Investors disappointed with NASCAR TV deal

Posted on Thu, Dec. 08, 2005

Investors disappointed with NASCAR TV deal

Shares of track owners ISC, SMI take a hit

By JOE BEL BRUNO

The Associated Press


NEW YORK - International Speedway Corp., the corporate name behind 12 NASCAR tracks, felt Wall Street's disappointment Thursday over a new $4.48 billion television contract that some felt should have been significantly higher.
NASCAR announced late Wednesday an eight-year agreement with News Corp.'s Fox, Walt Disney Co.'s ESPN and ABC, and Time Warner Inc.'s Turner Sports. The deal - which trumps its previous $2.8 billion, six-year contract - runs through the 2014 season.

However, analysts expected an even higher price to televise NASCAR's major racing events - including Nextel Cup, Busch and Craftsman Truck series.

"While the overall TV contract is an increase over the previous one, we believe the announced contract is at the low end of expectations, and the Street will view this as a disappointment," Raymond James analyst Joseph Hovorka said in a report.

The average annual rights fee of the deal is $560 million, which is about 40 percent higher than the current contract. However, NASCAR said the first year of the contract will be worth between $470 million to $500 million - and increase between 3 percent and 5 percent annually.

Analysts said this is well below their projected $573 million in rights fees for NASCAR next year, and they had estimated 2007 would hit about $575 million. This caused at least two Wall Street securities firms to recommend selling shares of ISC.

Investors were quick to sell off shares of International Speedway, sending it to a new 52-week low. Shares dropped $5.70, or 10.8 percent, to $47.10 at the close of trading on the Nasdaq, after earlier trading as low as $45.90. The previous year low was $48.97.

The stock is down 11 percent this year, however, it is now trading 22 percent behind its $60.59 high reached on April 5. Shares had traded at an all-time high of about $70 at the end of 1999.

It wasn't only International Speedway's stock that got slammed. Speedway Motorsports Inc., which owns six race tracks that host NASCAR events, also took a steep tumble in trading.

Shares of Speedway Motorsports closed down $4.17 at $34.80 - 10.7 percent - on the New York Stock Exchange. The stock is down about 8 percent so far this year, and has fallen 13.6 percent from its year high of $40.29 set in April.

"International Speedway and Speedway Motorsports will be negatively impacted in 2007 and beyond as the significant TV rights revenue stream will decline substantially," AG Edwards analyst Timothy Conder said in a report.

International Speedway - which was founded is controlled by the France family - owns or co-ownes a dozen race tracks throughout the county. The most well-known property is the Daytona International Speedway.

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Bill's Comment: Apparently, these so-called expert analysts do not watch NASCAR closely. Television ratings have been up every year since 2001, when they went to the current format of FOX/NBC/TNT/SPEED. None of the other major sports can make this claim. Also, you are less likely to change the channel because of the excitement, especially when the "Chase For The Cup", a ten race quest for the Nextel Cup with either the top ten drivers or drivers within 400 points of first place sprint (pardon the pun) to the finish line.

As in many events in our lifetime, there is always hindsight, thinking that you could have held out for more. However, I believe that the France family (and other NASCAR executives) decided to let the dominoes fall in place during the offseason, and proceed to make the product both more accessible and more marketable for all. Despite the fact that some are moaning and groaning about the value of the package, I feel that it is a win-win for all of the involved networks. As NASCAR is increasing its fanbase annually, the clock is ticking until " the good ol' boys" becomes more of a higher spectated event than both the NFL and the NBA. Only time will tell.