Teams Seeking Sustainable Economic Model from NASCAR
The teams competing weekly in the NASCAR Cup Series claim to be ‘far apart’ from the sanctioning body in their ongoing negotiations regarding the financial division of the forthcoming broadcast rights agreement set to start in 2025.
The teams assert that the existing economic model is ‘flawed’, lacking long-term viability and potentially leading to widespread layoffs and possible shutdown, unless substantial systemic revisions are made in the forthcoming charter agreement.
The existing broadcast rights revenue of $8.2 billion over 10 years is divided with 65 percent going to the tracks, 25 percent to the racing teams, and 10 percent to the sanctioning body. To engage directly with NASCAR, a subcommittee has been formed by the teams. This subcommittee includes Curtis Polk from 23XI Racing, Dave Alpern from Joe Gibbs Racing, Steve Newmark from Roush Fenway Keselowski Racing, and Jeff Gordon from Hendrick Motorsports.
On Thursday morning, at a hotel in Charlotte, North Carolina, the four individuals met with several seasoned media members. They discussed the challenges encountered by the teams and what they are aiming to achieve from the ongoing negotiations.
“The economic model for the teams is truly flawed,” stated Polk, a business affiliate of Michael Jordan for many years, who holds equity in both 23XI Racing and the NBA’s Charlotte Hornets. “We’ve reached a stage where teams understand that the sport’s sustainability isn’t long-term. The system is not equitable.”
Polk indicates that the group has concluded that NASCAR, the France family, and race tracks possess 93 percent of the sport’s total value, with the remaining seven percent held by the teams.
“Polk said, “I’m not aware of any sport where the inequality is so extreme.”
Gordon mentioned that Hendrick Motorsports has not made a profit in a significant period. The group unanimously concurred that no one is nearing a break-even point this season. This is the first season using a spec car, designed to provide cost-saving opportunities. However, this is only possible after years of accumulating inventory once safety and competition goals are met.
Alpern expressed his fear about what will happen once Coach Joe Gibbs leaves, stating, “I’m discussing survival.”
The teams claim that corporate sponsorship accounts for 60-80 percent of their revenue, while other sports generate 10-20 percent of their revenue in the same manner. Historically, the loss of sponsorship has led to the closure of NASCAR teams.
“Imagine a situation where Aaron Rodgers of the Packers couldn’t sign a contract because the stadium sponsor hadn’t made their decision yet. There’s no other professional sport where a top athlete’s signing is entirely contingent on a brand’s decision,” said Alpern.
"That’s what we’re faced with as race teams. And, if I’m honest, we’ve almost become full-time fundraisers. We spend the majority of our time raising money, not to make money (but) to survive."
The group is looking for a business model that will decrease the teams’ dependence on sponsors and increase their resilience to their departures.
In contrast to mainstream stick and ball sports, NASCAR operates differently with teams competing as independent contractors. The division of revenue is dictated by the charter system agreement. Whereas in other mainstream sports, the sanctioning body and teams effectively function as partners. Polk suggests that teams should be awarded revenue in proportion to their contributions to the industry.
“Polk stated, “NASCAR is a cash cow, however, the show is being put on by the teams and drivers.”
Polk stated that the ownership sub-committee proposed a seven-point plan for a new revenue sharing model to NASCAR back in June. However, it went unaddressed for months, prompting them to request a counteroffer from NASCAR. A response was received this week, which proposed a slight increase in revenue and a focus on cost reduction.
“Gordon stated, “We collaborated with them to draft a seven-point proposal and presented it to them. After waiting, we eventually received their response. However, our positions are quite divergent.”
However, the group asserts that the only way to reduce costs for teams at this stage is through layoffs. They have decided to make the negotiations public only after encountering the most recent obstacle, with all parties concurring that this is a ‘decisive moment’ for the industry.
Polk explained, “After patiently waiting for three months and repeatedly asking them to respond due to our owners’ growing impatience, we finally received a proposal. However, it only offered a slight increase in revenue and heavily stressed on cost reduction. With the introduction of the Next Gen car, the car cost is now fixed, leaving us with no choice but to layoff a significant number of team members.”
“They acknowledge that the current model isn’t working and that a solution needs to be found to reach a break-even point. They are offering a slight increase in revenue, but it comes with the condition of creating a structure to reduce costs. However, they’ve just acquired a new car, and the cost of its parts and pieces from the vendors remains fixed. Therefore, the only feasible way to cut costs further seems to be through more layoffs.”
Gordon admitted that the teams are having a hard time finding employees who can handle the demands of the Cup Series schedule and the increased workload. Alpern proposed that teams should not face negative consequences for investing in their business.
“Alpern expressed his astonishment at how, in our sport, spending money on additional personnel or facilities is perceived as reckless and necessitating cuts. He pointed out that in other sports or businesses, such expenditures are seen as an investment.”
“We are devoting resources to our businesses, people, facilities, and the sport with the aim of enhancing growth. It’s always amazed me since I’m unaware of any sport or business that prospered through cost-cutting. The two concepts simply don’t align.”
Newmark states that the teams are collectively open to a spending cap similar to that of Formula 1, with that said.
Newmark stated, “We are open to considering cost caps and other metrics, provided they are part of a fair and stable model that benefits the teams in the long run…We are ready to accept any approach that leads us to a new conceptual structure.”
Polk states that the group’s objectives can be encapsulated in a single mantra.
A Cup championship and a reasonable profit should be achievable for all well-managed teams.
The group acknowledges that going public might provoke the sanctioning body’s anger. Still, they suggest it’s now time to engage in difficult discussions for the teams’ longevity and the sport they participate in.
Polk stated, “In my opinion, the sport is a dormant powerhouse. However, we must unify our interests because its growth requires a collective effort. We need to increase revenue and establish a system where every generated dollar benefits drivers, teams, tracks, and NASCAR. Currently, the system is not structured this way.”
On Thursday afternoon, NASCAR released a statement in response to a media briefing.
NASCAR recognizes the current difficulties encountered by race teams. Moving forward, a primary focus is to extend the Charter agreement, aiming to boost revenue and reduce team costs. The ultimate objective is to develop a robust, thriving sport, which we aim to achieve collectively.
