Subject: [NEXTEL-1] The Changing World of NASCAR

From: [email-masked]
Date: Sun, 28 Sep 2003 12:48:47 -0400

Posted on Sun, Sep. 28, 2003

The Changing World of NASCAR: No. 4, Economics
Nextel answers NASCAR's call as partner for
the future
By RANDY COVITZ
The Kansas City Star
The courtship of
NASCAR and Nextel
began, of all places,
with a simple
flirtation at the
Super Bowl.

Brian Corcoran,
NASCAR's director of
corporate
marketing, struck up
a conversation with
Michael Robichaud,
director of sports
and event marketing
for Nextel, in the
lobby of the San
Diego Marriott.

NASCAR was in the market for a new title sponsor for the Winston Cup series, and
Nextel, attracted by NASCAR Nation's 75 million loyal fans, was looking to build
its customer base and increase its burgeoning role in the sports marketplace.
"The Super Bowl tends to be a place where sports and business people meet,"
Robichaud said of the unusual setting for a motorsports summit.

Corcoran had been invited to the game as a guest of Coca-Cola, another NASCAR
suitor, but Robichaud was so intrigued by the possibilities of NASCAR, he
convinced Corcoran to accompany him to the game.
Besides, Nextel's seats were better. So was its offer.

In June, NASCAR announced a 10-year, $700 million agreement for Nextel
Communications, Inc. to replace R.J. Reynolds Tobacco Co.  as corporate sponsor of
NASCAR's marquee series. What has been known as Winston Cup racing since 1971,
will be known as Nextel Cup, starting in 2004.

The shift from cigarettes to cell phones will mark the most dramatic change in
NASCAR since asphalt replaced dirt tracks.
The new sponsorship will take NASCAR off Tobacco Road and head it down the
information superhighway. Through Nextel, NASCAR will connect with new fans,
especially youngsters, it could not reach through its partnership with Winston
because of restrictions on advertising by tobacco companies.

"Let's look at the limitations Winston has had for 30-plus years," Corcoran said.
"No TV, no outdoor billboards, no radio, no Internet, no dot.com.

"But most important, what is NASCAR all about? Families. Winston, God bless them,
we appreciate them, and they'll always be part of the family in their own way, but
they limited our ability to support a groundswell of marketing efforts to kids.
"When's the last time you saw a teen-ager without a cell phone?"

Certainly, NASCAR had other suitors pursuing the title sponsorship after R.J.
Reynolds, burdened by tobacco lawsuits, rising taxes and a declining market share,
informed NASCAR it was free to find another sponsor, even though four years
remained on their five-year, $250 million agreement.

Visa, McDonald's, Home Depot, Coca-Cola and Kodak were among the candidates, but
the possibilities presented by Nextel's position as a cutting-edge,
technology-based business attracted NASCAR.

"Nextel is a perfect fit for NASCAR because technology is an untapped growth area
for our sport," said retiring NASCAR chairman Bill France Jr. "`Nextel will be
able to promote our drivers, our teams and tracks in all forms of media."
That, in turn, will provide new revenue streams for racing teams and drivers who
are battling the high costs of competing.
"You'll see more TV ads for the Nextel series," said Butch Hylton, crew chief for
Kevin Harvick's Busch series team. "You'll see them profiling drivers in different
ads, kind of like you see the Pepsi or Coca-Cola commercials.

"Let's say Matt Kenseth wins the championship this year. He'll be the first Nextel
champion, and I see them using him in a lot more ads than Winston could. You're
going to see drivers get more exposure, it's going to help their sponsors, it's
going to help that driver sell more T-shirts, and that all comes right back to the
race team, and gives us more money to race with."
Both NASCAR and Nextel are confident the new sponsor will attract new audiences.

"Maybe people who didn't think they were a NASCAR fan because it was for Southern,
package-goods people will see `Nextel' and say, `I'm a technology person, and
Nextel is involved, so maybe I should look at the sport,' " Robichaud said. "Then
they learn NASCAR is not just about going in circles, but there is a lot of
technology, a lot of strategy, and maybe it turns on new fans to the sport."

This isn't Nextel's first foray into major-league sports. Nextel has major
sponsorships with 12 NHL teams; six NFL teams; three major-league baseball teams;
two NBA teams; sponsors the NHL All-Star Game; the National Thoroughbred Racing
Association's Breeder's Cup Distaff; "Nextel at the Half" on CBS Sports' NFL
coverage; and "Sunday Night Baseball Presented by Nextel" on ESPN.

But Nextel executives were drawn to NASCAR's evolving demographics. Since NASCAR
became available on network TV in 2001, its youth fan base has grown rapidly.
Surveys show 58 percent of youngsters aged 7-11 are NASCAR fans. And NASCAR is the
only major sport that has shown significant growth in those 12-17, more than
doubling the number of teen-agers watching NASCAR.

"The demographic of who's watching and attending NASCAR races is not what it used
to be and is not what a lot of people still think of it today," Robichaud said.
"These are more affluent, technology savvy and a great target for us. Seventeen of
the 20 largest sporting events are NASCAR races. The Super Bowl gets 70,000,
80,000 people, depending on what stadium. The Richmond NASCAR race, which is not
one of the top 20, had 105,000.  Indianapolis got 300,000 people.
"They go for multiple days, it's a traveling carnival every week, and to be able
to interact with a large number of people is a great opportunity for us. There are
thousands of people who are starved for communications."

III

Nextel, a Fortune 300 company, was founded in 1987 in Reston, Va. It registered
its first profit, $1.66 billion, in 2002 and enjoyed record financial results for
the second quarter of 2003.

