What is really behind NASCAR’s new Race Team Alliance?
How much more is unclear.
Michael Waltrip Racing co-owner Rob Kauffman, chairman of the group, vowed Monday that the alliance was not formed to fight NASCAR but instead primarily to use the combined purchasing power of the teams to get better deals on travel, insurance and parts. When asked if he was ready to stage a sit-in at the NASCAR offices in Daytona for a bigger cut of the new 10-year, $8.2 billion television deal, he emphatically said no.
But the public perception, and wide-held belief of many in the industry, is exactly the opposite.
"We all knew this was inevitable," said former Charlotte Motor Speedway president Humpy Wheeler. "It's getting too big. There's too much money.
"This new TV deal has just brought the treasure from 5,000 feet to the surface and now it's on the ship and everybody wants part of it."
If the plans for the new group are so amicable, why do several track presidents, team executives and other stakeholders in the sport refuse to talk about it? NASCAR offered a tepid response to the group's formation, saying it didn't know the organization's goals and that it would continue to listen to the concerns of all stakeholders in the sport.
What this group plans to do — and maybe more importantly, what potentially it could do — is a bit of a mystery. Just its formation has led to a firestorm of speculation about just how far it could go to force NASCAR's hand, from boycotting races to splitting from NASCAR. Imaginations have run wild, and yet through interviews with a few willing to speak on the record and conversations with others in the industry, its true goals and potential are unclear.
"It's what I don't know (about it) that bothers me," said former driver and current ESPN analyst Ricky Craven. "It should bother other people or concern other people.
"You're talking about some very powerful people that have created an alliance, and I don't think it's to leverage against U.S. Air."
Who has the power
This is a battle for leverage among primarily rich people, from team owners to NASCAR's founding France family. They are intertwined, along with the publicly-traded track-operating companies primarily controlled by the France family and Bruton Smith. They often have a tug-of-war — sometimes friendly, sometimes fierce — on how the sport should operate and the distribution of funds.
"That (television deal) has not been part of the messaging from the alliance, so I don't go there," said Speedway Motorsports Inc. President Marcus Smith, son of Bruton Smith, when asked to comment about the group's potential. "I know these guys. They're fantastic businessmen and people who love the sport and are in it for the long haul.
"I consider them partners in the business side of the sport and we all benefit with each other's success. So I'm not following the speculation of ‘could be' or ‘might be.' … I'm not really concerned."
Typically in negotiations, both sides have power. And theories differ on how much power the team owners have. In the past, Bill France Sr. and Bill France Jr. have crushed any attempts by the drivers to unionize, including a short-lived drivers association in 1969. Current NASCAR Chairman Brian France couldn't prevent this group from forming.
"Tremendous (power)," Wheeler said about the owners' ability to dictate change. "Bill France Sr. was terribly adamant about no organizations within NASCAR. … Anytime (later) there was a wisp of somebody organizing something, there was a lot of behind-the-scenes movement because Bill France Jr. was not going to let it happen. He would always find a way to make some kind of move to stop it behind the scenes.
"The fact that they're organized, simply that, and represent all the top drivers, that is automatically a very formidable organization that NASCAR is going to have to deal with."
While some might call this a "union," the true workers have no say in this. Drivers expect to race. Crewmen expect to work.
"I don't know enough about it to say if it's worth enough to be worrying about it," said driver Brian Vickers. "Time will tell. We'll see how this unfolds, how it takes shape, and try to be a constructive part of it or a constructive part to the industry.
"Ultimately it's an entertainment business. I'm a competitor. I want to win. … If that (alliance) ends up being something that can help me get from here to a championship, then it sounds great. If it can't, then it's a distraction."
While in other sports, the owners control the league and hire a commissioner, NASCAR is a series of independent contractors. There are no bargained agreements between NASCAR and its participants, just some non-negotiable contracts to assign car numbers and licenses to compete. The drivers and teams can leave at any time and the race would still go green.
