When spo(rt)nsors collide....

NASCAR, AT&T ready to battle on sponsorship issue

Tom Bowles

Cnnsi.com

On April 26, a hearing will be held in U.S. District Court in Atlanta, where NASCAR will represent itself against team sponsor AT&T in order to protect the rights of its series sponsor, Nextel. The case will determine if AT&T has the right to sponsor Jeff Burton's No. 31 Chevrolet in 2008 and beyond following the company's permanent name change from Cingular (the current sponsor of the No. 31) to AT&T. Depending on the outcome, Burton's team may need a new sponsor next season.
For now, the pending litigation has left NASCAR fans wondering how such a seemingly simple dispute can wind up in federal court. Further examination reveals issues of exclusivity, sponsor loyalty and marketing competition -- the latter as intense as the racing on the track. Here's a review of the key issues and developments leading up to the court date
Nextel and the grandfather clause
Potential conflict wasn't on the minds of Nextel officials when they were negotiating to sponsor NASCAR in '03. At the time, they were merely seeking maximum exposure as a new company looking to wrap itself around the sport's top level.
The growing cell phone giant wanted a high degree of marketing control to sponsor the Cup series, and their request was reasonable, given that outgoing sponsor Winston had engineered a deal for 31 years that gave it exclusivity rights at every level in NASCAR. From 1972 to '03, no other tobacco companies were allowed to sponsor any teams, drivers, or tracks hosting any NASCAR series without Winston's approval. With a $70 million per year investment on the table, Nextel was looking to get a similar boost out of its marketing dollars, a position NASCAR understood.
"There are certain sponsors that have these larger commitments, and therefore certain assets and rights," NASCAR director of business communications Andrew Giangola told SI.com. "The series sponsor helps all of our teams and all of our drivers. And because of their unique position in the sport, they deserve special protection."
In Nextel's case, that protection was offered -- but getting it wasn't as easy as it was for Winston. Kicking existing cell phone sponsors out when Nextel signed on could have been a messy situation for everyone involved, especially when two of those companies sponsored prominent teams. At the time, Ryan Newman and Robby Gordon were combining to win 10 of the 36 races in the series, and each had a cell phone company prominently displayed on the side of their cars (Newman had Alltel on his Penske Racing Dodge, while Gordon's RCR Chevrolet was sponsored by Cingular Wireless).
Not wanting to be the bad guy, Nextel came up with a solution that would appear to solve the problem while still providing it the exclusive rights it sought. Through a "grandfather clause," cell phone sponsors already involved in the sport would be allowed to continue participating as they already were -- as long as they met certain future conditions. NASCAR agreed to the clause, and Nextel became the new series sponsor (unlike Winston, the exclusivity does not extend to other NASCAR series such as Busch or Trucks).
"The way to think about [the clause] is it's a snapshot in time," Nextel director of NASCAR marketing Dean Kessel said. "As long as sponsors stay the way they are from that point in time (back in '03), they can participate in the sport as long as they want to. If those parameters change -- logos, marks, ownerships, things of that nature -- it's very clear, not only in the contract or other correspondences from NASCAR over time, that's not allowed."
"With the Sprint/Nextel relationship (Sprint and Nextel merged in '05), NASCAR allowed (just) Cingular and Alltel on the playing field," Giangola added. "Teams have known about that for years."
So what about other cell phone companies besides Cingular and Alltel? They're placed on an annual "competitor list," updated annually in association with NASCAR. Simply put, if you're on the list, don't bother looking to sponsor a team in the Cup series; Nextel's marketing presence wins out. It's a practice that, according to Kessel, isn't unusual.
"Exclusivity in sports is advantageous," he said. "Here in Charlotte, you cannot go to Bank of America Stadium and expect to see a Wachovia ATM machine. It's just not going to happen. We're paying a premium to have (exclusivity), and we think there are certain advantages with that we intend to leverage."
Tackling a merger
That leverage was largely hidden from public view -- until this year. At Atlanta in mid-March, eyebrows were raised when Robby Gordon's struggling single-car team had Motorola logos stripped from his car before qualifying because Motorola, which is instrumental in providing radios to teams in the Cup series, was on the "competitor list." After some wrangling behind the scenes, Motorola's sponsorship was allowed to stand, and by race day the logos were back on Gordon's No. 7 Ford Fusion.
But the exclusivity issue was now public, and the debate involving sponsorship -- the lifeblood of a team's survival -- was on. That's when a more serious controversy brought the issue to the sport's immediate attention.
While both phone companies under the grandfather clause -- Cingular and Alltel -- had remained as team sponsors, Cingular's driver had changed, with Burton assuming the reigns of the No. 31 by the middle of '04. That same year, Cingular went through a merger, acquiring fellow cell phone conglomerate AT&T Wireless.
After months of debate, late last year the new company made a decision to drop the Cingular name in favor of AT&T. With rebranding on its mind, the company wasted little time taking its marketing effort to the race track -- in mid-March, it proposed a new paint scheme with a small modification, allowing for two AT&T globes to appear on the side of Burton's car.
The company felt it was a minor change, but it violated the agreement NASCAR made with Nextel. NASCAR rejected the scheme, and AT&T responded with its lawsuit. From Nextel's vantage point, the issue is cut-and-dried -- AT&T is not a protected name and thus its logos should not be allowed on a car.
"That car can remain Cingular-branded," Kessel said. "As long as it stays that way, they can continue (in the sport) for the next seven or eight or nine years. We're not forcing a change there; these are decisions that are being made by (Cingular/AT&T). These were the parameters of the agreement; there's no new news here. Everybody knew the rules of engagement from day one."
Cingular spokesman Lauren Butler said her company has a different idea of what those rules are, especially since Cingular never stopped being a part of the No. 31 team.
"We have a 10-year relationship being involved with NASCAR," she said. "Cingular was not sold or acquired. The majority ownership that created the brand over five years ago back in 2001 has now simply increased its ownership to 100 percent.
"Our brand is changing. We're no longer Cingular; we're AT&T. To get value out of our sponsorship, we must be able to change our name."
According to Butler, AT&T felt the "grandfather clause" only kicked the company out of the sport if it increased the size of its logos or jumped to a different race team. Butler says the company has done neither.
"The way that we see it is that we've been a good partner for the sport," she added. "All we want to do is continue our involvement."
Maintaining a healthy balance
That involvement is now in question, with the outcome of the lawsuit leaving the future of the No. 31 team hanging in the balance. Burton, who won in Texas on Sunday, is off to one of the best starts in his career; he's in second place in the points standings, just eight behind leader Jeff Gordon. But if AT&T loses the battle in court and decides to drop sponsorship of the team, Burton could face a big challenge next year in trying to find a new sponsor.
Although officials from Richard Childress Racing (owner of the No. 31 car) could not be reached for comment, their displeasure with NASCAR's position is clear -- no one wants to lose the hand that feeds it, especially when that hand is worth millions.
Still, NASCAR maintains such unfortunate situations are a necessity in a world where everyone is always looking for their fair share of the marketing pie.
"Conflict and sponsors rubbing into one another has been part of NASCAR since the very early days," Giangola said. "We do our best to regulate it in a way that's fair. The France family understands that a well-funded field is essential to the sport. Without well-funded cars, you don't have the great competition that puts fans in seats. And that's what NASCAR's all about -- close, competitive, side-by-side racing."