Sponsors willingly invest millions of dollars every year and NASCAR relies heavily on them to maintain their teams and events. However, recently sponsors have been leaving NASCAR and pursuing other options. You may be wondering the truth behind why NASCAR is losing their sponsors.
NASCAR is losing sponsors because their declining attendance and television ratings mean that there are fewer people seeing those sponsors. Therefore, companies that sponsor NASCAR are at risk of seeing both lower profit margins and financial losses if they continue their sponsorship.
Below, we will explore how NASCAR attracts sponsors, and whether their sponsors are earning a sound profit for their efforts. We will also look closer at why NASCAR is losing sponsors, how much the sport is declining in popularity, and whether their fan base will return.
How Does NASCAR Attract Sponsors?
NASCAR attracts sponsors by providing an entertainment option that retains fans, high views, and good ratings. Sponsors expect a return in investment, which is achieved by putting their logo out there in front of the fans. Without the fans or views, sponsors will not deem it worth the investment.
There is an old saying that everybody makes a living by selling something. Even if you don’t work in direct sales, you are still selling yourself because of the service you provide. For example, if you work in a steel packing warehouse, the quality of how you bundle and package the product is the means you use to sell both yourself and the company.
It Must Be Valuable For Sponsors
Translating this mentality into sponsorships, the product, which is the sports league, must show value to prospective sponsors. The entertainment mechanism plays a huge role for any sports league to attract the largest multinational corporations in the world for sponsorships.
NASCAR works in the same way. The more entertaining their product, the more sponsors they can expect. If sponsors don’t find the product entertaining, they will forgo sponsorship from NASCAR to another sports league or brand, like the NHL, whose popularity has rapidly grown in recent years.
Companies and brands sponsor a sports league because they believe that sports league will give a sound return on investment (ROI). They expect more eyeballs in front of their brand’s name, logos, and even services. This, in turn, creates consumer interest in the brand, and ultimately profits.
How Sponsorships Work In NASCAR
When you watch a sporting event either live or on television, you will find dozens of examples of sponsors. At a NASCAR race, this is obvious. Sponsors are plastered all over the cars. Someone is even sponsoring the race itself, and their logo is typically all over the track.
For example, the Southern 500 at Darlington is called the Cook Out Southern 500 as Cook Out is sponsoring the event as of 2022. Or even in years’ past, there are examples including the Winston Cup, Nextel Cup, Sprint Cup, and Monster Energy NASCAR Cup. They were all sponsors of the Cup Series.
Companies sponsoring the event are focused on customer interest, hoping to make a profit through NASCAR by attracting fans that are watching races in order to conduct business with them. They do so by exposing NASCAR fans to their business name and logo.
For example, Companies A and B are exploring sponsorship opportunities. After researching, Company A believes it is worth it to sponsor a NASCAR event or team. With Company A sponsoring the race or team, they are trying to attract fans to shop with them over Company B.
How Sponsors Choose Who To Work With
Unlike previous seasons in the 21st century, NASCAR teams have big-time sponsorships thanks to smaller fields and charters. In the past, we saw big-time drivers attract some of the largest sponsors, like Tony Stewart with The Home Depot, and Jimmy Johnson with Lowe’s.
The larger and more credible the name, the bigger the sponsor since that sponsor knows its driver will give them exposure and therefore, return on investment. Smaller names and teams will often attract sponsors that are exploring whether NASCAR is right for them.
It’s not uncommon to see sponsors sign on with smaller teams for just a few races. If a sponsor sees a sound ROI, they will continue to sponsor that team. However, if they do not see financial rewards, they will cease sponsorship. This also goes for NASCAR itself.
Rare Regional Sponsors
At NASCAR events, you often see several major sponsorships whose companies belong on the Fortune 500 list. However, you don’t usually see regional sponsors at NASCAR races or sponsoring a team because for them, it is simply not worth the investment.
You may remember smaller, independent race teams from the past. They would bring regional sponsors with them. In such cases, those sponsors would not earn an ROI. Instead, they went along for the ride to help fuel their local independent driver’s racing efforts.
J.D. McDuffie, one of NASCAR’s more successful independent drivers, who raced from 1963 until 1991, often used regional sponsors for his independent number 70 team. Those efforts once saw him finish a season ninth in the NASCAR Cup points standings.
However, in the 21st century, regional sponsors are a rarity. They don’t have the same type of reach as your national and multinational chains who could see a NASCAR sponsorship as another cash flow. Therefore, they choose not to invest their money into the sport.
Do NASCAR Sponsors Make A Profit?
NASCAR sponsors do make a profit. Sponsors expect a sound ROI, otherwise there would be nothing to gain from the sponsorship. At the very least, they expect to break even. When a NASCAR sponsor starts losing profit, they will usually choose to leave and pursue more profitable options.
The first thing you need to know about NASCAR sponsorships is that they are business investments. If it weren’t for sponsors, NASCAR would not be a thing. The same goes for the NFL, NBA, NHL, etc. No sponsors, no sporting organization. Even little league baseball has dozens of sponsors to help them fund the efforts so kids can enjoy a full season playing the sport they love.
You probably remember going to a little league baseball game and seeing a bunch of signs with business names and logos lining the outfield fence. Those local businesses forked money into the league because they believe they can attract the parents to invest in their services.
It could be a local real estate company, fencing company, bricklaying, concrete, whatever the niche. In NASCAR, some of the world’s largest corporations are giving both the organization and the teams large sums money to put on a show for 36 points-paying events.
