Monster Energy deal part of evolving business model for NASCAR

NASCAR has had three title sponsors for its premier series: Winston (1971-2003), Nextel/Sprint (2004-16) and Monster Energy (2017-present). Streeter Lecka/Getty Images for NASCAR

NASCAR needs a Cup series sponsor for 2020.

Or does it?

NASCAR revealed Tuesday that it didn't want to extend the Monster Energy deal beyond 2019 because it might not sell stand-alone series entitlement rights starting for the 2020 season.

The reasoning seems solid. NASCAR chief operating officer Steve Phelps said NASCAR is considering bundling its top sponsorships with racetrack sponsorships and potential television advertising buys. He wants to make the sport easier for sponsors to navigate.

That might sound strange at first -- a series sponsorship equates to serious dough. When Sprint was involved, more than $20 million of its reportedly $50-75 million annual spend went into the season-ending points fund. Monster Energy reportedly was only paying approximately $20 million a year.

But if by "bundling," NASCAR can generate more sponsorship revenue overall, that could make up for not having a sponsor name on its top series.

"It's not fully baked. ... We would like to go in that particular direction," Phelps said. "If there is not an appetite for it, then we would pivot and go in a different direction."

Baking in NASCAR is difficult because everyone has different ideas of recipes and different tastes. And that's where the challenge starts.

Phelps said NASCAR executives have talked about potentially going to a new model over the past few years. He said NASCAR will keep its options open, that it needs to make sure sponsors want NASCAR to sell sponsorships that way.

NASCAR will look at its current sponsors to see who might be interested in the new model.

"I think it will be positive," Phelps said. "I think we're going to have some success with it."

The Monster Energy deal would lend credence to those statements. After a somewhat last-minute deal with Monster Energy signed last December, the energy drink company had a rough start in 2017 when trying to do deals with the various tracks. Hendrick Motorsports doesn't use the Monster logos for in-house items because of its deal with Pepsi. And Monster Energy doesn't do much television advertising.

While Monster Energy's extreme athlete shows and mixed martial arts fights were attractive at tracks, its activation felt disjointed from week to week.

The speculated $20 million value of the series deal devalued the team sponsorships that were more than that -- why sponsor a team if a company can get the full series for less?

All these issues signal that NASCAR needs to shift its philosophy. By doing five-year sanctioning agreements with the tracks (the current ones end in 2020), NASCAR could possibly work sponsorship deals to coincide with those.

NASCAR also has been combining key roles for its company with that of International Speedway Corp., which operates a majority of the racetracks. NASCAR is a private company owned by the France family, while ISC is a publicly traded company whose majority of stock is owned by the France family.

Whether they could work as separate companies and have this type of sponsorship that goes across various entities remains to be seen. Whether ISC and rival Speedway Motorsports Inc. could do a combination deal in their current form also might be problematic.

Phelps said there will need to be more collaboration, which he considers already at a significantly high level. But NASCAR could benefit from having more than one company be the primary beacon of its product.

"We're talking about broadening it so it's just not one company at the top of the pyramid if you will," Phelps said. "It's multiple categories, multiple companies that will allow us to make it easier. We think there's greater value for the sponsors by doing this."

A big issue is the teams won't necessarily be part of the new deals. To get them to agree on having common sponsors could be difficult.

"At this particular point it probably would not impact the team model, but we certainly want to make sure our teams are feeling a part of this as well," Phelps said. "It's a little more difficult obviously given the number of entities that are teams."

Phelps said there would be different tiers, including a business-to-business tier. He said it is not meant to be exclusionary but to be as simple as possible to create value.

Monster Energy vice president for sports marketing Mitch Covington said he's interested in the new model, but he didn't dispute NASCAR's characterization that Monster Energy would not be the series sponsor in 2020 if it doesn't change the model.

"We're certainly hopeful that ... Monster will stay not just in our sport but stay as an official partner in some fashion," Phelps said.

This all doesn't sound like a half-baked idea. The only question is how it will taste. And the toughest thing is that once the menu is set, it's hard to change. So it had better be good right out of the oven.