Getty Images Dale Earnhardt Jr. is pushing the NASCAR business model into the future.
NASCAR action isn’t only taking place on track. There has been a huge concession made by NASCAR on the charter agreement, and if true, teams would be smart to take it.
Surprisingly, it’s Dale Earnhardt Jr. who seems to be pushing both sides toward a business model that will work for NASCAR, the teams, and the growth of the sport.
In short, NASCAR seems ready to agree to extend charters for seven additional years, enabling teams the certainty they need to run a car and make a profit.
This is not exactly what the teams wanted. In addition to guaranteed media money, teams are seeking to have charters become permanent. That’s unlikely to happen. NASCAR holds most of the cards in these negotiations — the brand, the history, many of the tracks, plus the massive media rights.
NASCAR Teams Want Guaranteed Money
As Heavy reported in February, NASCAR is not hurting for money. The sport just signed a 7-year, $7.7 billion dollar media deal with Fox, NBC, Amazon, and TNT. Question: who does all that money belong to?
The simple fact is, not anyone — or any company — can race in a NASCAR Cup Series event. Thirty-six teams have a NASCAR charter. What that means is, they are basically guaranteed the right to race a car at a NASCAR Cup Series event.
Charters are worth big money. How much? For now, at least tens of millions of dollars, each.
There’s no stock market for NASCAR charters. Sales are kept private, but estimates leak out. For example, in 2021, McLeod purchased the Go Fas’ charter for a reported $10 million. Two years later, they turned around and sold that charter to Spire Motorsports for a reported $40 million. That’s a huge jump in value.
Of course, there’s a cost associated with charters. And that’s the issue many teams have with the current system. To run a team costs a lot of money. Drivers gotta get paid — as do the crews and all the staff. Then there’s the cars.
A team can pour millions of dollars into its operation, fight for sponsors, possibly lose money — there is no guarantee. It’s all worth it, however, if the team can eke out a profit and, more likely, see the value of their charter rise by millions of dollars each year.
With streaming platforms, social media, YouTube, TikTok, plus the big new media deal, the value of NASCAR charters definitely should go up.
But what happens if NASCAR — if the Bill France family, which owns NASCAR — decides to end the charter agreement, or make big changes to it? All that investment, all those potential gains could get wiped out. It’s no wonder that teams are demanding NASCAR make charters permanent.
Dale Earnhardt, Jr. Points the Way
NASCAR created the charter system in 2016. It guarantees 36 teams a spot in every regular season points race. A team can hold more than one charter, and thus race more than one car — up to four, total.
When started in 2016, charters went to teams that NASCAR believed had shown a commitment to the sport. If they sought to qualify for every race for the prior three years, NASCAR gave them a charter.
Teams can lose their charter if they finish in the bottom three of the owners standings three years in a row. Teams can also sell their charter. However, the charter arrangement is set to expire at the end of 2024. That creates a massive uncertainty for teams with charters — especially teams that are regularly fighting to stay afloat.
However, multiple sources are reporting that NASCAR will extend the charter arrangement through 2031. That brings far more certainty to teams and helps them protect their investment.
NASCAR, teams extend charter negotiations UPDATES:
Sources say NASCAR’s offer is to extend the system from 2025 through 2031.
Getting a seven-year extension on their charter is a deal NASCAR teams should strongly consider. As Heavy reported just after this year’s Daytona 500, NASCAR’s ownership appears in no hurry to make concessions.
The organization didn’t even bother participating in a recent team meeting. Denny Hamlin said of the snub, “I think it’s disappointing. I can’t think of a league or an owner of a league or a commissioner that would decline meeting with his team owners.”
NASCAR may appear to hold the cards, but they no doubt know that teams won’t — or can’t — invest millions of dollars to get a car on track without some certainty of making a profit. NASCAR also understands that fans want the best product out there racing — and that costs money.
Plus, the sports world, and media, and demographics, are not locked in place. Audiences are bing picked apart by streaming services. Indy Car and even Formula 1 are making inroads with traditional NASCAR fans. The old model will likely not survive.
How to go forward?
NASCAR may be taking cues from Dale Earnhardt, Jr.. In his podcast earlier this week, and while being careful to note he was not taking sides, Junior remarked at how “different” the NASCAR business model has been. And suggested the need for a change.
In particular, Junior noted how the Michael Jordan-owned 23XI team, which has strong ties to other sports, find the existing NASCAR model so unlike other professional sports business models.
“This is not a good model. This model needs to change. Drastically.” Earnhardt Jr. said that — but prefaced it by saying he was just “imagining” what new owners, with “big money” might be thinking.
NASCAR is no doubt thinking the same.
NASCAR’s business model has to evolve, as Earnhardt Jr. suggested. It appears NASCAR is listening. Finally.