A Risk Worth Taking
Whether companies earn a profit from their sponsorship efforts varies. Obviously, if we go back to the local little league baseball example, those small businesses are probably making profits because they are not funneling over copious amounts of money for season-long exposure.
NASCAR sponsorships are way different. They expect to earn profits, or else they wouldn’t be sponsoring NASCAR. Therefore, if a sponsorship sticks with NASCAR, they are either coming close to breaking even, breaking even, or they are earning a profit.
However, you have probably seen companies leave NASCAR. Those companies either did not profit, or they profited and saw their profit margins shrink. This caused them to get out of the business and seek opportunity elsewhere. They decided it was no longer worth the financial risk.
Is NASCAR Losing Sponsors?
NASCAR is losing sponsors. Unfortunately, NASCAR has been losing sponsors for the greater part of the 2010s. Several major sponsors have recently seen a decrease or loss in profit and consequently have decided to drop NASCAR and pursue opportunities elsewhere.
After 2022, Mars Inc, whose M&M’s brand sponsored Kyle Busch for years, is discontinuing their sponsorship. They had been around the NASCAR landscape since the 1990s when they sponsored Ernie Irvan. Mars isn’t the only familiar face in NASCAR that pulled the plug on its sponsorship. You may remember Red Bull, Kellogg’s (another former Kyle Busch sponsor), UPS, Target, and many more.
To make matters worse, NASCAR is having difficulty replacing these sponsors. Even if they could manage to attract the same quantity of sponsors, it would be no easy endeavor to replace quality, big-time multinational corporations like Kellogg’s or Target.
Why Are Sponsors Leaving NASCAR?
Sponsors are leaving NASCAR because NASCAR is losing fans and views. With a decrease in viewership and ratings, sponsors no longer see the value in investing in the sport. Instead, majors sponsors are turning towards sports that are rising in popularity, like the NHL.
Take one look at a NASCAR race with those Next Gen cars and you are seeing tighter, more exciting racing than ever before. However, you also need to realize that consumer tastes change over time. It’s fair to speculate that maybe consumers are just no longer interested in NASCAR.
NASCAR isn’t the only league suffering. Major League Baseball is now becoming a distant third in the big four North American pro sports leagues, paling behind the NBA. The MLB used to be more popular than the NFL. Football teams even played in baseball stadiums for years.
Now, the NHL is surging in popularity. Ten years ago, you’d have been laughed out of a board directors meeting if you mentioned putting an NHL game on ESPN. Now, sports fans all over America love professional hockey.
Unfortunately for NASCAR, sports fans are going in other directions. Formula 1 is more popular worldwide, but NASCAR held the edge in America. Now, Formula 1 and IndyCar are slowly closing the gap on NASCAR, even if the latter is still technically more popular.
The richest companies in the world are also the smartest financially. They know how to make money. They study demographics, attendance, and television ratings and use the information to decide who they want to sponsor. When companies see declining ratings or attendance and fans looking elsewhere, they have no reason to sponsor NASCAR.
Therefore, NASCAR is losing sponsors because they are losing fans. Companies that once saw value in sponsoring the organization or individual teams no longer see that value. The more fans who watch IndyCar or Formula 1, or even the NHL, the more former NASCAR sponsors know they can earn a higher profit margin.
Is NASCAR Losing Fans?
NASCAR is losing fans. We know this because over the past half-decade, television ratings and attendance have declined. We also see NASCAR attempted to save ratings by revamping their schedule and designing the Next Gen car to better resemble the showroom cars.
If NASCAR wasn’t losing fans, they wouldn’t be adding more road courses or attempting to have the Next Gen car better resemble their showroom cars. When NASCAR or any sports organization loses fans, they make drastic changes to try and rekindle interest in the brand. If something isn’t broken, don’t fix it. For years, the only changes NASCAR made involved safety.
While NASCAR still changes things in the name of safety, they are also changing events now more than ever before. They revamped the NASCAR playoffs in recent seasons, added stage racing, modified the cars to race in tighter packs, and added road courses, all in attempt to bring back that fan base.
Despite this, NASCAR still lost fans. The Daytona 500 is still losing out. In 2019, it drew 9.17 million viewers, the least watched 500. In 2020, that number declined to 7.33 million. In 2021, it dropped to just 4.83 million, before the number rebounded in 2022 to 8.9 million.
A Sign Of Hope?
As you can see, the 2022 Daytona 500 brought in nearly twice the number of viewers than the 2021 event. But that doesn’t mean NASCAR is anywhere near out of the woods yet. They are still suffering from record-low numbers, yet the advent of the Next Gen car may have drawn interest.
If the ratings at future races continue to trend upward over the initial seasons of the Next Gen car’s lifespan, then there is hope for NASCAR. Their descent was a long, slow, and painful process, so those sponsors won’t return if they see higher ratings only for a single season.
They will come back if NASCAR can maintain those better ratings and even reach the 10-million or more-mark viewership-wise in the future. You can guess that someone in those corporate offices across the world will be monitoring the situation closely. If sponsors believe that NASCAR can once again provide a sound ROI, they will return.
NASCAR is losing sponsors because many of them no longer see value in sponsoring the sport. They leave because of declining profit margins or financial losses resulting from NASCAR’s decrease in popularity. Sponsors are currently pursuing other sports but may return if NASCAR can bring fans back.