Can Mighty Max Save DEI?
Dale Earnhardt Incorporated may have lost the most popular driver in NASCAR (a certain Junior), but ex-gospel music exec Max Siegel is determined to keep DEI relevant. Is it too late?
It's Monday morning about 8:40 and Max Siegel pulls his company car, a black Chevrolet Avalanche, into his reserved parking space outside the offices of Dale Earnhardt Incorporated. Dressed in his standard work attire of white button-down shirt and black slacks, he hops out and makes his way into the building with a small suitcase on wheels in tow. He gets off the elevator on the second floor and greets the receptionist as he walks past a large painting of Dale Earnhardt.
Several years ago when Rick Pitino was head coach of the Boston Celtics and trying to bring the storied franchise out of mediocrity, he famously melted down during a press conference. Fed up with a media inquisition and demanding fans, Pitino remarked that "Larry Bird's not walking through that door, fans. Kevin McHale is not walking through that door…"
As president of global operations of DEI, Siegel knows that no one expects Dale Earnhardt, who died in a crash during a NASCAR race in 2001, to walk through the door of the company that Earnhardt and wife Teresa founded in 1980. But for nearly the past year, Siegel has had to deal with the realization that Dale Earnhardt Jr. isn't walking through that door either. And the media and fans aren't letting him forget that.
Siegel came to DEI in January 2007 during a very contentious time. Hired by owner Teresa Earnhardt, he was given the keys to all of DEI's properties, which include motorsports, auto dealerships, a charter airline, real estate, a charitable foundation, and about 600 employees. But his first and most important task was to help negotiate a deal that would keep the most popular driver in the sport with the team that bears the driver and the driver's father's name.
Siegel, an Indianapolis native with a law degree from Notre Dame, spent several years working as a sports and entertainment attorney before moving on to be a senior vice president for Sony/BMG, where he was president of the largest gospel label in the world. For most of his career he's helped broker deals with high-profile athletes and musicians. Siegel worked with Reggie White, the former Carolina Panther, to buy a NASCAR race team. White's death derailed the plans, but Siegel became interested in racing. Shortly after Siegel's hiring at DEI, Earnhardt Jr. expressed his confidence in Siegel, saying, "If anyone can get this deal done, Max can." But even the mighty Max couldn't heal the relationship between Earnhardt Jr. and his stepmother, Teresa, which has been strained since Teresa took over her late husband's company.
Earnhardt Jr. defected to Hendrick Motorsports for the 2008 season. Siegel, forty-three, is left with the challenge of turning DEI into one of the most successful companies in the industry and restoring Dale Sr.'s legacy of winning. And he has to do it while battling the negative public perception of once-proud DEI: that it has an absentee owner in Teresa Earnhardt; that it isn't willing to spend the money needed to win; that it's the team that drove away Junior.
In the NASCAR world, Mondays are slow. Many people take the day off, particularly if they were at the track over the weekend. Siegel spent the weekend in Indianapolis evaluating NASCAR's diversity training program. As the highest ranking African-American in the sport, it's something he's happy to be involved in. He got back last night, and he flies to New York tonight for sponsorship negotiations. He'll return Wednesday morning, then fly out again Thursday evening. He's married with three children and says his family is not only supportive of his busy career, but they've grown accustomed to it because he was just as fast paced when he was a music executive.
Right now he's sitting in his office, reading e-mails. He engages in a little small talk about the presidential election, talks about the Mary-Kate Olsen-Heath Ledger ordeal, and mentions that he hasn't seen The Dark Knight yet. Throughout our interviews, he pauses in mid-answer to tap away on his BlackBerry. By way of explaining his short attention span, he jokes that he has ADD. Once, while standing at a whiteboard while giving a presentation, he pauses, seemingly without even realizing he is doing so, to answer a BlackBerry e-mail.
One wall of his office has large windows, one is all glass and faces the hallway, and a third wall is all glass and overlooks DEI's first-floor visitors area. Though it's early, fans have already begun walking around, checking out racing memorabilia, which includes the famous No. 3 black Chevrolet Monte Carlo. The fans moving about below can barely be heard in his office. This is the only bit of peace he'll experience today. Mondays aren't slow for Siegel, especially since it's the height of sponsorship-renewal season.
"Locking sponsors down and getting the 2009 lineup in place hasn't happened as quickly as I would've liked it to," he says. "So I have to focus on moving the company forward day to day without paying attention to all of the potential media distractions."
