Cover Story - Auto Racing
The France family of Daytona turned NASCAR and International Speedway Corp. into a national phenomenon, but the caution flag is out as they try to expand into Seattle and New York.
So forgive Staten Islanders if not all of them are salivating over International Speedway's plan to build an 80,000-seat NASCAR track and a 50-acre retail center on an old petroleum tank farm there. The local reception to the plan, Oddo says, has been "cold -- very cold. There's a cold front blowing in from the Arctic. It's far, far, far way off from being a done deal."
One thousand miles away in Florida, at International Speedway Corp.'s headquarters, just across the street from the 168,000-seat Daytona International Speedway, Lesa France Kennedy exudes a different kind of cool. France Kennedy, the most influential woman in sports business, says she would be wrong not to worry -- especially having spent $100 million for the 677-acre Staten Island site, the largest undeveloped tract in the five boroughs. But she sees the chances of having a racetrack up and running in New York by 2010 as highly likely. "Every community has different concerns," she says confidently, even placidly, from a purple chair in her president's office.
France Kennedy, 44, can't afford to hit the wall at this point: New York and Seattle, where International Speedway's plans for another track also aren't going smoothly, are the last big domestic markets for her family to conquer as it creates a national business phenomenon out of what was a regional car cult. Says analyst Bob Simonson of William Blair & Co.: "They've said so loudly so often, 'That's the Big Kahuna. We have to have NASCAR in New York.' It's very important to get into that market, the No. 1 media market in the country."
ISC'S NAVIGATOR: As president of International Speedway Corp., Lesa France Kennedy is steering the company toward important new markets. And she hopes to make ISC's next destinations New York and Seattle.
Elsewhere, it's all green flags for International Speedway and its sister company, NASCAR, which is run by France Kennedy's brother, Brian France, 43. Seventeen of the 20 most-attended U.S. sporting events are NASCAR races. NASCAR's premier series, the Nextel Cup, is second only to the National Football League in television ratings. Indeed, its minor league circuit, the Busch Series, has higher ratings than pro baseball, basketball and hockey.
Some 40% of NASCAR's 75 million American fans are women, which explains why cereal and laundry detergent companies sponsor nearly as many cars as do beer and liquor companies. Sponsors gladly pay $10 million to $20 million for naming rights to a race car: NASCAR ranked first in the most recent sponsorship satisfaction survey by Street & Smith's Sport Business Journal.
International Speedway Corp.: Higher Margins
Notes: Figures include revenue related to the North Carolina Speedway, which International Speedway sold in 2004. Numbers may not total due to rounding. Source: SEC filings
No family deserves more credit for the sport's popularity than the Frances. "The story of racing in Daytona Beach is really the story of my dad and my family," the sport's 72-year-old guiding light, Bill France Jr., wrote in the foreword to one of the NASCAR-related coffee table books in the lobby of International Speedway's office.
The same is true of NASCAR. Indeed, the Frances are the most influential Florida family in any major sport. Bill France Jr.'s father, "Big Bill" France, founded the National Association for Stock Car Auto Racing in 1947 to be a professional and honest race promoter in a field where organizers sometimes absconded with the prize money during the race. He and his wife, Anne, from nearly the start, had two operations. One, NASCAR, organized and regulated races. A separate company, now known as International Speedway, owned the Daytona speedway that Big Bill and Bill Jr. completed in 1959.
Bill Jr. took his father's legacy and over three decades built big. As NASCAR boomed, International Speedway went along with it, with Bill Jr. presiding over both. NASCAR ran the sport, and International Speedway became the repository for family-owned tracks and the catering business and the race-broadcasting radio network that went along with them.
IN THE ZONE: Daytona's new infield Fan Zone allows spectators to watch race teams prepare, get autographs and hear bands.In the last nine years, the company bought out a part-owner of its Watkins Glen track in New York and acquired eight tracks in Arizona, Virginia, California, Michigan, Florida, North Carolina and Pennsylvania. It partnered in constructing the Chicagoland Speedway and won government financial support to build a track in Kansas City. Both tracks held their first Cup races in 2001. Today, the company owns 11 raceways and a share of the two in Chicago. Some 630 of its 1,000 employees work in Florida, most of them at the Daytona track and the company's one-story headquarters building nearby, off Bill France Boulevard.
