So, NASCAR had a Tuesday news dump.
The big announcement Tuesday afternoon was supposed to be that stock car racing's sanctioning body signed a one-year extension with Monster Energy for title sponsorship of the Cup Series. Instead, the bigger news became why that extension was only for one year — because NASCAR is scrapping its old business model and planning to forgo a title sponsorship altogether.
But what exactly does that mean? There's a lot of jargon to be untangled and a lot still left to be determined, but we'llexplain what we know and what it might mean for NASCAR fans. Without further ado ...
Q. So NASCAR is going to a "new business model," but what exactly was the old one? What exactly is changing?
A. Let's start with the basics. Every year since 1971, NASCAR's top level — the Cup Series — has had what's called a title sponsor. That's some brand that sponsors the entire Cup Series. Back in 1971 (and up through 2003), that was R.J. Reynolds, the tobacco company, and its cigarette brand, Winston. The title sponsor became Nextel in 2004, then Sprint in 2008. Monster Energy took over that role last season. When we say old business model, that's what we're talking about in this context.
Starting with, it hopes, the 2020 season, NASCAR won't have that singular title sponsor. Instead, chief operating officer Steve Phelps said Tuesday, the sport will focus on "bundling" sponsorships with the sanctioning body, media partners (namely TV networks), and tracks. That's what we mean by new business model (or at least that's what NASCAR is proposing, but more on that later).
Q. So if NASCAR doesn't want a title sponsor, why did it sign an extension with Monster?
A. NASCAR's original deal with Monster, the one it signed in December 2016, was for two years. It also left open the potential for an extension, which is something NASCAR had hoped to get done before Jan. 1. Ultimately, because it was Monster's first year with NASCAR, the sport gave Monster some extra time to decide how it wanted to proceed. Tuesday's announcement of a one-year extension is the culmination of that process.
So why the extension at all? Because NASCAR can't make a huge decision like this willy-nilly. It's going to take some serious time and negotiations with a number of big-time stakeholders to figure out how exactly the new model is going to work. The one-year extension means Monster will still be around through the end of 2019. That's a bridge for NASCAR to figure out all the deals it needs without cutting off its lifeblood straight away. Or as Phelps said Tuesday, it would be nice to go all-in, but realistically you have to keep your options open.
Q. What will happen to Monster Energy after 2019 then? Do they just go away?
A. Probably not. NASCAR wanted Monster as its title sponsor in the first place because it's a flashy, young, exciting brand. NASCAR needs a new generation of young fans ... and Monster's entire customer base is exactly the kind of people NASCAR craves. The match made sense, and it still does. More likely, as Phelps suggested Tuesday, is that Monster sticks around the sport as the official energy drink or as an official partner in some capacity — just not as the title sponsor anymore.
Q. OK, so let's say NASCAR goes through with this change. How will it actually change the sport in a visible way for fans?
A. Uh, what you call the top series? That's about the only thing we can say for certain now.
There is actually some precedent to a sports league doing this. English soccer's top league operated similarly to NASCAR for many years, with a title sponsor. Up until 2016, it was known as the Barclays Premier League. But since then, it's just been the English Premier League. So you're looking at the NASCAR Cup Series, or the NASCAR Premier Series, or something like that, with no brand attached to the front.
Q. This sounds like a fairly substantial change for NASCAR. What if it doesn't work? Does NASCAR cease to exist?
A. Not even close. Look, NASCAR knows this is a big jump. NASCAR fans are loyal to sponsors, both of the sport and their favorite drivers, so opting to move away from a title sponsor in that regard is one thing. But the monetary risk? Monster's naming rights deal with NASCAR was reportedly worth around $20 million per year (the financials for the extension were not released), and that was less than the naming rights deal with Sprint before them. That's a lot of secure money from one place that suddenly ... isn't as secure. It's going to take time to talk to sponsors, get them on board, and try to figure out what works best for everyone.
And even after all that, there's still a chance this new business model fails. Or maybe the individual sponsors aren't ready to make that sort of commitment yet. Either way, Phelps said — and rightfully so — that NASCAR isn't going all-in here. It can't afford to, nor could any sports league dealing with that amount of money.
Instead, NASCAR is going to take the next year or so to weigh its options on this new model. If enough sponsors sign on, and it works better for everyone involved, then great. But if it doesn't, there's always the old model to fall back on. Phelps said it would be "highly unlikely" that Monster is the title sponsor beyond 2019, but he added that there's certainly a chance NASCAR could go back to that system if this new one doesn't pan out.