Australia’s leading motorsport series has a lot to contend with as it prepares to restart its racing season. With only two races conducted over seven months, and the next not scheduled until 27 June, the organisers face a considerable range of challenges as the show gets restarted.
COVID-19 has thrown up many serious issues for all sports, however Supercars have also been hit with a number of other heavy predicaments to wrestle with. This is not a perfect storm, it’s more like a cyclone they are facing.
So significant is the combination of both COVID-19 issues and other untimely dramas, I would suggest Supercars need to immediately establish a specialist ‘Crisis Cabinet’ (this term maybe overdramatic but not when you hear feedback from stakeholders in the Series who feel many major issues require urgent action) This Crisis Cabinet would address both transformational change and problem solving.
Is it unreasonable to suggest that the current structure and leadership of Supercars does not have the capacity or capability to handle all the urgent concerns? They will be fully stretched just managing business operations thrown up from the pandemic. The added brain power and specialist expertise and experience necessary to implement robust solutions to navigate the business threats noted below will have to come from either new ownership/management and or a highly skilled team of external specialist advisers.
Regardless of whether it’s new ownership and/or a’ Crisis Cabinet’ model that is urgently needed, the person central to any recovery and reset of Supercars must be former supremo, Tony Cochrane. His proven leadership and intellectual sports deftness is crucial for Supercars’ right now.
The three different storm cells creating these cyclone conditions are: 1) those flowing from COVID -19 being sponsorships, government funding and team sustainability; 2) those that are self-inflicted: television contracts, Supercars For Sale sign and Team Sydney; 3) out of the blue events, being Holden Exit, Virgin Airlines Receivership and Adderton Mk II.
The primary components of the Supercars economy are television rights, sponsorships and government funding. It’s not unreasonable to assume each of these crucial revenue streams are under pressure – both for teams and Series.
Here is some commentary and opinion on each of these disturbances to the momentum of the Supercars business.
This is a double-edged sword. Firstly, if for example, a sponsor at the start of the season had signed on for $500,000pa, what would their expectation be for a reduced figure given the revised calendar, fewer races, experimental unproven new racing formats, loss of customer coach’s box experiences and limited media attending the races until we come out of current COVID restrictions? A sponsor may feel it’s reasonable to renegotiate a 25% reduction now and a further 15% if certain KPIs were not achieved by year end.
Teams will be trying extremely hard to sell the benefits of the E Series, however that program, as well promoted and televised as it has been with enthusiastic social media driver posts, did not register on my passion meter. Not sure Sponsors would be prepared to accept E Series represented any sponsorship value as its appeal was artificially inflated by one-off sports starved audiences during lockdown.
Secondly, if recessionary conditions and a much tougher economy plays out over the coming years, corporate and retail marketing budgets will be hammered. Unfortunately in tough times it’s sponsorships that always get treated the most harshly when the bean counters introduce heavy cutbacks. Contracts due for renewal with existing sponsors will be very hard going for both the Series and the teams. Hard to quantify, but maybe for every dollar previously invested in good times, it may now be more in the area of 70 cents post-COVID.
The various state and territory governments are very generous financial contributors to Supercars. Given their tough road ahead with serious budget deficits already coming into play, one could assume all governments will be taking a very hard look at ‘Essential’ versus ‘Non-essential’ expenditure contracts. It’s not hard to forecast government money going into the sport in a manner, to which Supercars have previously been accustomed, could be seriously scrutinised and squeezed.
As unbelievable as it sounds Supercars are currently pushing to move the calendar to a summer season. This could also create some disquiet with governments, particularly in northern regions which hopefully does not put at risk contracts currently on foot.
The news that broke on February 17th this year, a week prior to the first race in Adelaide, that Holden would exit Australia, stunned the entire nation. The flow-on effect of Holden’s exit from Supercars is profound. The impact of 16 of the 24 cars on the grid carrying a defunct brand and logo for the next two years is a marketing nightmare.
It was concerning to read a report of a team owner suggesting car brands are now irrelevant as the sport is only about providing great entertainment. This is bollocks and is treating Holden loyalists with contempt given the significant investments in the sport over the past 50 years by the massive Holden fan base.
By any measure the Holden closure is a huge blow to Supercars, this year, next year and ongoing. No one should underestimate the emotional wrench and potential loss to the sport of three generations of loyal Holden racing fans with their hero car brand gone forever from Australia and NZ showrooms. A competitor ARG has already left Supercars flat-footed by seizing the brilliant initiative for a Holden racing revival program later this year.
On April 21st, two months after Holden’s exit announcement, came the news that the highest profile brand in the sport, and naming rights sponsor, Virgin Airlines, went into receivership.
It doesn’t get more serious than this in terms of financial impact on the Series. The loss of income and special travel offsets for both the Series and the teams will be significant. Primary naming rights sponsorship is a costly business, so post receivership, one would foresee any new owner of the airline hardly in any hurry to renew old sponsorship arrangements.
Naming rights sponsorship for a sport such as Supercars should attract $1 million-plus annually and finding replacement sponsors in that league will be difficult in the post virus landscape.
The Supercars Foxtel and Free to Air television deal has not yet been renewed for next year.