How the TV Money Flows
NASCAR is in position to demand more for television rights to its races than its current six-year, $2.4-billion deal, analysts say. The NFL has seen average annual TV payments climb 27% to 37% even though viewership has been flat since 2000. Over the same time, NASCAR viewership has grown about 40%, notes analyst Bob Simonson of William Blair & Co. Even better for International Speedway: TV money is apportioned to tracks according to the drawing power of the races. International Speedway has the Daytona 500, NASCAR's biggest event, and the finale at Homestead. Here's how the TV money flowed between NASCAR and sister company International Speedway last year:
$415 million from TV networks to NASCAR for broadcast rights to Nextel Cup and Busch Series races. The portion ascribed to ISC tracks totals $220.2 million.
$198.2 million (90% of the total) flows from NASCAR to ISC as ISC's share of the TV money. NASCAR keeps 10% of the TV money for itself.
INTERNATIONAL SPEEDWAY (ISC):
ISC keeps $78.9 million of the $198.2 million. (Money flows back and forth between NASCAR and ISC as reimbursements for advertising, leased space and shared personnel. ISC gets a $1.2-million net benefit from this.)
ISC pays $119.3 million to NASCAR for prize and point fund money and sanction fees.
DRIVERS AND TEAMS:
NASCAR passes along $107.9 million to the driving teams as ISC's contribution to the prize and point fund. NASCAR keeps $11.4 million of the $119.3 million.Bill Jr. and Bill Sr. both have been called "benevolent dictators." They led wildly successful dictatorships. As head of NASCAR, Bill Jr. balanced the interests of all the sport's participants -- drivers and teams, sponsors, broadcasters, fans and even other track owners. "Everybody would like more," says analyst Dennis McAlpine of McAlpine & Assoc. in Scarsdale, N.Y., but "everybody gets their piece of the cake."
International Speedway's piece of the cake last year was $648 million in revenue, up 55% from 2000. The company's margins, already at 24% after taxes, are increasing with the sport's popularity on TV and moves into new markets. Last year, it made a $156-million profit, up 210% from 2000. Shares of International Speedway began trading on the Nasdaq in 1997, though the Frances still control the company through a class of super-voting stock.
As the sport matures, Simonson predicts, growth will slow, but profits and cash flow will continue to climb. Operating cash flow increased $31.3 million last year to $226 million. A change in the makeup of International Speedway's large investors reflects the shift. Growth stock buyers attracted in the past by the company's acquisitions have given way to conservative investors drawn to companies with strong cash flow at below-average risk, Simonson says.
France Kennedy started in the ticket office as a teenager and graduated from Duke University with degrees in economics and psychology in 1983. She returned to the family business and was put on the International Speedway board the next year. She developed Daytona USA, a speedway side-attraction where race fans pay $21.50 to pass under giant sponsor signs to tour the history of Daytona racing, watch an IMAX movie, play interactive games and simulators, view cars and drop dollars in the gift shop. It opened in 1996, the year she was made executive vice president. She's been president of International Speedway since 2003, with Bill Jr. remaining as chairman.
The contrasts between France Kennedy and her father are evident. Bill Jr. held court for years from the capacious France family suite in the Daytona grandstand and from the NASCAR trailer in the garage area. "That's not my strength," France Kennedy says, sipping Propel water under a car painting created by her father and now 13-year-old son during a charity event. "I'm probably more a one-on-one person. My dad has a presence."
In a business where Dodges, Fords and Chevrolets race, France Kennedy drives a Lexus -- and, she adds, a Chevrolet Avalanche. She and her husband, Bruce Kennedy, an Ormond Beach plastic surgeon, spend 20 to 35 weekends a year at races. France Kennedy is, according to the Sport Business Journal, the most influential woman in sports business. She pulled in $817,133 last year in salary, bonus, stock awards and other benefits. She also holds one of six NASCAR board seats.
