The NASCAR season is underway, with 38 races to determine another stock car racing champion in the 76th season of the top motorsports series in the United States.
There is a serious problem for NASCAR and its teams: Negotiations on a new revenue-sharing model have deteriorated. In mid-February, representatives from five teams told The Associated Press they have hired top antitrust sports attorney Jeffrey Kessler as an adviser.
The move was a power play by the 15 teams holding the 36 charters that guarantee entry into every race, a message that they won't be bullied in the negotiations. Here's what to know about this off-the-track brawl with millions at stake:
WHAT ARE CHARTERS?
The charters are the equivalent of having a franchise within NASCAR, but they aren't permanent and can be revoked by the series. Their value is set by the current market rate, but the details are not disclosed. A charter purchased by Spire Motorsports last year was sold by Live Fast Motorsports reportedly for $40 million — an enormous jump from the $6 million Spire spent in 2018 when it became the first team to buy a charter from another team.
NASCAR determined which teams received charters in 2016. There are four charters that have not been offered for sale and are on hold by NASCAR for use if a fourth manufacturer enters the Cup Series.
The current agreement expires at the end of this season, and teams have been trying for two years to get a better deal from NASCAR, including making the charters permanent.
NASCAR claimed it needed to first complete a new media rights package, and a new $7.7 billion television rights deal was announced in December. NASCAR's economic offer to the teams came shortly after.
The five-member negotiating committee for the race teams told the AP that NASCAR was clear: "We've been told, 'This is all there is; there is no flexibility.' That's not a negotiation," said Curtis Polk, part owner of 23XI Racing with Michael Jordan and Denny Hamlin.
NASCAR'S FINANCIAL HEALTH
The stability of NASCAR has ebbed and flowed for years, with much made about empty seats in the stands or viewership numbers from season to season. The series has weathered it all, and the TV deal is considered substantial.
A recent S&P Global Ratings Report sees ongoing strength in live attendance, sponsorship, and advertising-related revenue for NASCAR this year and added that the new rights deal "provides good revenue visibility" through 2031.
The report also raised its rating on NASCAR's credit, citing the series' ability to pay down debt while still growing revenue. S&P expects NASCAR to see 6% to 8% growth this year in its earnings before interest, taxes, depreciation and amortization, a standard accounting measurement.
S&P also expects a positive cash flow of $135 million to $145 million — which could be reduced to $85 million after infrastructure upgrades — that could be used to further trim its debt.
Polk noted the report proves that NASCAR is financially stable and has had little trouble paying down the nearly $1.5 billion it borrowed in 2019 to take its racetracks private.
"The rating agencies have upped NASCAR to a better rating based on the health of NASCAR," Polk said. "That debt that NASCAR had is now down to like $400 million. They paid off $1 billion of debt in less than five years."
WHAT IS THE ISSUE?
The teams want more than just a larger financial stake.
In addition to an increase in the percentage the teams receive from the media rights deal, the teams want the charters to become permanent the way franchises are in other leagues. With so many of NASCAR's top team owners in their 70s — Roger Penske turned 87 last week — they want their investments to become legacies they can leave to their families.
NASCAR has refused to even consider making the charters permanent.
The teams also want a seat at the table when it comes to governance, and they want to create a collaborative environment to create new revenue opportunities.
WHAT CAN THE TEAMS DO?
The teams are independent of NASCAR, which sanctions the 38 races each year and distributes the purses along with revenue from licensing, merchandise, and other streams. It also controls a swath of top-tier tracks.
The teams do not want to create a breakaway series of their own, citing the demise of CART when Tony George took the Indianapolis 500 away and formed a rival league. Two open-wheel series were not sustainable, and in 2008, they reunified for what is now IndyCar. The damage was already done, though; what was once the top U.S. motorsports series was bypassed by NASCAR during the split.
The teams also have no plans at this time to promote a race outside of NASCAR's supervision. They want to make a deal.
Teams could technically go on strike and stop showing up at the track, but it makes no financial sense, and NASCAR would likely just find teams from a stock car series it doesn't already own to fill a field.
WHO IS JEFFREY KESSLER?
The attorney is a specialist in sports labor and antitrust disputes. He helped secure a 9-0 win in 2021 at the U.S. Supreme Court in NCAA v. Alston, a major case on athlete compensation. He also led the U.S. women's soccer team in its successful fight for equal pay as well as litigations for current free agency rules in the NBA and the NFL.
Although retaining Kessler could mean the teams are exploring litigation, and the negotiating representatives insisted the attorney so far has only been brought on to advise them in negotiations.
The Race Team Alliance met at Daytona International Speedway, but NASCAR declined to attend. The teams claim NASCAR is no longer negotiating with them as a group. Instead, they believe NASCAR is trying to talk to teams individually to create division in what is now a unified front.
WHAT IF A DEAL IS NOT REACHED?
NASCAR could remake the entire eligibility system and write its own rules for distribution of revenue. NASCAR does not have a collective bargaining agreement for teams, and even though the RTA was formed to fight this battle, it is not a union.
The teams could make an antitrust challenge to NASCAR's control of the market and argue that NASCAR operates stock car racing as a monopoly.
However, NASCAR has won legal fights before, including a 2009 case in which Kentucky Speedway failed to prove its denial to host a Cup Series race, which constituted an illegal monopoly.