Without being prompted, Siegel speaks often of media distractions.
"It's like I get questioned literally daily from various reporters about a lot of the things we're working on. To them, twenty-four hours is a lot. To us, a week or two is not—it's the natural rhythm of a negotiation."
While Siegel is known for his cool demeanor, he's perturbed by the media at the moment. Reporters have been hounding him and DEI, wanting to know if their top driver, Martin Truex Jr., will re-sign. If Truex doesn't re-sign, the news will be all over ESPN and other news outlets. Potential headline: "Another Junior Leaves DEI."
"People have this insatiable appetite to know everything right now," Siegel says. "I think I'm pretty hard on myself and I take it very personal. You have to make a concerted effort and be very deliberate about focus and patience without listening to the chatter. That's a new skill I've had to try to develop and perfect."
Two days later, Truex Jr. re-signs with DEI.
"Martin Truex was really the big winner in that whole situation with Dale Jr.," says Gordon Stewart, in-studio host of Lucas Oil on the Edge on Speed Channel and a track announcer at the Toyota Speedway at Irwindale in California. "They had to scramble and Teresa really had to put herself in a position where she wasn't going to be taken as a joke with the rest of those racers who were looking to switch teams."
DEI fields four Sprint Cup series teams: Truex Jr. in the No. 1 car, Paul Menard in the No. 15 car, Regan Smith in the No. 01 car (yes, there's a 1 and an 01), and Mark Martin and Aric Almirola each race part time and share the No. 8 car. (Almirola will drive full time for DEI next season when Martin jumps to Hendrick Motorsports for a full-time gig.)
None of DEI's drivers had posted wins in the Sprint Cup series as of our press time. And, subsequently, none of them made the Chase, during which the top twelve drivers compete for the championship. Truex Jr. is the only one in the top twenty.
"They gotta win -- it's that simple," says Humpy Wheeler, CEO of The Wheeler Group, the company he started after retiring earlier this year as president of Lowe's Motor Speedway. "If drivers aren't winning, then you need to make some changes. They have to compete against Hendrick and Roush and Joe Gibbs, and that's tough. But they've won before and can win again. It's about having the right people in the right places."
"I know they have some people in development, but they're going to have to really step it up or they could end up like the Pettys," Stewart says. "And that's the saddest thing. Richard Petty's organization is already the laughingstock of NASCAR. That name is so incredible and yet you see them all the way back at forty-second and thirty-ninth. They don't have a chance to win on most Sundays. You could actually see DEI and Petty, some kid's going to grow up in the next four or five years and think, ‘Dag, those teams are horrible.' And they're legendary names."
In racing, names don't get more legendary than Dale Earnhardt. That name is the reason DEI is able to sell Chevrolets through its automotive dealerships and continue to make millions of dollars through licensing of the "3" and "The Intimidator." But to carry on Dale Sr.'s tradition means to win. He won seventy-six races and seven championships, which is tied for most all time with Petty.
"The problem with legacies is that the further you get away from the person who died, the more people won't connect with it," Wheeler says.
"[DEI] is a great brand, but until you put the points on the board on the track it's hard," Siegel says. "We're trying to strategically reposition our company. We have very talented drivers. Martin Truex is certainly capable of winning a championship. Our other drivers—Regan's a rookie, Aric is a rookie, Paul is in his second full year in cup. So it's really pushing those guys to achieve, but at the same time being realistic about the goals you set and have the patience."
It seems strange that the head of the largest gospel record label in the world would leave his job to work in stock-car racing. But Siegel became intrigued with the sport after he and Reggie White almost bought a team. He was tired of the music industry's resistance to change, how it wanted to stick to the same formula, even as the industry had begun dying a slow death. And he liked how NASCAR was a combination of sports and entertainment. When Teresa Earnhardt made him a great offer, he jumped at it.
Now Siegel is trying to use his background in entertainment and his connections to expose NASCAR to a wider audience while making sure DEI is at the forefront. He came up with the idea for a new reality show, tentatively titled The Ride. It's being developed through a partnership with NASCAR Media Group, BET, and DEI. Siegel says he expects the series will begin airing on BET next year—he hopes around the time of the Daytona 500, which signifies the start of the NASCAR season. The winner of the show's competition will become a driver in DEI's development series.
