In yet another example of the current economy’s impact on the sports ticketing industry, Speedway Motorsports, Inc. (SMI) announced sharp earnings decreases for the...

In yet another example of the current economy’s impact on the sports ticketing industry, Speedway Motorsports, Inc. (SMI) announced sharp earnings decreases for the fourth quarter of 2009 compared with the same period last year.

The racing track giant, which owns nine tracks and hosts 12 of NASCAR’s 36 yearly events, reported income for the quarter at $90.5 million, while the same quarter in 2008 brought in $130.6 million. This works out to a net loss of $15.2 million or 36 cents per share last quarter, as compared with loss in the same quarter in 2008 of just $4.9 million, or 11 cents per share. Analysts had predicted a drop of only 15 cents per share for the last quarter of 2009.

SMI’s year-over-year income also showed a significant drop: revenue for 2009 was $550.5 million, while in 2008 it totaled $611.0 million.

A number of factors have been blamed for this steep and unexpected loss in revenue, but in the current economic climate, two issues seem to be particularly impacting the company’s performance. First, SMI has seen a decrease in revenue from ticket sales over the past year, with super-promotions and other special offers to fill the stands partially responsible for diminished overall ticket revenue. With continued difficulties in drawing the crowds it desires, SMI is planning to further reduce ticket prices for the 2010 season.

Second, Motorsports Authentics (MA), a NASCAR merchandiser co-owned by SMI with rival track owner International Speedway Corporation (ISC), saw a significant drop in revenue in 2009, with impairment charges of nearly $19 million for the last quarter and over $74 million for the year. With fewer fans attending events, both concessions and sports paraphernalia sales have been impacted, dropping MA’s revenue. In order to save the company, SMI and ISC have plans to renegotiate all NASCAR licensing agreements and engage in other cost-cutting measures this year, but if these efforts fail, MA reportedly risks bankruptcy.

Additional factors less directly related to the economy also have had negative effects on SMI’s performance over the past year. The company cited bad weather in the second quarter of 2009 as disruptive to sales and concessions. Regarding the fourth quarter drop, SMI has cited this year’s switch of the Pep Boys 500 Sprint Cup Series event from an October date to Labor Day as sapping revenue from their fourth quarter earnings.

Last year SMI made a similar charge to explain its drop in first quarter 2009 earnings over the same period in 2008. At that time, in addition to citing economic factors, the company explained its losses in part as due to the omission of a NASCAR Camping World Truck Series race from its tracks that quarter, a change from 2008.

While schedule changes likely contributed to SMI’s financial woes, the task of operating a sports business with weakening fan appeal in this economic climate seems to be the company’s greatest burden. In a March 10 web conference, Bill Brooks, Vice Chairman and CFO addressed the company’s $26.8 million decrease, quarter over quarter, in deferred race event income, essentially equal to advanced ticket sales. “Ticket sales are occurring much closer to the events. It doesn’t mean that we’ll recoup all of those revenues, but experience has shown that we’ve recouped a substantial portion of them. We have pretty good crowds, we just have less revenue from the crowds.”

In a same-day press release, Marcus G. Smith, SMI’s President and COO, described the company’s plans to improve its financial health, emphasizing a long-term perspective on recovery as well as the loyalty of NASCAR fans. “SMI’s solid business model is seasonal and event based, resulting in relatively long revenue cycles because of the nature of many sponsorships and other corporate marketing commitments. After a likely challenging fiscal 2010, we believe SMI’s longer-term outlook is strong. We believe our results position us favorably relative to other destination-based entertainment and industry peers, and demonstrate that our core fan and corporate customer interest remains strong for SMI’s premier venues.”

At SMI’s web conference, Smith added, “In 2010, we continue to offer an array of ticket options and fan incentives for our customers, and we believe that as the economy recovers, so will our admissions revenues. We’ll keep an eye on new opportunities as well as a focused eye on cost containment, and as we’re hopeful with everyone else that the economy improves, we’re bullish on the improvement of our business along with it.”