The ‘broken’ nature of NASCAR’s business model: Why teams are calling for reform
Unhappy with the way financial negotiations with the governing body were going, NASCAR racing teams took the very rare step Friday of talking to the media about their issues.
23XI’s Michael Jordan co-owner Polk, who served as his longtime adviser, said there was a “complete misalignment of interests”. “As a result, the economic model of the teams is failing. Without a significant change in concept, the long-term viability of teams in this sport is not very good.
Four team representatives – Curtis Polk of 23XI Racing, Dave Alpern of Joe Gibbs Racing, Jeff Gordon of Hendrick Motorsports and Steve Newmark of Roush Fenway Keselowski Racing – met a small group of reporters at a hotel in downtown Charlotte to discuss their disappointment and dissatisfaction. with how NASCAR has responded to their demands for a “fair” deal starting with the 2025 charter deals.
The Athletic’s Jeff Gluck and Jordan Bianchi analyze what’s happening, what issues need to be addressed and what it means moving forward in the paragraphs below.
Compared to teams in other sports, this put clubs in a perilous position. According to RFK, which is part of the Fenway Sports Group, Major League Baseball teams receive sponsorships that account for about 8-12% of their total revenue, compared to 17-18% in the NHL. Even in the English Premier League, where shirt sponsorships are sold, around 25% of overall revenue comes from this source.
The majority of NASCAR teams receive between 60-80% of their total revenue through sponsorships. As a result, if a company like Mars Inc. decides to stop sponsoring JGR with millions of dollars (primarily through its M&M’s brand), JGR will no longer be able to afford to re-sign a top driver like Kyle Busch until find new sources of funding.
What about the rest? NASCAR teams are seeking a change in revenue sharing from things like paying TV rights (the current $8.2 billion TV deal expires after the 2024 season).
Teams believe that NASCAR has provided them with enough funding to improve their organizations to the point where sponsorship is no longer essential not only to survive each season, but also to thrive.
It’s a fantastic sport. People are in love with it and it makes a lot of money, according to Polk. Let’s be honest about it. Let us practice fairness and justice. That’s all we ask. The teams’ mission statement for the negotiations, which were conducted through the Team Negotiating Committee (or TNC), reads: “All well-run teams should be able to compete for a Cup Championship and make a decent profit.”
There are three things in there. First, a “well-run” team is one that makes sound financial decisions and doesn’t overspend.
Second, the phrase “contest for a Cup championship” highlights the continued quest for parity as opposed to a small number of cars constantly hogging the season. Third, teams claimed they just wanted to make a profit or at the very least break even, rather than looking to double or triple their profits (even the Hendrick powerhouse is currently losing money every season, according to Gordon).
The majority of teams, in Newmark’s opinion, would now simply appreciate not suffering a loss. Polk made mention of the Formula 1 car. Similar to how the France family owns NASCAR, Liberty Media owns Formula 1, although in this competition the teams only get half the money.
How did the timeline come about? NASCAR executives and authorities reportedly started the conversations earlier this year, according to the TNC (which is separate from the Race Team Alliance that links the teams). They collaborated behind the scenes and had kept their discussions under wraps until this point.
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- The ‘broken’ nature of NASCAR’s business model: Why teams are calling for reform
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