Racers, Start Your Valuations
After months spent under a caution flag, we have officially entered the "interesting times" phase of the 2024 NASCAR season. Surprisingly, this phase has nothing to do with action on the racetrack. Instead, it's all about the world of the Cup Series garage sizing up who everyone really is, discovering what the teams are truly worth, and finding out more about their own identity.
The announcement of the sale wasn't a shock. Gene Haas has long been distracted by his Formula One efforts, and Tony Stewart has openly expressed his distaste for life as a NASCAR team owner in recent months. Now, the very interesting time of determining what's next and what it means has arrived, and it means a lot.
The Charter System and Its Implications
Stewart-Haas Racing (SHR) is a charter member of NASCAR's charter group. In 2016, teams received what essentially amounts to a franchise tag for each full-time car they field in the Cup Series. SHR owns four charters. It was no secret they had been shopping around these coveted charters.
Charters were created to facilitate a financial passing of the NASCAR baton. In 2018, Furniture Row Racing departed and sold their charter to Spire Motorsports for just $6 million. Three years later, 23XI Racing purchased outgoing StarCom Racing's charter for $21 million. Last year, Spire bought another charter, reportedly for approximately $40 million. Stewart-Haas Racing’s conversations with potential buyers have been situated below that number, and the first of their three charters are expected to land with existing and expanding teams. Front Row has already acknowledged plans to expand to three cars in 2025, while Trackhouse has not denied working on a deal.
Television Revenue and Upcoming Negotiations
In November 2023, NASCAR announced its new seven-year, four-network TV deal worth $7.7 billion. However, exactly how that pie chart will be sliced up isn't going over well with the teams’ side of the table. Currently, teams receive 25% of the television revenue, tracks get 65%, and NASCAR takes 10%. NASCAR owns the majority of the racetracks, and team owners have highlighted that they rely on sponsorship to cover as much as 80% of their budget.
The current charter agreement between NASCAR and its teams expires on January 1, 2025, with significant negotiations pending. The Race Team Alliance (RTA) seeks an increased share of the new media rights agreement. NASCAR's subsequent offer did include an increase, but it was not as much as the teams desired. Speculation arises around the potential sale of NASCAR to another ownership group if agreements are not reached. TV revenue and deal lengths are major issues, underpinning the ongoing debates.
Leadership and Policy Concerns
The France family is still in charge of NASCAR's operations. None of us were happy with Brian's tenure as the head, leading many to wonder what it would be like if Jim France took the reins. Opinions on his leadership remain divided, with policies being set through individual conversations. This strategy is seen either as a method of personal attention or a "divide and conquer" approach, adding complexity to the ongoing negotiations.
With a December 31 deadline, these "interesting times" must inevitably conclude. NASCAR COO Steve O'Donnell has confidently stated that a new charter agreement is "very close," but the final decision lies with the RTA, TNC, and NASCAR.
Voices from the Industry
Various figures in the sport have shared their insights and concerns:
“Charter truth is going to be out there now. Feelings are going to get hurt. Because no one actually wants to hear what they’re really worth. Unless you’re Jeff Bezos, it’s never as much as you think,” one source noted.
Another industry veteran remarked, “Imagine if the owners of the Kansas City Chiefs or the Charlotte Hornets had to renegotiate with the NFL or the NBA every seven years. That’s crazy, right?”
Financial strain is on everyone's mind. One team owner commented, “We can only support you as long as we are being supported. Be careful what you wish for, because this is Bill Junior’s brother, after all.”
There are fears about leadership and the future. “None of us were happy with Brian in charge, and we used to say, what would it be like if Jim stepped in?” another figure observed.
Conclusion: The Future of NASCAR
The decision to create charters was a transformative move, promising to help racers become the individuals with real money. As we approach the upcoming deadlines and continue the negotiations, the entire NASCAR community holds its breath to see what the future holds.