NASCAR Teams Struggle with Revenue Sharing Issues

NASCAR Teams Demand Fair Share of Growing Revenue

by Faruk Imamovic
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NASCAR Teams Struggle with Revenue Sharing Issues
© Getty Images/Jared C. Tilton

In 2020, a new NASCAR team entered the scene with ambitious plans and substantial financial backing. The venture required significant investment, from assembling a skilled team and maintaining cutting-edge Next Generation cars to investing millions in new facilities. Despite the high initial costs, the team believed in NASCAR's potential for growth. They anticipated that increasing viewership, rising attendance, and lucrative sponsorships would eventually yield a profitable return on their investment. However, as they navigate the complexities of the sport, they find themselves in a challenging financial landscape, raising questions about the future of NASCAR and its teams.

Betting on NASCAR’s Revival

The optimism of the new team was grounded in the belief that NASCAR was on the cusp of a revival. They foresaw a resurgence in television viewership and race attendance, fueled by a renewed interest in the sport. This confidence was bolstered when NASCAR secured a seven-year, $7.7 billion broadcast deal with major networks such as Fox, NBC, Amazon, and Warner Bros. Discovery. Additionally, the enduring appeal of sponsorships, a critical revenue stream for any racing team, seemed assured given the sport’s rich history and fan base.

However, the financial returns have not materialized as expected. The primary concern among team owners is NASCAR's reluctance to share a greater portion of its increasing revenue with the racing teams. "In all partnerships, if you grow the pie, that means your business is going to continue to grow," one team owner remarked. "And to grow the pie, you’ve got to make sure everybody’s healthy within the partnership. If our ownership in NASCAR is losing money and NASCAR’s the only one making money, that’s not a good partnership."

For more than two years, NASCAR and the racing teams have been at an impasse regarding the financial structure of the sport. NASCAR has offered a modest increase in the teams’ share of the new broadcast contract but has resisted sharing revenue from potential future income streams like gambling. Furthermore, NASCAR has declined to make the charters, which are essential for operating cars, permanent fixtures.

Financial Strain on Teams

Under the current system, most NASCAR teams operate at a loss. Teams argue that the uncertainty surrounding charters hinders their ability to plan for the future, deters investors, and makes their operations precarious. A representative from the negotiating committee emphasized the need for alignment within the sport: “Until we are all aligned and paddling the boat in the same direction, we’ll never be able to reach the full potential that NASCAR has.”

NASCAR Xfinity Series BetMGM 300
NASCAR Xfinity Series BetMGM 300© Getty Images/Jared C. Tilton
 

Unlike other major sports leagues such as the NBA or NFL, NASCAR is a privately held business, predominantly controlled by a few families. NASCAR not only serves as the sanctioning body for the sport but also owns many of the tracks where races are held and manages its own national sponsorships and broadcast deals. Teams, on the other hand, are independent entities competing for sponsorships, which constitute a significant portion of their revenue. Additionally, about 30 percent of NASCAR’s broadcast revenue is shared with the teams, a figure that can increase to 39 percent with track purse payouts.

The ongoing dispute between NASCAR and the teams is more than just a financial issue; it represents a clash of visions for the sport’s future. Will NASCAR remain a beloved but regional sport, or will it transform into a major national league?

Permanent Charters: A Crucial Demand

A central point of contention is the permanence of the charters. Teams argue that having permanent charters would attract external investors, helping to offset the high costs of running Next Generation cars. These cars, while designed to level the playing field and reduce costs, have not significantly lowered expenses for the teams. The parts for these cars are more expensive and less durable, often lasting only four races compared to the ten races that parts for older cars lasted.

Jonathan Marshall, executive of the Race Team Alliance, an advocacy group for the teams, stressed that teams are not seeking a share of NASCAR’s existing revenue streams but rather a cut of future revenues. This would encourage them to invest more in their operations, benefiting the sport overall. Permanent charters would also create a more stable financial environment, making it easier for teams to secure significant sponsorships and investments.

Despite considering drastic measures like forming their own race series, the teams prefer to negotiate a fair deal with NASCAR. Jeffrey Kessler, an antitrust lawyer representing the teams, mentioned that creating a new series could lead to antitrust issues if NASCAR tried to block their access to racetracks. However, the teams are hopeful for a mutually beneficial agreement that would grant them a greater stake in NASCAR’s future.

Enhancing the Sport’s Visibility

Team executives acknowledge NASCAR’s efforts to increase the sport’s visibility through initiatives like a new video and broadcast production center and the Netflix reality series “Full Speed,” which follows drivers through a season. These efforts have helped boost fan engagement, but they do not address the core financial challenges that teams face.

One team owner highlighted the critical need to resolve these issues for the sport’s long-term viability. “If you had permanent charters, then you could create a revenue stream, either with new investors or different types of sponsorships that would subsidize that type of variance between ownership and the league. That’s a big, big miss right there. If you don’t correct that, this sport’s going to die not because of the competition aspect, but because economically it doesn’t make sense for any businesspeople.”

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