Delays in Supercars getting a deal locked away by now is a conundrum. Their job has just become a lot harder with recent announcements that two major sports and networks have finalised their deals. The NRL have just concluded negotiations with an estimated $2 billion deal over a seven-year cycle and the AFL have extended their big money Foxtel and Channel 7 deals to the end of 2024.
Both these deals would have created palpitations for Supercars, knowing such a significant amount of money has already been sucked out of the television sports coffers prior to their deal being done.
There are reports in media circles that Supercars CEO Sean Seamer last November rejected a very attractive Foxtel deal that would have created a clear platform for going forward. If this was the case it defies belief, as eight months later opportunities for an improved new contract would seem a much tougher proposition.
One wonders if Supercars’ current crazy push to shift races to a summer series is more a roll over to accommodate the networks who wish to build content for their soft summer sports programming. Surely Supercars could not be so mindless to move to a summer series where ‘eyeballs’ are nowhere near a TV screen, as our sensational summers beckon all generations of Australians to our entrenched culture of enjoying our beautiful outdoors lifestyle.
Last year Supercars trumpeted the prospect of a Sydney team coming into play for the 2020 season as virtually the biggest fillip for the sport in a long time. Then in January there were media reports the new dream team ‘was on the skids’, but suddenly the Supercars CEO insisted it would proceed.
All this uncertainty on the eve of season start up was a bad look. But worse was still to come when immediately after the first race the highly-promoted supposed star and glue of the Sydney team, James Courtney, walked out. This effort has been a big embarrassment for Supercars and one can only ponder whether, after the worst start imaginable, what the future now holds for Supercars’ big plans for a high profile Sydney team.
The financial health and viability of the teams is the most crucial element of the overall Supercars business model – always has been and always will be. How will teams come out of COVID is the 64 million dollar question. To what degree will teams, already experiencing tough going with operating budgets, be impacted for the balance of this year and next?
Incomes will be down, it’s only a matter by how much. The only counter measure a team has to offset any major loss of income is to attack their cost base, which is very delicate exercise. When you take large chunks of money out of the ‘product’ you often gamble with customers’ reactions to big changes.
It did not take long for the first victim of the downturn to present itself. A major tool company was forced to withdraw its sponsorship, which then triggered a long-standing stalwart of the industry having to totally withdraw his franchise, which in turn meant a well-established driver lost his seat.
The first task and priority a new ‘Crisis Cabinet’ should tackle would be an action plan to address team profitability and ideas for new revenue streams. This is where a Supercars recovery plan must start.
Supercars for Sale
As mentioned in a previous article the worst possible look for any business, in particular a major sporting body, is a ‘For Sale’ sign hanging over a business for a prolonged period, which is the case with Supercars. All the behind the curtain scenarios of who might or might not be candidates to buy the business is unsettling for stakeholders. A ‘Crisis Cabinet’ must find a way to determine an appropriate solution and quickly stabilise this situation.
There is currently plenty of noise circulating that a certain party and syndicate are working through an acquisition plan and possibly making a play. This hearsay noise however seems to be setting off negative alarm bells.
Adderton Mk II
As the Team 23 door closed at Tickford, another one opened for a return sponsor, who at the end of last season claimed he would have nothing further to do with Supercars. Will this ‘overnight’ marriage of convenience sustain or end in tears in motorsport’s high risk minefield where sponsors back the driver rather than the team?
The new sponsor is Peter Adderton with his company Boost. He resides in America and is a 24/7 social media self -promoter who nonstop posts photos of himself. In April last year in this article when Adderton took on the sponsorship of the Garry Rogers team, I flagged how this unusual cocktail of two differing personalities could be a future best seller. Sure enough there was excessive argy-bargy on social media from Adderton’s keyboard where his hubris saw him give Supercars an ultimatum on demanding certain technical changes which the Series rejected. The long established Garry Rogers Team is now no longer part of the Series.
Given the unpleasant dust-up between Supercars and Adderton last year, hopefully Supercars would have stipulated Tickford include some strict contractual undertaking for his sponsorship re-entry to prevent any repeat of last year’s disputations.
From firsthand experience, conducting a four-car team requires exacting balance and precision management skills. Its complexities make it six times more onerous than running a two-car outfit. Whilst it’s no holds barred between the four drivers on the race track, all off-track marketing, activations and media activities present challenges around proportionality of energy on any one car or driver.
With the huge egos of Adderton and Courtney now coming into play, head coach ‘Tickford Tim’ will have his hands full. With four cars, four drivers and four naming rights sponsor, all parties will need to remember the first lesson we learnt at school sports: “No Individual is bigger than the team”. Then as we moved to more senior ranks of sports, every change room or coach’s room featured a bold sign again reminding us of this and “There is no I in team”. Maybe this could be a first for a team in Supercars with ‘Tickford Tim’ placing such a sign in their pit garages.
All these issues noted above are significant by any standard, and whilst new ownership (whenever that may come about) will hopefully introduce transformational change in the Series, most of the problem areas above need attention now. There would be little argument from good judges the sport urgently needs Tony Cochrane. Every button should be pushed to have Tony either head up the ‘Crisis Cabinet’ or take a lead role in organising a new ownership regime.
This article was written by John Crennan, Motorsport Contributor.