Nextel ranks fifth among the nation's wireless carriers in terms of customers with
11.7 million subscribers as of June 30. It emerged as the most profitable wireless
carrier by carving a niche selling to high-use business customers while other
carriers engaged in price wars chasing individual consumers. Ninety percent of
Nextel's subscribers are businesses.
Nextel, listed No. 1 in this year's annual Information Technology 100 rankings by
Business Week magazine, forged ahead of its competitors when it became the first
wireless company to develop a walkie-talkie feature, called push-to-talk, in which
subscribers can communicate with about 13 million other Nextel and Nextel Partners
subscribers throughout the United States in less than a second.

"If you think of work groups that have immediate need to have a quick
conversation, you can do it more quickly," Robichaud said of the push-to-talk
feature. "The way we price that, as opposed to minutes of a cellular call, we have
all-you-can-call monthly plans, you push that number, go one-to-one, one to many."

With Nextel's new relationship with NASCAR, Robichaud envisions racing teams using
the push-to-talk serivce as well as transmitting data with Nextel phones.

"They can use two-way radio from the track back to their shops or their home
office," he said, "or to a sponsor or to coordinate at the track, or with their
drivers or their crew or with their owners.  These racing environments are big,
time is important, and communications are a big part of it.

"Let's say a team is in Kansas City for the race, but they have a question about
something that was done with the engine. They can just push the button, and get
right to someone at the shop in Charlotte and go over a couple of things. It goes
beyond what they can do at the track."

Nextel also hopes to create a better fan experience by providing racing
information through its voice and data systems.
"You're at qualifying, and you're not sure where everyone is running," Robichaud
said, "or who's out of the race, who's not, we can provide services to keep people
up-to-date. You subscribe to a service, pick your favorite driver, and we'll send
you a message to let you know when and where he qualified. Or you want to know
what the running order is, instead of having to log onto the Web site or wait
until the morning paper comes out, it will be on your device."

Still, some might question whether Nextel, while competing in such a volatile
marketplace, won't turn out to be another high-tech company destined for rough
times. Just a few years ago, Sprint would have been an example of a high-tech
company capable of taking on such as project. But that was before it was tainted
by layoffs, a management crisis and a money-losing PCS division.

No one knows that better than Bill Scott, president of Petty Marketing. Sprint
dropped its sponsorship of Kyle Petty's No. 45 car this year because it could no
longer afford it.

"Certainly we learned from Sprint a little bit about the telecommunications
industry, and what can happen," Scott said. "I think Nextel is a survivor in some
of the shakeout of the telecommunications industry just like Dell is a survivor in
the shakeout of what's happened in personal computers. Those companies that have
come out of it strong, like Nextel, are well-positioned for the future."

Industry analysts say Nextel is the real deal. "You measure a carrier by a couple
of things," said Michael Chuba, principal analyst with Gartner, a technology
research company in Stamford, Conn. "You look at churn, which is how quickly
people leave their network and go to their competitors, and ARPU -- the average
revenue per user. Although their number of subscribers are significantly lower
than say, Verizon or Cingular, their churn is among the lowest in the industry and
ARPU is the highest."

Indeed, Nextel's ARPU is about $69 per month for the second quarter, up from $67
in the first quarter, compared to the industry average of $50. It's churn was 1.6
percent, the lowest in an industry that averages a 2.6 percent monthly defection
rate.

"One of the interesting things about Nextel that seems in concert with NASCAR, is
Nextel's service is a little bit different than other mainstream wireless
carriers, and its customers are extremely loyal," said Adam Guy of the Yankee
Group, a technology and telecommunications market-research firm in Boston.

"It's pretty fair to say Nextel is going to be around a while in one fashion or
another. We've all been waiting for years for this next wave of industry
consolidation. You never know what's going to happen, but Nextel's strength in the
marketplace is going to proliferate despite a lot of the market uncertainties."

III
One of the most visible changes at NASCAR tracks in 2004 will be the elimination
of the familiar red and white Winston tents, where free packs of cigarettes were
distributed. They'll be replaced with Nextel kiosks, where salespeople will
demonstrate phones and activate celluar service for fans.

But as Nextel launched a new ad campaign this week, complete with a new bright,
eye-catching yellow logo; a language targeted to reach a new customer base of race
fans; and a new slogan --

"Nextel. Done."-- it wants to enhance, not destroy, the good will Winston built
for 33 years.
"We're very much about the future, but we understand the sport has a rich
tradition, and we're going to embrace that," Robichaud said. "Imagine somebody
came up to you when you were 34 years old and said, `You've got a new name now.'
That's going to take time."

RJR and Winston's stamp is ubiquitous in racing, beginning in the early 1970s
after tobacco companies were prohibited from advertising on television and radio.
RJR took that advertising money and channeled it toward NASCAR, giving stock-car
racing a much-needed marketing boost.

Winston provided the red and white and paint for grandstands at tracks throughout
the South; built restrooms, roads and media centers; and contributed more than
$101 million in points-fund money for the drivers.

"Clearly, the stature the sport has gained makes us proud we played a small role
in it," said Ned Leary, president of RJR's Sports Marketing Enterprises. "I look
back and think we did a good job with the tools we had. Unfortunately, those tools
have been diminishing. They're coming to the table with every tool imaginable."

While Winston could be a tough act to follow, veteran driver Kyle Petty is keeping
an open mind.
"People said the same thing about the TV package a couple of years ago, when
everybody seemed to be upset that ESPN was losing the TV package," he said. "Now,
you're hard-pressed to find anybody who even (remembers) ESPN's commentators
because they like the Fox and NBC broadcast so much.

"The same thing for Nextel. You have a lot of naysayers out there, but Nextel has
their agenda, and that might be better than what RJ Reynolds was. How they promote
the sport and take us in
another direction, and once we get there, we may look back and
say, `Man, we should have been here all along.' "

http://www.kansascity.com/mld/kansascity/sports/6845011.htm

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