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US Motorsports Corporate Spending Off In '09 - IEG

Reuters, February 12, 2009

By Ben Klayman

CHICAGO - Motorsports, including NASCAR, will continue to feel the pinch of the U.S. recession this year as sponsorship spending in that sector by North American companies is expected to fall for the first time in nearly 25 years.

North American-based companies will spend an estimated $3.3 billion in 2009 to sponsor motorsports teams, tracks and sanctioning bodies, down 5.7 percent from $3.5 billion last year, according to research firm IEG, which is a unit of advertising giant WPP Plc (WPP.L).

The fall would be the first such decline since IEG began tracking motorsports spending in 1985.

"I don't think it's any surprise," William Chipps, senior editor with IEG Sponsorship Report, told Reuters. "Most sponsorship sellers in the motorsports community saw this coming. The challenge is the cost of entry is so high that it makes it difficult for many companies to plunge into motorsports."

While motorsports includes such properties as the American LeMans Series, the National Hot Rod Association, the IndyCar Series and World of Outlaws dirt track racing, NASCAR makes up the bulk of the spending, he said. NASCAR, which opens its Sprint Cup racing season on Sunday in Florida with the popular Daytona 500 stock-car race, boasts a fan base of abut 75 million people and a large stable of corporate backers, but the sport has moved to slash the costs of participation.

Other sports also have been hurt by the recession and the resulting pullback in consumer and corporate spending. The National Football League and National Basketball Association cut jobs, while Major League Baseball froze its 2009 budgets.

NASCAR has been hurt as General Motors Corp (GM.N), Ford Motor Co (F.N), Chrysler [CBS.UL] and Toyota Motor Corp (7203.T ) have slashed spending in the sport as they struggle with a U.S. sales market that in January was the weakest in 27 years. Most other industries also have been hit in the recession, making it hard for NASCAR to replace lost spending.

NASCAR Chief Marketing Officer Steve Phelps told Reuters the sport expects attendance at its races this year to fall in the single-digit percentage range, while sponsorship spending will be down slightly.

"On the business side, absolutely it's a hunker-down year out of necessity," he said in a Wednesday telephone interview. NASCAR and other motorsports are likely to see some existing primary team sponsors sell their exposure on a vehicle for several races to offset their costs, while new sponsors sign deals for less than a season or for as little as one race, Chipps said.

The 2009 estimate reflects reductions in spending by existing sponsors as well as elimination of programs, like the exit from NASCAR by Domino's Pizza Inc (DPZ.N ) and Eastman Kodak Co (EK.N), he said, adding there were bargains to be had.

Increased spending by such NASCAR sponsors as recreational vehicle retailer Camping World and insurer AFLAC Inc (AFL.N ), mandated price increases in existing sponsor deals, and the entry of IAC/InterActiveCorp's (IACI.O) search engine kept the decline from being worse, however. IEG also pointed to a multiyear contract extension with NASCAR signed by candy maker Mars' North American unit in the chocolate, chocolate bar, cheese-filled snack and pet food categories.

"Motorsports is a viable marketing platform," Chipps said. "The brand loyalty fans have to sponsors is phenomenal.

"Deals are still being done and new companies are still hopping in, but not at the same level as in previous years," he added. (Editing by Matthew Lewis)