"I wanted to figure out a way to discover new talent," Siegel says of the show. "I also wanted to generate interest in the development series for all of our drivers and have something that sponsors could see a return on from their investment, which is what they'll get through the TV exposure."
"[Max] has really taken a hold of that company and become the leader of DEI," says Kinnon Marshall, marketing director for Co-Pilott, a motorsports marketing firm in Mooresville that represents DEI driver Paul Menard. "With that has brought accessibility, new ideas, and he's energized everyone who works there. He's a very straight-up kind of person, which is very admirable in this sport."
Siegel's also delving deep into Internet technology, partnering with a company to develop SplashCast, a social-networking application, and Live Loop, a desk-to-desk communication application. Live Loop is like widgets on steroids. The user would be able to customize it, for instance, choosing an image of his favorite driver to be on his desktop delivering news, video, enabling text messages, and many other functions. DEI would sell sponsorships for that onscreen presence.
"I'm always looking for something that I don't see out there, that might make my life better, that's cooler, if there's an opportunity and it's never been done," Siegel says. "My philosophy, and Teresa's philosophy, has always been what's good for us is good for everybody. Finding new ways to generate revenue is what I primarily need to focus on."
In June, Forbes ranked DEI as NASCAR's sixth most valuable team, citing an estimated value of $109 million, with $86 million in revenue for 2007. Hendrick Motorsports ($335 million) and Roush Fenway Racing ($313 million) run away from the pack—no other teams are even worth $200 million. Petty Enterprises is ranked twelfth with an estimated value of $44 million.
As the old adage goes, it takes money to make money. Last year, DEI acquired Ginn Racing, which added a fourth car to the DEI team. A 180,000-square-foot race shop came with the acquisition, and DEI renovated the facility, which is less than ten minutes away from its corporate headquarters, and it allows all four race teams to be under the same roof.
In an eye-opening move last year, DEI merged its engine program with competitor Richard Childress Racing. Work began last season, and the combined program was fully up and running for the start of this season. The engines for both organizations are built in DEI's new race shop.
"They were spending five or six million dollars on R&D [research and development] and we were spending five or six million dollars on R&D," says Richard Childress, owner of RCR. "Together, once we merged, we could spend $8 million and get more out of it."
Childress has quickly taken a liking to Siegel and his style of business, even calling the competitor his friend.
"I think what Max Siegel has come in and done under the circumstances is phenomenal," Childress says. "He's well respected in the sport. He's not only a good businessman, but he's also a great people person. He knows how to communicate with people. I know Teresa has put a lot of trust in him to do what he's doing over there."
When Childress mentions "circumstances," no further explanation is needed. Dale Earnhardt Jr. is still not walking through that door.
"Our biggest challenge has been the perception of our company in the days after Dale Jr. left last year," says John Story, vice president of motorsports operations for DEI. "How stable of an organization are we without Dale Jr.? And we've had our critics. It's required us to work harder, I believe, than anybody else in the industry."
Story started at DEI on the same day as Siegel, and they work very closely along with Chad Warpula, senior vice president and general counsel, in running the company.
"Because we have worked hard, and we've all aged ten years in the last year, we've battled through it and I think we're starting to come out of that perception issue," Story says the day after Truex Jr. re-signed.
The success of DEI, as with all other NASCAR teams, is contingent upon how much money they are able to consistently bring in through sponsorships. And, yes, that's directly related to winning.
"I have to give Teresa credit because she's hung in there and stayed the course, where a lot of people would have sold the team and moved on," Wheeler says. "I think that hiring Max was a good move. It's hard to come into this industry new and make bold changes. And sooner or later that's probably what he's going to have to do. That's what Joe Gibbs did. That's what Rick Hendrick did. And that's what Jack Roush did. An operation as big as that one is, and as well funded as it is, needs to win in a prolific manner. And that's at least three or four races a year."
"If he can turn this around, you might see one of the absolute best jobs ever done as far as NASCAR executives," Stewart says of Siegel. "But I don't know how much of a time frame he's going to get for that. After a couple of years sponsors go away."
Siegel realizes the clock is ticking. He's just as anxious as everyone else.
"The expectations are high, and it's hugely challenging at this point," he says. "But if you follow the media accounts, they thought we wouldn't be in business this year."
Jarvis Holliday is a freelance writer in Charlotte. For the July issue, he wrote about the challenges facing the U.S. National Whitewater Center.