Here's how NASCAR plans to recover from a tough 2020, starting with the Daytona 500

A welcoming environment.

It’s what NASCAR president Steve Phelps said when speaking with CNBC about how the sport wants to be perceived following its defining moment in 2020

“That was Bubba’s mantra throughout the entire back half of the season since June,” Phelps said. “It’s welcoming and inclusive.”

Phelps made his media rounds before NASCAR returns with one of its signature events, the Daytona 500, on Sunday. Entering his third year as president, Phelps is tasked with repairing the organization that once drew 11 million viewers to its signature race.

NASCAR made headlines in 2020 when it banned the Confederate flag last June. It stood behind driver Darrell “Bubba” Wallace, who faced backlash after calling for the ban. And then Wallace was at the center of a noose allegation. 

Before that, driver Kyle Larson used a racial slur while engaging with a live video gaming community. It put NASCAR in the spotlight no sports company wants. It needed to confront its issues to move forward.

“It was the most challenging year in our sport’s history, but I would say was the most gratifying and most successful in our sports history,” Phelps said.

Now comes the challenging part: creating the welcoming environment by addressing race and diversity concerns and thereby repairing the business of NASCAR.

Following Wallace’s departure from Richard Petty Motorsports, basketball icon Michael Jordan joined forces with respected driver Denny Hamlin to form the 23X1 racing team. They recruited Wallace as the top driver.

I’s a good move for NASCAR, which is betting Jordan will bring new interest.

“We’re thrilled that Michael is here,” Phelps said. “I think that is going to drive a significant amount of interest in of itself. Like most owners, Michael just wants to be successful on the racetrack,” he added.

The 23X1 team has already attracted top brand sponsors, including McDonald’s, Toyota and DoorDash. 

Wallace has yet to record a victory in his career. He needs to be successful for NASCAR to get its Tiger Woods-like PGA Tour moment, where minority fans are lured in. He had a strong night during 2021 Daytona 500 qualifying, finishing second in Duel 2 and earning a sixth starting position in Sunday’s race.

One person speaking with CNBC about Wallace’s influence mentioned Danica Patrick as an example of how things can go if Wallace doesn’t win. The person asked not to be identified due to sensitivity around the subject.

Patrick set records in the sport as a female driver when she entered in 2012, shedding a positive light on diversity, the person said. But, despite the high-profile, she struggled and eventually decided to depart full-time in 2017.

NASCAR has an opportunity to help boost viewership and engagement, using Wallace as an entry point. Popstar Pitbull is also a NASCAR team partner. He joined the Trackhouse Racing Team in January.

“I’m very bullish on NASCAR this season,” said Dan Cohen, senior vice president of Octagon’s global media rights consulting division. “They are back on their schedule. You’ve got Bubba Wallace – a good storyline. You’ve got celebrity owners involved, which adds a little flair.”

A former NASCAR team owner, who spoke to CNBC on the condition of anonymity, said NASCAR should attract even more celebrity owners. Hip-hop star Snoop Dogg was name mentioned.

Said Phelps: “There are some names that have been thrown out. Whether any of it comes to fruition, I don’t know.”

Beyond celebrities and Wallace’s potential success, NASCAR needs a marketing strategy that targets a minority audience, suggested long-time marketing executive Tony Ponturo.

How will Phelps and company sell NASCAR to more diverse communities? What will it do to draw newer fans to the track?

Ponturo, the former vice-president of Anheuser-Busch global media sports and entertainment marketing, suggested NASCAR avoid “overcomplicating things,” like its playoff system, for example.

“I think they confuse more people than they educate,” said Ponturo. “I couldn’t tell you, as a sports fan, how their whole system really works.”

He said a simplified approach should work, adding “you have to appeal to red and blue states and urban communities so that there is a reason for consumers to want to spend time with the sport. And you have to work hard on that.”

George Pyne, CEO and founder of Bruin Sports Capital, concurred. Pyne served as NASCAR’s chief operating officer and helped it land a $4.5 billion media rights pact before he left the sport in 2005

“You have to market the sport to them and a driver, a team that could make it more relevant to them,” Pyne said. “And you have to talk about why that product is interesting.”

Pyne suggested better storytelling as a method. He said NASCAR’s promotion of Wallace could be one storyline, and added NASCAR could tell the audience what goes into building a car by showing more engagement behind the scenes.

Showcasing more non-driver stories could help NASCAR, too. In 2018, Brehanna Daniels made history when she joined a top NASCAR pit crew, becoming the first Black female to join a team.

“You have to tell the story about the people,” Pyne said. “And if you can do all of that, it becomes interesting. The human part of it is a big part, too.”

Building a new fanbase will require patience and time, and it starts with Daytona.

Like other sports leagues, NASCAR touts its metrics, suggesting its unique audience is up 17%. But money is made through sponsorship support and TV viewership. And Daytona has taken a beating over the last decade.

The race once saw viewership climb past 18 million in 2002. It dropped to around 11 million viewers in 2017 and 9 million viewers in 2019. A weather-related postponement forced the 2020 race to span over two days, drawing an average 7.3 million viewers.

Marketing executives and NASCAR pundits point to various things, including the failed “Car of Tomorrow” project and a charter system, which turned off long-time fans. The great recession was to blame, impacting attendance at the same time NASCAR was losing top stars like Jeff Gordon and Dale Earnhardt Jr. to retirement.

It led to a lack of interest and the viewership declined.

Worse, the decision to move NASCAR to Fox Sports and NBC Sports’ cable channels assisted in lost broadcast TV exposure. It may help now that NBC is moving its races to USA Network, which reaches 86 million homes, compared to NBCSN’s 80 million. The current $4.4 billion rights deal runs through 2024, after which NASCAR could run elsewhere.

Marketers have dropped off, too, according to advertising firm MediaRadar. The firm provided data to CNBC showing 865 advertisers (for a total of $182 million) ran on NASCAR programming in 2020, down from 946 ads ($291 million) in 2019. MediaRadar aggregates advertising data from marketers across a multitude of media channels, including TV and online.

To combat this, NASCAR wants to gain attention by returning a dirt track via the Bristol Motor Speedway. The sport hasn’t seen that in over 50 years. And expect to see more marketing around popular drivers like 2020 champion Chase Elliott. Even the return of Larson, who was suspended for his mistake, is drawing intrigue.

“There is a lot of momentum the sport is experiencing,” Phelps said. “And I think that is going to continue in 2021.”

The outside execs trust Phelps will deliver in time.

“Phelps is a smart marketer, a smart businessman,” Cohen said. “He gets it – they are going to need to change and adjust and adapt. He gets that they’ll have to be different.”

Added Pyne: “He’s a good person; a sincere person. I believe he committed to doing the right thing.”

It’s the new NASCAR: One big welcoming environment.

“We’re going to be disruptive,” Phelps said. “And we’re going to be bold. And we’re going to do it in our own authentic way. We’re not the NFL. We’re not the NBA. We’re NASCAR.”