Wednesday, April 25, 2007

AT&T lawsuit could take power from NASCAR

By Mark Aumann, NASCAR.COM
April 25, 2007
12:41 PM EDT

On Thursday in an Atlanta courtroom, a federal judge will begin the process of sifting through documents that will ultimately determine whether AT&T has a valid argument in its lawsuit against NASCAR over exclusivity rights for the sanctioning body's entitlement sponsor.

But what's at stake is more than logos and paint schemes. What currently exists as a "gray area" in NASCAR's driver-owner agreement would suddenly become black and white -- and NASCAR officials say could negatively affect every team in the garage, no matter which side wins.

"There are three categories that are essential to the industry," said Ramsey Poston, NASCAR's managing director of corporate communications. "One is the title sponsorship: Nextel, Busch, and Craftsman. The other is the tire manufacturer and the other is the fuel supplier.

"If those categories are damaged, then there could be a ripple effect that ultimately hurts the drivers and teams. We think it's very important to protect those three categories that benefit everybody in the sport. That's why everyone in this garage ought to be rallying around NASCAR's position and fighting to maintain the status quo because it benefits everybody."

Unlike most sports leagues, NASCAR does not operate under a franchise system. Instead, teams are independently owned, having to negotiate their own sponsorship agreements. Those sometimes come in conflict with NASCAR's own sponsorship deals, as in the case of Sprint/Nextel and AT&T.

When Nextel signed on as entitlement sponsor of NASCAR's premier series in 2003, Cingular and Alltel were given exemptions. That's the crux of the argument set forth by AT&T.

"There is nothing in our contract that prevents us from changing the Cingular brand name to our new brand, AT&T, on the No. 31 car," said John Burbank, AT&T's vice president of marketing. "Cingular's grandfather clause, which was provided to us by NASCAR before we signed our agreement with Richard Childress Racing, states we can continue as a sponsor as long as we do not increase our brand position on the vehicle we sponsor and do not move to a different race team. What could be clearer?"

So what are the long-term implications? If AT&T wins, Nextel loses much of its exclusivity as an entitlement sponsor. NASCAR and Nextel have never made specifics of their 10-year agreement public, but industry insiders say the contract -- estimated at between $70 and $75 million annually -- may actually be a five-year deal with an option to renew.

If that's the case, Nextel could opt out at the end of 2008, which would be detrimental to the sport, according to Poston.

"Nextel spends a huge amount of money to support the Series including the points fund, the marketing, and all the advertising," Poston said. "If that goes away, it will have a direct negative effect on the drivers, teams and tracks in the Series."

On the other hand, if NASCAR's defense is successful, not only does Childress potentially lose a primary sponsor that has claimed to have spent more $100 million since 2001, but other teams could suddenly find themselves as targets.

Sponsors that currently exist somewhat peacefully under the status quo may decide to follow suit, literally. If entitlement sponsors have broad exclusivity, it stands to reason that official sponsors could conceivably force their competition out of the industry.

"Today's environment is incredibly flexible, it's a sponsor nirvana," Poston said. "That's why we're able to have so many competing sponsors be successful in this sport. We work with the teams to make sponsorships work. The reason Cingular and Alltel are in this sport is because we went to bat for them.

"Today we have over 100 of the Fortune 500 companies successfully participating in the sport. We think that's an incredibly positive feat for everybody."

And NASCAR's ability to police disputes would be severely limited, Poston believes.

"Our hands then are potentially tied," he said. "Everything could be more black and white. The driver-owner agreement could change and there could be less competition.

"And you might get to the situation like you have in the NFL, where if you wear the wrong baseball hat during the Super Bowl, you get fined a $100,000. That's not a good environment for our drivers and our teams."

For now, the Childress camp remains quiet, saying "at this time, the lawsuit is in the hands of NASCAR and AT&T."

Poston said it was never NASCAR's intent to get involved in a contentious conflict between two corporations battling over market share. However, with so much at stake, NASCAR must defend its ability to govern as a sanctioning body.

"There are very few places where we have to draw the line, but this is one of them," he said.

"We're also responsible for creating an environment where everybody wins. Brian France says in order for this sport to grow, drivers, teams and tracks have to win. Right now, everybody's winning."

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