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10 Things to Know About Thompson's World Series
Oct 7, 2022
The teams that compete each week in the NASCAR Cup Series collectively say they are 'far apart' from the sanctioning body as negotiations continue over how to financially split the next broadcast rights agreement set to begin in 2025.
The teams say the current economic model is 'broken' with no long-term sustainability and the eventual risk of mass layoffs and possible closure unless there are significant systemic changes in the next charter agreement.
The current 10-year, $8.2 billion broadcast rights revenue is split 65 percent to the tracks, 25 percent to race teams and 10 percent to the sanctioning body. To interact directly with NASCAR, the teams have formed a subcommittee comprised of 23XI Racing executive Curtis Polk, Joe Gibbs Racing president Dave Alpern, Roush Fenway Keselowski Racing president Steve Newmark and Hendrick Motorsports vice chairman Jeff Gordon.
The four met with a handful of veteran media members on Thursday morning at a Charlotte, North Carolina hotel to outline the challenges faced by the teams and what they are seeking from the ongoing negotiations.
"The economic model is really broken for the teams," said Polk, a longtime business partner with Michael Jordan, who owns an ownership stake in both 23XI Racing and the Charlotte Hornets NBA franchise. "We have gotten to the point where teams realize the sustainability in the sport is not very long-term. This is not a fair system."
Polk says the group has determined that NASCAR, the France family and race tracks hold 93 percent of the total value of the sport with teams holding the remaining seven.
"There’s not a sport that I know of where the inequity is so severe," Polk said.
Gordon said Hendrick Motorsports hasn’t turned a profit in 'a long time,' with the group agreeing that no one is coming close to breaking even this season -- the first utilizing a spec car that intends to create cost saving opportunities but only after years of building up inventory once safety and competition targets have been reached.
Alpern said he is "terrified of what happens after coach (Joe Gibbs) is gone --- I’m talking about survival."
The teams say 60-80 percent of their revenue is derived by corporate sponsorship, with other sports deriving 10-20 percent of their revenue in the same way. Historically, NASCAR teams have been shuttered by the loss of sponsorship.
"There is no other pro sport where the signing of your top athlete is completely dependent on the decision of someone at a brand," Alpern said. "Imagine if Aaron Rodgers of the (Green Bay) Packers had a contract held up because the stadium sponsor hadn’t made their decision on what they’re doing.
"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 seeking a business model that will make the teams less reliant on sponsors, and more resilient to their departures.
Unlike major stick and ball sports, NASCAR exists with teams competing as independent contractors. The charter system agreement is what determines the revenue split. Other mainstream sports exist with the sanctioning body and teams as de facto partners. Polk says the teams should receive revenue commensurate to its contributions to the industry.
"NASCAR is a money printing machine, but the teams and drivers are putting on the show," said Polk.
Polk said the ownership sub-committee sent NASCAR a seven-point proposal for a new revenue sharing model back in June but it "sat there for months and we told NASCAR we'd like a counteroffer." A response came this week and featured a minimal increase in revenue and emphasis on cost-cutting.
"We presented a proposal that we worked with them on in how to come up with that seven-point proposal," Gordon said. "We waited. We finally did get a response from them. And we're very far apart."
But the group says the only place to cut costs for teams at this point is layoffs, and they are only taking the negotiations public after running into the latest headwind with each of them agreeing this is a 'pivotal moment' for the industry.
"After waiting three months and asking them to please respond because our owners are losing their patience, we received a proposal with a minimal increase of revenue and an emphasis on cutting cost," Polk explained. "With the Next Gen car, the cost of the car is fixed and all that's left is massive layoffs across the teams.
"They say 'yes, we recognize the model is broken and we have to find a way to get you guys to a break-even point so here is a little (more) revenue (but) you have to create a structure to bring the costs down. But we just got this new car, the parts and pieces from the vendors costs what they cost so the only way we can bring costs down is more layoffs."
And Gordon conceded the teams are struggling to find employees willing to meet the demands of the Cup Series schedule and increased workload as it is. Alpern suggested that teams shouldn't be effectively punished for investing in their business.
"What's always surprised me about our sport is that when other sports or businesses add people, or facilities, it's viewed as an investment," Alpern said. "When race teams spend money, we're reckless and we need to cut.
"We're investing in our businesses, and people and facilities and the sport. We're trying to grow it. It's always surprised me because, again. I don't know of another sport or business that came to prosperity thrugh cutting. They don't go together."
With that said, Newmark says the teams are collectively open to a Formula 1 style spending cap.
"We have expressed a willingness to entertain cost caps and other measurements as long as it’s part of an overall structure that was a fair model and provided that stability and longevity for the teams," Newmark said. "… We are amenable to whatever gets us to a conceptual new structure."
Polk says what the group is seeking can be summed up in one mantra.
"All well-managed teams should be able to compete for a Cup championship and make a reasonable profit."
The group says the know going public could risk drawing the ire of the sanctioning body but suggested now was the time to have tough conversations for the longevity of the teams and the sport in which they compete.
"I think the sport is a sleeping giant, but we all have to get the interest aligned because we need to grow it together," Polk said. "We need to grow more revenue, and we need to create great sharing and an arrangement where every dollar that is created benefits the drivers, benefits the teams, benefits the tracks, benefits NASCAR. That’s not how it’s set up right now.”
NASCAR issued a statement on Thursday afternoon in response to the media briefing.
"NASCAR acknowledges the challenges currently facing race teams. A key focus moving forward is an extension to the Charter agreement, one that will further increase revenue and help lower team expenses. Collectively, the goal is a strong, healthy sport, and we will accomplish that together."