As president of ISC, France Kennedy faces some tests ahead that will require adroit steering. One involves maximizing revenue from existing facilities. Following the lead of Concord, N.C.-based rival, Speedway Motorsports, which brought luxury suites and lights for night racing to the sport, International Speedway added lights at Daytona in 1998. Last year it also added a new premium ticket club facility. France Kennedy built a new infield Fan Zone where spectators can observe car inspections, look through garage windows to watch teams prepare, get autographs and hear bands.
The company also is adding lights for night racing, 16 suites and 800 club seats at the Homestead-Miami Speedway south of Miami. Once a slower seller, Homestead is a hot ticket now that her company has banked the track for more exciting competition; in addition, NASCAR awarded Homestead the November season finale for all three NASCAR series, making it the potential site for determining the Nextel Cup winner.
Meanwhile, International Speedway has signed with Sarasota-based Casto Lifestyle Properties to tear down the buildings that house the company and NASCAR headquarters in Daytona. In their place, International Speedway and Casto will construct new headquarters as well as offices, retail, lofts and a movie theater on the 50-acre site.
France Family Group
Owns 100% of privately held NASCAR
Owns 60% of the voting power at publicly held International Speedway Corp.
Board members in common
Bill France Jr., Jim France, Brian France, Lesa France Kennedy. The Frances hold four of the six NASCAR board seats and four of the 13 International Speedway board seats.
William "Big Bill" France, who died in 1992, founded NASCAR in 1947 and ran it with his wife, Anne (who died in 1991). Built the tracks in Daytona and Talladega, Ala.
William C. France Jr., 72, chairman of ISC and vice chair of the NASCAR board. Bill Jr. was in charge at NASCAR from 1972 and ISC from 1981 until heart and cancer surgery slowed him. The two children of France and his wife, Betty Jane, now run the sport.
James C. "Jim" France, 60, NASCAR board member and executive vice president and ISC's CEO and vice chair. He was formerly president and COO.
Lesa France Kennedy, 44, president of ISC since 2003 and a NASCAR board member. Bill Jr.'s older child.
Brian Z. France, 43, NASCAR chairman and CEO since 2003 and an ISC board member.Another challenge for France Kennedy is keeping International Speedway's slice of cake the largest for any track operator hosting NASCAR races. The company hosts 21 of the 39 Nextel Cup races and gets 85% of its revenue from NASCAR.The family ties between the two companies have always raised the specter of conflict of interest.
Competitors aren't always content to drift along behind ISC: In July, Kentucky Speedway filed an antitrust suit against International Speedway and NASCAR after the 5-year-old Kentucky track wasn't awarded a Nextel Cup race. In 2002, Francis Ferko, a shareholder of Speedway Motorsports, sued when that company failed to get a second Cup race at its Texas track. That case was settled last year when International Speedway sold its North Carolina track, including its Cup date, to Speedway Motorsports for $100.4 million. Speedway Motorsports then transferred the Cup date to its Texas track.
Analysts are concerned that track owners will see court as the road to securing one of the lucrative and limited Cup dates -- to International Speedway's detriment. France Kennedy declined to comment on the Kentucky suit.
The Big Apple
France Kennedy's biggest hurdle, of course, is penetrating the New York and Seattle markets, continuing the geographical realignment that has defined the company in recent years. For a time, as NASCAR's popularity grew beyond the Southeast, it simply awarded Nextel Cup races to tracks in new markets. That's how International Speedway got Cup races for Kansas City and Chicago, where it has partial ownership.
More recently, however, as the schedule neared capacity at 39 weekends a year, International Speedway has had to take Cup dates from its Southeast tracks in order to add races at its tracks in important new markets such as Phoenix and Los Angeles. While that diminishes the value of the older Southern racetracks that lose Cup dates, France Kennedy says it's a worthwhile tradeoff. The new tracks have better attendance, and their bigger markets mean more sponsorship and hospitality dollars. Once it has tracks in Seattle and New York, International Speedway expects to move races from existing tracks to those sites, as well as get one of the remaining open weekends on the Nextel schedule for New York.
