Speedway Motorsports (NYSE: TRK) is the second-largest owner/operator of motorsports racetracks in America. The Company owns/operates seven racetracks which host a combined 26 NASCAR-sanctioned events: eleven Sprint (formerly NEXTEL) Cup Series races, eight Nationwide (formerly Busch) Series races, and seven Craftsman Truck Series races. The racetracks host non-NASCAR races as well, but NASCAR series events are the Company's most important source of revenue, accounting for 82% of total revenues in FY 2007.
In addition to revenues from admissions, merchandise, food sales, approximately 25% of the company's total revenues come from television rights fees and corporate sponsorships. In 2007, NASCAR signed a new eight year broadcast agreement with Fox, ABC/ESPN, TNT, and Speed worth $4.5 billion. In 2007, this agreement generated $142.5 million for Speedway Motorsports and the Company predicts its value will increase by 3% per year through 2014. The long-term nature of these contracts provide TRK with a certain amount of financial stability. That said, Four sponsors (General Motors (GM), Chrysler, Sears Holdings (SHLD), and Chevron Corporation (CVX)) have already announced that they will drop or reduce their NASCAR team/event sponsorships next season and NASCAR's third-tier truck series is searching for a new naming sponsor. TRK is looking for a new naming sponsor for its Spring 2009 Sprint Nextel Cup Series Race in Las Vegas and the search will be more difficult in light of these sponsorship cutbacks. Between March 30 and June 30, 2008, TRK reported lower attendance rates at NASCAR-sanctioned events at three of its racetracks and attributed the lower numbers to more conservative consumer spending habits.
In FY 2007, Speedway Motorsports had revenues of $561.6 million, a decrease of 1% from FY 2006. Net Income in 2007 decreased 65.5% from 2006, primarily as a result of the poor performance of Motorsports Authentics - a joint-venture with Speedway Motorsports that designs, promotes, markets, and distributes motorsports licensed merchandise. Speedway Motorsports lost $57.4 million in Motorsports Authentics when most of its inventory's value was stripped when the sponsorships for NASCAR's two largest series changed and many high-profile drivers joined new teams/sponsors.. The other primary factor in depressing total revenues was a 12% decrease in NASCAR Broadcasting revenue which is discussed below.
In January 2008, TRK purchased New Hampshire International Speedway (NHS) for $340 million cash. The 96,000 seat track in Loudon, New Hampshire has agreements to host two NASCAR Sprint Cup races, one NASCAR Nationwide Series race, and one NASCAR Craftsman Truck Series race in 2008. The addition of a new track has already begun to impact the Company's bottom line with total revenues in the first quarter of 2008 up 17.7% since a year ago; admissions revenues alone increased 18% due to a NASCAR Sprint Cup race held NHS.
Professional car racing generates more revenues from advertising than any other sport. According to one source, many NASCAR teams receive 80% of their funding from corporate sponsorships. NASCAR and Speedway Motorsports are vulnerable to any cutbacks in corporate spending/advertising, and to a lesser degree, cutbacks in consumer spending. The Company has seen fewer advance ticket sales and lower attendance at some of its races in 2008. Magement expects, however, claims that attendance at its signature NASCAR events has remained relatively constant. The amount of money advertisers are willing to spend on NASCAR is related to NASCAR's popularity and vast reach; fortunately for Speedway Motorsports, a signifcant portion of their revenue is set in long-term TV contracts, multi-year sponsorship deals, and in association with the NASCAR brand.  Present economic woes are already impacting NASCAR's sponsorship revenues; some sponsors have begun reducing their commitments for next season and a number of teams and races are looking for new corporate sponsors.
All of TRK's venues are outdoor racetracks and thus susceptible to adverse weather conditions that can delay or cause the cancellation of events. Many races sell out beforehand but for the races that don't sell out, the threat of bad weather can have a negative impact on walk-up ticket sales. Delaying events also has a negative impact on revenue because it hurts walk-up ticket sales, many people leave before the race, depriving the company of concessions revenues, and television revenue is decreased because a smaller audience will tune in to the race if its not run at its expected time. Because of the collective nature of the broadcast contracts, if any NASCAR Series events are canceled at any racetracks, even those not owned by TRK, the company would lose a portion of live broadcast revenues.
The cost of building and owning a racetrack, the limited number of motorsports races, and limited media contracts are all significant barriers to entry in the motorsports entertainment industry, inherently limiting Speedway Motorsports competition. The company's main competitors in motorsports entertainment are International Speedway (ISCA) and Dover Motorsports (DVD), however all of these companies see their competition as other professional sporting leagues and events such as the NFL, NBA, and MLB.
International Speedway (ISCA) - The largest operator of motorsports racetracks in the US, this company operates 13 racetracks versus Speedway Motorsports' 7 and hosted 46 NASCAR Series events compared to Speedway Motorsports' 26 events. In FY 2007, International Speedway's revenue was $816.6 million. International Speedway and Speedway Motorsports are co-owners of Motorsports Authentics, the leading producer of motorsports licensed merchandise. NASCAR-sanctioned racing events accounted for 85.8% of International Speedway's 2007 total revenues.
Dover Motorsports (DVD) - Dover Motorsports is the third largest operator of motorsports racetracks in the US. They operate 4 racetracks and hosted 12 NASCAR Series races in 2007. In FY 2007, Dover Motorsports had revenues of $86.1 milion.
|Speedway Motorsports (TRK) ||International Speedway (ISCA) ||Dover Motorsports (DVD) |
|Total Revenue - FY 2007 ($ mil)||561.6||816.6||86.1|
The number of motorsports events in the US is limited and although there are many permutations of the sport - Indy Racing League, National Hot Rod Association, motorcycle, etc. - NASCAR is the largest revenue generator by far. The NASCAR Sprint Cup Series has 39 races, the Nationwide Series has 34 events, and the Craftsman Truck Series consists of 25 races. In total, there are 98 NASCAR Series races  and in 2007, Speedway Motorsports racetracks hosted 26 of these events (27%).
|Speedway Motorsports (TRK) ||International Speedway (ISCA) ||Dover Motorsports (DVD) ||Other Racetracks|
|NASCAR Sprint Cup Series Events||11||21||2||5|
|NASCAR Nationwide Series Events||8||16||6||4|
|NASCAR Craftsman Truck Series Events||7||9||4||5|