NASCAR on track for change


By Dave Friedman. The economics of NASCAR are surprisingly simple, and by-and-large have remained intact for a long time. Unlike most other professional sports, for decades there has been no union, drivers work as independent contractors, and if you have the cash and car, you can race against the big boys. However, times are changing, and some observers believe the sport is on the verge of an overhaul.

“In the next 10 years we’re going to see a revolutionary change in how NASCAR does business,” says racing legend Humpy Wheeler.

After running Charlotte Motor Speedway for years, he now is the chairman of Speedway Benefits, an organization that consults with and combines many short tracks to give them bargaining power based on scale.

Wheeler thinks the near future will bring a major change in who owns NASCAR teams, who runs the tracks, where and how far races are run, what race day looks like, the way revenue is split up, and quite possibly, a new NASCAR circuit.

Investor Rob Kaufman has turned Michael Waltrip Raceworld on its ear. Kaufman, who was once listed among the world’s billionaires by Forbe’s magazine, is taking his investment dollars to Chip Ganassi Racing, leaving MWR and some 220 employees in a lurch. Kaufman is the chairman of the Race Team Alliance, a partnership of 18 Cup teams that is looking at, among other things, different financial structures to improve profitability in the sport.

Consolidation is under way.

In recent years equity stakes of Richard Childress Racing, Roush Racing, and Richard Petty Motorsports have been sold. In a climate where investors are looking for long-term opportunities, and race teams have large fixed costs, getting together makes sense.

“Look to Wall Street now,” said Wheeler. “There is a tremendous amount of capital looking to pounce on something that will be good down the road. That’s NASCAR.”

While owning a part of a racing team is lucrative, the bigger prize may be tracks. All but a couple of the tracks that NASCAR runs on are owned by two groups. Both Speedway Motorsports and the International Speedway Corp. are publicly traded companies, but they also are both still controlled to a great degree by their founding families.

“They’re both family entities.” said Wheeler. “They can sell for a lot of money. The kids can go their merry way. They will be sold and when it is done it will be revolutionary.”

With change in ownership comes different perspectives and ideas. There is a thought among many in auto racing that fans no longer want to watch 600 mile marathon races. Race days can be transformed into a full afternoon and evening of entertainment with the 200 or 300 mile competition the main event that follows concerts and includes innovative merchandising, appealing food options, and more opportunities for high-end fans.

Patrick Wood is the executive director of the motorsports program at Belmont Abbey College. He sees lots of ways for NASCAR to modernize in the coming years.

“You can shorten races like at the Poconos, use the throwbacks like they did at Darlington, more specialty races, and mid-week events are an option, too. Made-for-TV races in front of 20,000 or 30,000 fans work, and then there are the initiatives like Daytona Rising. Clubs and premium options are going to go up all over the place.”

The influx of more television money is significant. NBC signed a 10-year deal worth $4.4 billion earlier this year and at the same time Fox agreed to an eight-year package totaling $2.4 billion. ESPN and TNT had been paying a combined total of $2.74 billion over eight years. Television money is divided with 65-percent going to the tracks, 25 percent to the purse for the races, and 10 percent to NASCAR. The pie is likely to be split differently in the near future.

The Race Team Alliance is a business coalition of team owners. Whether it be to discuss franchising or licensing models, the issues revolve around money. If team owners are to get more cash, it has to come from somewhere. The only way to make everyone happy is to produce more revenue.

“It doesn’t matter if NASCAR is sold, or who owns and runs it,” said Wheeler. “It’s going to go global because that’s where the money is. Soccer and Formula One are the two sports that are global and they’re making the most money.”

Formula One racing is incredibly popular abroad, and NASCAR races are much less expensive to put on. With billion dollar tracks having recently been constructed in Abu Dhabi and Malaysia, there is a thirst for racing and ample facilities to host events. Unlike football and basketball, brands like BMW and Mercedes do not need to be taught to a worldwide audience. They are already known and revered. Drivers can come from all over the world.

Wheeler suggests a two circuit system where NASCAR International and NASCAR North America can have some cross over. The Daytona 500 can be an International event while the 400 can be on the North America circuit. With more races, more cities, more drivers, and more tracks, there is a larger supply of inventory to sell television partners.

Of course they are still only in the brainstorming and early planning stages, and a whole lot of details would need to be worked out. Wood, from Belmont Abbey, suggests even before an entirely new product is produced, the current one can yield more money.

“There can be a further exploitation of media rights and the international market. Licensing NASCAR races outside the U.S. is an area of opportunity. We don’t have to start racing in China tomorrow to start televising there.”

Many racing teams will continue to be based in the Golden Crescent. Whatever changes take place, it is a virtual certainty more money will be flowing in. On the rare weekend that the teams are off you better believe their boats will be out on Lake Norman. Their vessels might be a little bit larger in the future, if that is possible.


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