Monday, July 7, 2014

Owners Want Their Fair Share -- And a Little More

RTA is a challenge for NASCAR management
At least they didn’t call it Championship Auto Racing Teams.

You remember CART don’t you?  The organization formed by Indy car team owners back in the 1979 that eventually ripped the sport and led to a civil war from which it has yet to recover. 

Is history doomed to repeat itself?

If the announcement Monday by NASCAR’s top nine teams that they were forming a “business alliance” doesn’t concern fans of the sport – it should.  The Race Team Alliance – RTA – is made up of (with their current value as estimated earlier this year by Forbes magazine) Hendrick Motorsports ($348 million), Joe Gibbs Racing ($171 million),  Roush Fenway Racing ($157  million), Stewart-Haas Racing ($148 million), Richard Childress Racing ($128 million), Team Penske ($108 million), Michael Waltrip Racing ($80 million), Chip Ganassi Racing ($69 million) and Richard Petty Motorsports ($48 million).

Forbes estimates the average operating profit of those teams last year at more than $6 million, up 5% from 2012.  Apparently that’s not enough.

The RTA announcement says it is out to "harness the combined purchasing power and scale of the teams' operations to drive efficiencies in costs."  Better rates for hotel rooms has been cited as one area were the organization hopes to save money.  If hotel rate efficiencies is what they want, they should call William Shatner at Priceline.

No, the RTA isn’t about saving money.  It’s about making money for the team owners. The reality is that many of the teams no longer have complete control of their financial destiny.  MWR, RPM, even Roush Fenway, are now controlled by outside investors and venture capitalists. 

The RTA has its eyes on a much bigger prize, the $820 million worth of checks from Fox and NBC that NASCAR will begin cashing next year when the new television contracts go into effect.  Currently the tracks receive 65 percent of the television dollars, the teams 25 percent and NASCAR pockets 10 percent.  Don’t feel sorry for NASCAR, however.  The tracks are owned primarily by International Speedway Corporation, like NASCAR, controlled by the France family, and Speedway Motorsports, controlled by Bruton Smith and family.  But the tracks have been suffering from free-falling drops in ticket and concession sales, and will be loath to give up much of their share. 

And that’s where the RTA comes in.  No one seems to be willing to settle for the same piece of a much bigger pie.  They want a bigger price of that pie too.  The RTA has been formed to make sure the big owners get their share and hopefully a little more.  And presumably for all teams.  The RTA says one of its first orders of business will be to bring other teams into the alliance.  Hope so.  I guess they couldn’t find Tommy Baldwin, Bob Jenkins, Frankie Kerr, Barney Visser and others in Daytona.

The timing of the RTA announcement is interesting, coming two days after Brian France’s annual midyear talk with the media at Daytona.  During the session France was asked if he was “contemplating any changes to the percentage allocation of TV money as far as distribution to tracks and teams or distribution among the three national series.” France said “We are looking at that because we start, of course, a new TV agreement beginning next year so naturally we are rethinking that a little bit, and in particular with the Nationwide teams.  But that'll be something that we will consider and we will look at to make sure that the appropriate values are where they need to be.”  No mention of the owners.

It’s no accident the RTA is being fronted by MWR co-owner Rob Kauffman.  No way they wanted a Roger Penske or Chip Ganassi, CART Founding Fathers and among the first to jump ship when things went bad, out front.

You remember Kauffman.  The former venture capitalist with a personal worth estimated at $1.8 billion according to Forbes.  Same guy who refused to dip into his own pocket to keep Martin Truex Jr. in a MWR car after the team’s fiasco in Richmond cost Truex his NADA sponsorship. 

While comparisons to CART are natural, Kauffman says the RTA will more closely resemble the Formula One Constructors Association or FOCA.  And that’s supposed to put us at ease? 

Unfortunately, the comparison to FOCA may be an apt one.  The group of F1 race team owners was headed by Bernie Ecclestone, who negotiated billion dollar television contracts for the sport and his companies.  But F1, like all of racing, has fallen on tough times of late and FOCA and Ecclestone are at the center of battle between the have and have not teams.  He recently said he hoped one team would fail.  Ecclestone himself is the center of a bribery trail that may cost him his job.  Still, Kauffman says the RTA isn’t interested in the television contract money – at least not yet.

