Entrepreneurs Race for the Prize

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Oprah Winfrey's much-publicized finish at the 1994 Marine Corps Marathon helped jump-start the second running boom.

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For sponsors eager to jump on the wellness bandwagon—and show they're taking a stand against obesity—a marathon actually provides two good causes for the price of one (see BusinessWeek.com, 2/26/07, "Get Healthy—Or Else").

Perhaps the first to truly harness the marketing potential of marathons was Tim Murphy, the founder of marketing/management company Elite Racing. His "crazy idea" was to make marathons more fun by tying them to something with broad-based appeal: rock music. He put bands at every mile marker, with a huge public concert at the finish line, and called it the Rock 'n' Roll Marathon. "Basically, a 26-mile party," he says.

Though the first marathon in 1998 wasn't profitable (it actually lost him about $1.1 million), Murphy says the event was an unqualified success. The race sold out its 20,000 spots almost six months ahead of time—earning it the record for the world's largest inaugural running event—and an economic impact study found that the event pumped $36 million into San Diego's economy in direct spending alone. A brand was born, and with it an entirely new concept: the "destination marathon" (see BusinessWeek.com, 4/18/05, "Marathons Around the World").

Growing by Leaps and Bounds

By the second Rock 'n' Roll Marathon, Murphy says, he had various cities across the country clamoring for a similar event of their own. Tourism boards were more than willing to cover the standard fees for things like extra police services, which would otherwise cost a promoter $50,000 to $200,000, and to chip in serious cash (between $100,000 and $750,000) to help with advertising, too.

Today, Elite Racing's staff of about 70 full-time employees puts on six big racing events each year, and Murphy says he's negotiating deals with three other cities to create new distance race events for each. And Elite Racing isn't the only company milking the win-win formula.

One of the most prominent race directors in the country, Dave McGillivray, contracts with the non-profit Boston Athletic Assn. to direct the Boston Marathon (the nation's oldest, and the sixth-largest by size). He's also the race director of the Denver Marathon (a for-profit venture) and helps produce numerous other races through his company, DMSE Sports. Event Marketing & Management International in Orlando produces more than 40 races each year for clients such as Cingular Wireless and Outback Steakhouse (OSI). The Walt Disney (DIS) Marathon, directed by EMMI's Jon Hughes, is the eighth largest in the country. (The Rock 'n' Roll Marathon is No. 7.)

Aided by the Internet

Other companies are tinkering with their business models to boost their profits. Kathy Kinane says her Carlsbad, Calif., company, Kinane Events, "…is growing like crazy," as it has shifted its focus away from charity events such as Race for the Cure, which are typically less profitable. Instead, Kinane has assumed larger management and operations roles in commercial races. The company's biggest event, the Pacific Shoreline Marathon in Huntington Beach, was purchased by an investment group two years ago.

Since then, she says, the event has grown 40%. Kinane says she expects future growth to come from exploiting sponsorship opportunities more fully, rather than managing more events. That's getting easier, she says, thanks to the Internet. For the upcoming Saddleback Memorial Half-Marathon in Laguna Hills, for example, online registrants will get an e-coupon for a nearby Nike (NKE) Women's Store.

Though most remain optimistic about the industry's future, race directors caution that race management is no way to get rich quick. Marathons are labor-intensive events with razor-thin margins, and typically require a significant investment before they start to turn a profit. (Without a title sponsor or funds from the cash-strapped city of San Diego, Murphy admits this year's Rock 'n' Roll Marathon wasn't profitable.) Which isn't to say that his investors— including Back to the Future producer Frank Marshall—aren't happy. With Elite Racing pulling in more than $35 million in revenue, Murphy says of his lead backer, "He has done quite well on his investment."

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BusinessWeek's Mark Hyman ran his first marathon at age 46 -- he shared his training secrets in The 26-Mile Itch. BusinessWeek also wrote about marathons around the world, running for a good cause], and took a look at the fittest CEOS).

Miller is a reporter with BusinessWeek.com in New York.