M
$45.67M
-1.01%
-2.30%
Combined Totals
$1,149.27M
$1,139.43M
$1,170.92M
2.76%
1.88%
All figures via 2013 and 2014 SEC filings for their respective companies

Net income by company

Company
2012 Net Income
2013 Net Income*
2014 Net Income
Change, 13 vs 14
Change, 12 vs 14
Speedway Motorsports Inc.
$42.12M
$82.58M
$31.11M
-62.32%
-26.13%
International Speedway Corp.
$54.58M
$45.29M
$67.38M
48.77%
23.45%
Dover Motorsports Inc.
$9.19M
$8.99M
$5.69M
-36.68%
-38.03%
Combined Totals
$105.88M
$136.86M
$104.19M
-23.87%
-1.60%
*2013 Net Income figures for SMI and DMI exclude one-time goodwill impairment charges for both. SMI's charge was calculated as a loss of $89.04M while DMI's was set at a loss of $4.33M.
ISC's headquarters is a gleaming tower of steel and glass built on racing profits
ISC's headquarters is a gleaming tower of steel and glass built on racing profits | Source

A look at the basic gross revenue and net income figures for the companies show some interesting trends. After the 2013 figures are adjusted for impairment charges (one time financial write-downs of value that do not represent actual cash lost), all three were profitable in 2012, 2013 and 2014. The only question is how much money they made. However, there is an incredible disparity between ISC and its competitors. Despite relatively small changes in gross revenue percentages between 2012 and 2014 (ISC was up 4.67%; SMI was down 1.19% and DMI was down 2.3%), the net income figures showed a major drop for all but ISC.


Just as important as the straight figures for ISC are the trends. Their revenue figures have gone up each of the last two years, at $612.4 million in 2012, $612.6 million in 2013, and $640.9 million in 2014. Their reported income figure dipped in 2013 but there were some one-time factors at work that were more statistical in nature than any actual cash lost (e.g. accelerated depreciation on assets at the Daytona International Speedway as a part of the Daytona Rising project kickoff). In terms of real dollars, the company has steadily improved its financial position year over year despite an ambitious construction program.


Meanwhile, SMI and DMI have both seen their revenues stagnate and their profit totals decline. Their net income is down 26.13% and 38.03% respectively when looking at 2012 versus 2014. Their percent of overall revenue and net income are down as well. Dover in particular has seen its value free fall as the track has struggled to draw fans despite two favorable race dates (one at the kickoff of summer and one in the Chase). While their gross revenues are only down 2.3% over that period, their net income has dropped from $9.2 million in 2012 to $5.7 million in 2014.

TV revenue figures got you down? Watch NASCAR on DVD instead

Advertising banners now cover plenty of seats Dover is unable to sell to fans
Advertising banners now cover plenty of seats Dover is unable to sell to fans | Source

There are any number of different reasons for the drop. Perhaps the biggest reason is the lack of competition. Jimmie Johnson has won six of the last 12 races at Dover and while that kind of dominance is admirable in a performer, it's a death knell for racing. The only time Dover sees any drama is when circumstances take the #48 out of the equation. Short of a major overhaul at the track, there's no reason to believe Johnson's dominance will end any time soon. And with the track's profits steadily declining, the money to make that kind of capital investment simply isn't there.


In many fields, changes in gross revenue roughly track with a company's overall profitability. That has not been the case here. The reason why is simple; overall attendance has declined while the value per fan has dropped even further. A track's operating costs for a race weekend are relatively set- from officials to utilities to temporary weekend employees, these kinds of costs aren't going vary significantly if attendance drops from 100,000 to 85,000. Tracks have also engaged in promotional efforts to draw that reduced fan figure, cutting into the revenue stream there as well. Fewer fans paying less money to attend the race equal fewer opportunities to offset fixed costs.

Aside from the overall stagnancy in revenue, SMI and DMI have also seen their piece of the overall cash pie grow smaller. In 2012, SMI accounted for 42.65% of overall track revenue in NASCAR. By 2014, that figure had dropped to 41.36%. The income figures are even worse as SMI's portion of the income total went from 39.78% in 2012 to 29.86% in 2014 (Dover's share dropped from 8.67% to 5.46% in the same period). Meanwhile, that cash had to go somewhere and it went to ISC. Their portion of overall net income went from 51.55% in 2012 to a whopping 64.67% in 2014.

Percent of overall revenue by company

Company
2012 % of Revenue
2013 % of Revenue
2014 % of Revenue
Change in %, 12 vs 14
Speedway Motorsports Inc.
42.65%
42.18%
41.36%
-1.29%
International Speedway Corp.
53.28%
53.77%
54.74%
1.45%
Dover Motorsports Inc.
4.07%
4.05%
3.90%
-0.17%
A small portion of the overall revenues moved from SMI and DMI to ISC between 2012 and 2014

Percent of overall net income by company

Company
% of 2012 Net Income
% of 2013 Net Income*
% of 2014 Net Income
Change in % Net Income, 12 vs 14
Speedway Motorsports Inc.
39.78%
60.34%
29.86%
-9.92
International Speedway Corp.
51.55%
33.09%
64.67%
13.13
Dover Motorsports Inc.
8.67%
6.57%
5.46%
-3.21
2013 Net Income figures exclude the previously mentioned goodwill impairment charges for SMI and DMI.
Bruton Smith (Executive Chairman) and son Marcus Smith (CEO) are the family powers at SMI
Bruton Smith (Executive Chairman) and son Marcus Smith (CEO) are the family powers at SMI | Source

These kinds of figures may explain why Speedway Motorsports announced in February that Marcus Smith will replace Bruton Smith as CEO. Bruton hasn't gone anywhere as he is the company's executive chairman. But at 88 years of age and with the company he founded hitting a financial wall, the time had come for change. SMI's investors see another company in the same field making enormous gains in market share and profitability despite no change in the overall distribution of races. That can't be erased by promises of huge revenue increases in 2015 thanks to the new television contract.