"We're going to focus on things we can do ourselves and doesn't require a lot of outside help," he told the Associated Press.  "Some of those topics are behind our control. If some of those stakeholders want to have conversations, we'd be happy to do that."

The RTA says it was formed “with the encouragement of NASCAR.”  But the sanctioning body was scrambling on Monday to meet with manufacturers and discuss the announcement.  NASCAR’s own statement didn’t sound very encouraging and seems to question the need for a RTA.  To keep a low profile, it was attributed to Brett Jewkes, vice president and chief communications officer.

We are aware of the alliance concept the team owners have announced, but have very few specifics on its structure or purpose. It is apparently still in development and we're still learning about the details so it would be inappropriate to comment right now. NASCAR's mission, as it has always been, is to create a fair playing field where anyone can come and compete. Our job is to support and strengthen all of the teams, large and small, across all of our series and we'll continue to do that. NASCAR is a unique community with hundreds of stakeholders. They all have a voice and always will."

So far only Kauffman is talking, but another theory is that Penske and Ganassi are the driving forces behind the RTA and that the alliance serves as a warning shot across Brian France’s bow to keep his hands off open wheel racing.  The France family already controls stock car and sports car racing in America.  Flush with cash from the television contracts, so the theory goes, France could easily add IndyCar and even the Indianapolis Motor Speedway to his empire.  Penske and Ganassi want to avoid that at all costs.

Not sure I buy into that theory.  Again, the RTA is not about saving or spending money. 

It’s about making money.





  1. I'm sorry... NASCAR has done nothing to make the smaller teams be able to compete with the HMS and other large teams.. I don;t see that changing anytime soon.
    Now fund sharing is the way to go or just have 8 teams with 5/6 cars each and share the technology... Would HMS share their very lucrative gray area>???

  2. The time for the little teams is over. The Top 35 killed the last incentive to start a new team. Its now a matter of dividing the spoils. This is a business and its time we took off the rose colored glasses and realized it.
    Make no mistake this is about money pure and simple. Nascar/ISC will report earnings of 600-650 million this year. They will get 75% of the TV money going forward and the teams want part of it.
    Should be interesting.

  3. If it takes the owners banding together to force Brian France to stop screwing up the sport, that will work for me. Of course, the law of unintended consequences may strike here, but unless the racing in NASCAR improves, I'll be gone when my favorite driver retires.

  4. I thought wealthy conservatives didn't like socialist concepts like unions?

  5. I don't have a problem with this. In addition to the ability to leverage the power of a large group to save on certain costs, I don't think it's a bad thing for the big time owners to present a unified front to NASCAR. If they want to argue over money, that's their prerogative. The sanctioning body and the teams both have skin in the game and they can argue over what is a fair split of the profits. I hope they use this as a way to send a message to the France family that they can't keep screwing with the sport, which has, over the last few years, boiled down to rule changes whose purpose served to try to undo the bad results of other rule changes.

    I think the fear of a CART/IRL type split is unfounded. ISC owns many of the tracks, so if owners bailed and started a rival series, they would have to consider where they could and could not race the cars. NASCAR would have title to the multiple marquee races during the year (Daytona 500, Bristol night race, etc)..heck, CART struggled simply on the basis that it didn't have the Indy 500, and that's ONE race. Nobody can argue that NASCAR is on a decline, and perhaps the France family needs to be reminded that the team owners have just as much to lose as they do.

    1. You're making an assumption that if a split occurred between NASCAR and the Owners, Bruton Smith would side with NASCAR. That is not a good assumption!! He controls a few high profile events, like the Bristol event you mentioned. I know most casual fans won't understand this, but racing at Daytona and Talladega is not really "racing"....they get talked about because of the wrecking, not the racing. If the owners ever decided to take the sport in a better direction, finding tracks to run on would not be a problem.

  6. But it is ok for NASCAR to monopolize everything at everyone else's expense, lining the France family profits.