Business of Speed

The Money Behind the Motorsports Industry

By: Tim Frost

Date: January 1, 2019

Another year is upon us and this time will examine the business issues and trends that will affect the motorsports industry for the coming twelve months.

As the trade shows and banquets conclude, the off-season chatter looks towards the new year. The racing business is generally a positive crew, people who are passionate about the sport and enjoy what they do for a living. This may cloud the lens, but they will try harder and make do with less as the situation dictates.

The aisles at the PRI Trade Show at the Indiana Convention Center filled to capacity with companies showing their latest products. Complimented by educational sessions and press announcements, the event serves as the backbone of the industry from a business-to-business perspective.

Racing maintains a year-round calendar. As drivers received their trophies and points fund checks for the 2018 season, they were eager to get back to action. The number of indoor races continues to expand, led by the famed Lucas Oil Chili Bowl Nationals in Tulsa, Okla.

The media segment of the motorsports industry is undergoing rapid change. Will the rise of broadcast contracts continue as they reach the end of the contract terms? Existing carriers may elect to extend their relationships with sanctioning bodies or will potential new rights holders create bidding wars? The result will be tempered by declining ratings and audience sizes.

The wild cards are new technology and consumer habits. The development of the over-the-top market and bundled services for cord cutters are available. The financial impacts are unknown. The properties that own, develop and have the ability to distribute their respective content will be at an advantage.

Race fans are changing. Dedicated time to take in an entire race requires flexibility and mobile devices are meeting that need.

Esports has arrived. No longer in the shadows, it has become part to conversation in terms of fans and sponsorship. The fan base is growing rapidly. The next step is to commercialize and harness audience engagement power as it continues its strong growth.

The challenge is to develop a revenue-generating model that is similar to traditional sports. Each of the key stakeholders – publishers, brands, media, and properties (teams, leagues, and players) has prioritized tapping into the popularity of esports.

Motorsports is a leader in esports. Fans have been participating in simulation races for many years. From personal computer-based consoles to online sim-leagues, users compete against professional drivers in weekly challenges. Semi-trailers bring the events trackside with a season – ending championships.

Teams, sponsors and leagues are seeking to deepen the connection with their audience. Sponsorships are evolving into partnerships. The relationships are multi-layered and bidirectional. This takes an expanding skill set requiring a deep understanding and ability to change.

Data is a driving force. The ability to collect, analyze and understand is critical. Technology companies are working with sports properties to solve real business challenges resulting in unique story telling opportunities.

Races provide fans with digital content interactions. Information may be gathered to and analyzed to develop a better understanding of market segmentation.

Specialty events are being more common. Properties are creating races that are new. They create fan interest and social media buzz. The long-term benefit is the ability to control many aspects of the production and associated revenue streams.

No longer is the track front and center in making the race an event, and ancillary programming is key. Concerts require a similar same skillset to  expand visitation with non-traditional spectators.

Non-traditional forms of racing are giving rack promoters new options as off-road vehicles and powersports are rapidly growing segments with desirable demographics.

Venue design is evolving and track officials are creating new spaces to meet the needs of the spectator. Replacing grandstands with viewing decks and large gathering spaces has become a popular trend.  Midway areas allow sponsors to interact and activate with consumers have also become more important.

The underlying theme is for motorsports stakeholders to collaborate and create partnerships. Together their shared passion will race towards a successful future.