Without question, NASCAR has done plenty in its efforts to help the track companies. The new model car in both the Xfinity and Sprint Cup series was designed to match safety gains already made with better racing on the track. They have also tweaked the rules in an effort to enhance drama at both the individual race and overall season level. Whether those changes have had their intended effect remains up for debate. At least they're trying.


The danger is that if current trends continue, ISC will wield even more influence than it already has. The company is controlled by NASCAR and the France family and already is perceived to be favored by the sanctioning body (with good cause). SMI and ISC/NASCAR have engaged in legal battles over the years as a result of those ties. If SMI ultimately believes that it can make more money without NASCAR than with it, the temptation to break free and form an alternate stock car racing series would be strong. As CART/IndyCar showed us a decade ago, the only losers in that scenario are the fans.

Could Miles the Monster have fewer cars to chomp on in the future? He will if Dover loses one of its Cup dates
Could Miles the Monster have fewer cars to chomp on in the future? He will if Dover loses one of its Cup dates | Source

One way NASCAR could work to alleviate the disparity would be to move a Sprint Cup date from an ISC track to an SMI track. As Dover Motorsports Inc. is largely dominated by ISC shareholders, one of their two dates would be on the table as well. Smith has argued for years that Las Vegas, one of the few tracks in either company that has increased its attendance, deserves a second Cup date. While I would normally argue against adding more intermediate tracks to the schedule, the racing at Dover has been even worse than that at Vegas. Local residents simply are not supporting the track and unless NASCAR plans on sinking significant money into changing the configuration, that isn't going to change.


If Dover's dates aren't on the table, any one of a number of other tracks could be on the chopping block instead. Michigan would find itself on any short list. The track has a pair of Sprint Cup dates and like Dover has seen its attendance nose dive over the last five years. Its importance on the Cup schedule has also diminished along with Detroit's importance in the American auto industry. If the price of NASCAR track peace is moving a date from Michigan to Vegas, NASCAR will gladly pay it.


Ultimately something will need to be done to ensure that peace. SMI will not sit idly by while NASCAR keeps an ever-larger chunk of the revenue and the profit. They are already at the mercy of NASCAR for the bulk of the money thanks to the national TV contracts. They cannot afford to give away any more leverage, perceived or otherwise. If ISC and the France family are smart, they'll recognize that and move now. If they act in their own short-term self-interest? Things are liable to get interesting in a very short period of time.

Need more NASCAR news and opinion?

Another Left Turn columns on hubpages at http://anotherleftturn.hubpages.com
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Now it's your turn!

Should NASCAR consider divesting itself of its controlling interest in ISC?

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    • profile image

      Ann 2 years ago

      Nascar throws more bad ideas at the fans and tell the fans.."hey, this is what YOU wanted", when in fact they did not. The death knoll for many including myself started with "The Chase" and certainly the buffoonery of a one race format crowning a "Champ" has fans screaming. Castle Daytona has soundproof walls, all the while patting themselves on the back at how clever they are. Those seats ARE NOT empty solely due to economics, they are due directly because of Nascars actions on so many things. The 15 minute fan they coveted so much (because their "trending" research tells them) have left for another thing to occupy their 15 minute attention spans..and have left true fans divorcing what was once a very big part of their lives.

    • profile image

      Russ Edwards 2 years ago

      Always interesting to see the business side of the sport. And it certainly doesn't agree with the mantra that so many have about the sport hemorrhaging money hand over fist.

      That said it would be interesting to know how the industry has adapted and driven revenue increases, despite the obvious decline in attendance. TV is the easy answer but I can't help but feel its more than that.

    • profile image

      RJ Hirtzel 2 years ago

      Hello ISC Na$car, wake up the elephant has been in the room for quite some time, you even touched on it briefly. johnson and hendrick the convicted felon are the reason for the decline. Confict of interest? no CONVICT hendrick, that the problem , most penalized team, crew chief, and he gets house arrest for 5 indictments

      Wake up before its too late. Remove rick Hendrick!

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      Author

      Mike Roush 2 years ago from Newark, DE

      Russ, thanks for your kind words. I did a deeper dive into the 10-K filings this morning to see what the answer was. I don't know that there's a column in it but the short answer is that yes, TV revenues are it. The percentage net income (after impairment charges are removed) vs gross revenue remains roughly the same across the board, so the tracks aren't any more profitable per customer.

      Admissions revenues are down almost 50% from 2007 to 2014 ($467M vs. $239M). Event-related revenues are down 30% ($518M vs. $358M) and other revenues are down 15% ($45M vs. $53M). Only the TV revenue trended upwards, increasing nearly 25% during the last seven years ($528M vs. $423M).

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