Even if you’re not a NASCAR fan, you probably know that their yearly competition is sponsored by Nextel (now Sprint/Nextel) — hence the Nextel Cup. They’ve had this sponsorship since 2004, when tobacco advertising was outlawed in the US, ending the over 30-year reign of the R.J. Reynolds Tobacco-sponsored Winston Cup. The $75 million yearly contract between Nextel and NASCAR is said to have brought new heights to the stock car circuit.

With this deal came certain privileges for Nextel — notably a large control over marketing issues and an clause allowing them exclusivity in telecommunications sponsorship. The only problem was that both Altell Wireless and Cingular Wireless already had sponsorships on cars. So, as is reasonable, both were grandfathered in to these sponsorships — that is, they could keep them, but no new telecommunications sponsorship deals could be made.

That right of exclusivity is now up in the air.

In December 2006, AT&T bought Cingular. Surely, the folks at Nextel foresaw trouble even before that, during talks of the merger. After all, AT&T’s brand is much more recognizable than Cingular’s. Why wouldn’t they want to place it on the car they were now paying to sponsor? So AT&T brought the proposal to NASCAR, and it was denied outright. You would expect the proposed change to be significant, right? Well, maybe not so much.

Thanks to Consumerist for the image and commentary.

In traditional corporate fashion, AT&T filed suit against NASCAR in March of 2007 after failing to reach an agreement about the rebranding. AT&T’s position, via spokesman Clay Owen, is that “[t]here’s nothing in our contract that prevents us from changing our brand name.” Since the contract is between the racing team, and is not regulated by NASCAR, this is likely true.

Of course, NASCAR fired back: “Nascar’s contract with Sprint grandfathered both Cingular and Alltel into competition. This would allow Cingular and Alltel to participate in the Nascar Nextel Cup Series as team sponsors indefinitely as long as the companies didn’t change the scope of their sponsorship or the actual name and brand on the racecar,” said NASCAR spokesman Andrew Giangola. But, since sponsor agreements don’t include NASCAR itself, how can that be enforced?

U.S. District Judge Marvin Shoob bought AT&T’s story and ruled in favor of them, thus allowing AT&T to add its logo to the No. 31 car. “The court concludes that the continued appearance of the Cingular brand on the No. 31 car, unaccompanied by any indication that Cingular now does business as AT&T, is likely to confuse NASCAR fans,” Shoob said.

The decision was predictably appealed by NASCAR, but it was upheld, which allowed the No. 31 car to roll out that Saturday (May 19) with the AT&T logo. With driver Jeff Burton, the team finished fourth.

As a result, Nextel has joined the suit, which is still under appeal. Further hearings on the matter are set for late June into July. “We intend to vigorously protect our sponsorship from these unfounded claims of AT&T,” said Dean Kessel, director of Nextel Cup Series marketing for Sprint Nextel.

What it means on a grander scale
Because of Nextel’s exclusivity clause — that is, no further telecommunications businesses can sponsor cars or races — only Cingular and Altell could have sponsorships, because they had them when NASCAR was still sponsored by R.J. Reynolds. Will this ruling change the entire landscape of race team/sponsor relations?

For starters, Alltel hopes so. Now that there’s precedent that the team/sponsor contract doesn’t contain the restrictions imposed by NASCAR, Alltel hopes to take advantage of it’s sponsorship deal just like other sponsoring companies do. “Could this allow us to leverage the race track and other platforms that have been off-limits to us? What has been conjecture in the past now must be formalized. We’ve always been very respectful of Nextel’s rights, but we need a better understanding of how far-reaching those rights are,” said Alltel director of sponsorship marketing Samira Zebian.

Of course, this would also be met with much resistance by NASCAR. But, with the precedent in place, it would be difficult to win a ruling should Alltel pursue other forms of marketing their product to NASCAR audiences. However, should NASCAR lose the appeal to AT&T (which seems very likely), they could pursue a completely different tack in their sponsor/team relations.

“We’ve usually found ways to make things work and our model has been considered pretty sponsor-friendly, but now our hand might be forced to get rid of some of those gray areas,” said NASCAR spokesman Ramsey Poston. That statement makes it appear as though NASCAR is fully expecting to lose this case. In the future, however, they’ll seek protection against such actions.

How far can it go?
If AT&T ends up victorious in the case, Alltel will likely try its luck with increased sponsorship opportunities. AT&T would be foolish not to do the same, which could open up a whole new floodgate of lawsuits — and not just from Alltel and AT&T.

The big question is then: what does this mean for other telecommunications companies like Verizon and T-Mobile? Once again, there has been little, if any, insider speculation regarding this, but if AT&T and Alltel enjoy sponsorship rights, why can’t the other companies? Yes, there is the grandfather law and the exclusive Nextel-NASCAR partnership, but that’s never stopped a lawsuit before. And for a telecommunications giant like Verizon, it just might be worth it. They have an easy in: AT&T was on the banned sponsor list. AT&T now sponsors a car. Why not Verizon?

And what if — and this has seen some mild speculation — Verizon buys Alltel? Though, Alltel has a far-reaching brand and may not be merged under the Verizon moniker. However, it is still a possibility. And then NASCAR would have its hands full, trying to put together a new policy that would supersede the team/sponsor agreement. And then there’s a lawsuit regarding that.

Those aren’t the only lawsuits NASCAR could be facing. Predictably, Nextel isn’t too happy over the results of the proceedings. “We were sold a bill of goods in basic terms. And we’re expecting to receive that. Exclusivity is not new in sports. AT&T has done the same thing with ‘American Idol,’ they have done the same thing with the NCAA Final Four. You pay a premium for that, and there are rights and privileges that go back to you,” said Nextel’s Kessell.

Kessell declined to say whether his company planned to sue NASCAR, but it’s not a far-fethched thought. However, the likelihood of Nextel winning such a case is not nearly that of AT&T winning its case. As mentioned, NASCAR does not intervene in the sponsor/team contracts, so it would be difficult to pin this matter on NASCAR. If the AT&T case is upheld, their sponsorship would still be governed under Cingular’s grandfather clause, which was known when Nextel began sponsoring the Nextel Cup.

Clearly, this hoopla is far from over. A final ruling in favor of AT&T could start a domino effect of telecommunications companies trying to get a piece of NASCAR sponsorship. After all, it is said to be the nation’s second most popular sport. In this lawsuit-happy time we live in, it wouldn’t come as much of a surprise.

Posted By : Joe
Posted at : June 5th, 2007 - 10:32 am
Filed under : AT&T