But first, the tracks have to get built. In Seattle, International Speedway had to drop a proposed site as costs rose and the likelihood of getting sufficient public financing faded. International Speedway switched to a site in Kitsap County, an area 30 to 40 minutes by ferry from Seattle that is best known for its U.S. Navy facilities. International Speedway says it must have government support to build the more than $250-million, 80,000-seat track it wants. But state Treasurer Mike Murphy opposes funding. Washington is still paying off the bonds on the torn-down Kingdome and is already supporting the Seahawks stadium.
If the company can get into New York, says analyst Simonson, "there will be a halo effect that will be phenomenal." An example: Sponsors entertaining customers and clients at a Cup race in the rural South might well have to lodge their guests in a moderate hotel chain a long bus ride from the race. In New York, the sponsors could lock up rooms at the Waldorf, host a dinner at a fine restaurant and treat their guests to the race and other New York amenities. NASCAR and International Speedway also hope New York will bring new business sectors, such as financial services, into the sponsorship fold.
One measure of the company's hunger for New York is that it isn't asking for special government financing, just approval. The potential payoff to the sport and the $100-million land cost have made winning over Councilman Oddo and his constituents imperative. Aside from lobbyists and other experts, France Kennedy has hired Gameday Management Group, an Orlando company that engineers moving people in and out of events like the Olympics, to devise a way to get most of the fans to Staten Island without their cars. The plan depends on requiring 80% of spectators, when purchasing tickets, to commit to coming to the race by bus or ferry.
"Deeply flawed," Oddo says of the traffic plan. "The world hasn't seen that many people moved by small boats since Dunkirk." He says two other council members representing Staten Island are just as skeptical, and he can't envision the project being approved over the objections of the local representatives. Says Oddo: "If this is the final plan, it's dead on arrival."
Adding to the hurdle, Staten Island Congressman Vito Fossella has released a letter to France Kennedy announcing his opposition. Besides a better traffic plan, International Speedway must make a financial return to Staten Island, Oddo says. Tax revenue that goes into the general city coffers doesn't count.
International Speedway's timeline calls for submitting plans over the next year and racing by 2010. France Kennedy views the quest for New York as "a timing thing. It's patience. It's an educational thing too. I think we have some exciting times ahead of us. They're more challenging, especially when it comes to development. It's going to bring out the creativity in our management team."
The Race for the NASCAR Hall of Fame
HALL MONITOR: Five cities, including Daytona (rendering above), are in the running for the Hall of Fame. NASCAR will decide who gets it by the end of the year.
In Georgia, Gov. Sonny Perdue personally pitched the NASCAR committee deciding where to put its Hall of Fame. Kansas City offers grand plans and government money, as does Charlotte, N.C. And Richmond, Va., is in the running too.
In the race to land the Hall, Daytona too wanted state financial help, but its effort ran out of gas in the Legislature. George Mirabal, president of the Daytona Beach/Halifax Area Chamber of Commerce, has made virtue out of necessity. The more than $100-million Daytona Hall project will sell bonds to be repaid with Hall revenue, the only one of the five competing cities not dependent on public funding that may not materialize, Mirabal says. He also says Daytona's closely guarded design is superior to that of its competitors.
Lesa France Kennedy, International Speedway president, is staying out of the site selection for now but says she may have an opinion when the decision comes to NASCAR's board. "I think you have to park your heart," France Kennedy says. "This is really truly a Hall of Fame for the industry."
NASCAR starts a Hall of Fame as Halls for other sports suffer from stale exhibits, shrinking attendance and obscure locations -- all the more reason to pick Daytona, Mirabal says. "Location, location, location is No. 1. They want sustainability. They're going to look at which site is going to sustain this Hall of Fame where it will be more successful in 10 years than it was in year one and in 20 years than in year 10."
NASCAR will decide on a host city by year-end. Each city projects opening in 2008. "We need this in Florida," Mirabal says. "It belongs down here."