If contracts and financial agreements were negotiated, NASCAR could tell the teams they should just spend less money. The teams could say they need more money to pay higher salaries and build the best cars. The track operators could say they invested millions into their facilities — New Hampshire Motor Speedway, where the series races this weekend, was bought by Speedway Motorsports Inc. for $340 million in 2008 — that they need to recoup.
"There probably is no other way in increasing (the teams') bottom line other than two things," Wheeler said. "One is to cut costs. In a certain sense, the top car owners really don't want to do that because all of a sudden you start leveling the playing field.
"The second is get more purse. And that's where the next chapter could come because tracks are going to fight that bitterly because of their lack of revenue coming in on the front (through tickets)."
The options
If NASCAR doesn't listen or agree with the teams, what do the teams have as recourse? Could they actually skip a race despite their contracts with sponsors and drivers?
"I think they could," Wheeler said. "If they didn't go to Atlanta, they would have to give up the sponsorship for that event and the prize money for that event.
"I don't think it will ever get to that. I think the mere threat of something is going to create change. Maybe it will be for the better. Who knows?"
Teams actually might not be able to boycott a race, according to noted sports law expert Gary Roberts, former dean of the Indiana University Robert McKinney School of Law.
In general, a group of separate businesses cannot get together and act in concert to rig the deals that can be made in a specific business market (which likely here would be stock-car racing). They can't collude to limit driver salaries or set minimum or maximum sponsorship levels.
Less clear are the limitations in negotiations with NASCAR. Roberts believes an antitrust lawsuit would be filed by NASCAR against the teams if they tried to boycott.
"If they band together, demanded more money from TV contracts and if they didn't get it, collectively boycotted NASCAR, there would be an argument that could be made that they're violating (anti-trust laws) and they're acting in an illegal fashion," Roberts said.
Wheeler said the short-lived one-race driver boycott at Talladega in 1969 — which included such stars as Richard Petty and David Pearson — nearly crippled the sport.
"How do you have a race without Jimmie Johnson and Jeff Gordon, et cetera, et cetera?" Wheeler said. "You just can't. We've been through that. It just doesn't work. That's the real significance of this."
If that's true, then that enhances the legal arguments for drawing a line in the sand and making demands.
"The question is do these nine have so much reputational capital with the public that they in effect have a lot of market power," Roberts said. "The answer is probably ‘Yes.' But how would a court react to that? A court could simply say to NASCAR, ‘Go get your own drivers. There are a lot of people who would be happy to drive cars in NASCAR races.'
"Those are the kinds of issues that would end up getting litigated and we don't know how the courts would come out on them."
Television split
Some want to view this much like the Indy car split of the 1990s. But there are many differences. CART, which was owned by the teams, already existed and the Indianapolis 500 was operated and officiated by the U.S. Auto Club and included as part of the CART schedule.
When the Indianapolis Motor Speedway, owned by the Hulman family and operated at the time by family member Tony George, created the new Indy Race League open-wheel series in 1996, that sparked the open-wheel split. George made the Indianapolis 500 the cornerstone event with most spots reserved for IRL members, so the CART teams refused to participate.
A quite different scenario is happening here.
With more than half the NASCAR tracks controlled by the France family through the publicly-traded International Speedway Corp. and most of the others owned by SMI, the teams would have limited options of places to race and no television contract. Neither ISC nor SMI are going to give up the average $12-$15 million in television revenue they'll pocket per race from 2015-2024 to go to a new series, and there are no other TV networks willing to foot the bill for major league stock-car racing.
The TV money believed to be at the crux of the issue began to pour in starting in 2001. Before 2001, each track negotiated with the networks to televise its races, and the track would determine how much it would put in the purse. Then NASCAR and the tracks realized they could command a much higher fee if they put the entire series into one television package. NASCAR and the tracks decided on a split of 10 percent for NASCAR, 65 percent for the tracks and 25 percent to the teams, which is paid through the purse.
The teams never had a say, according to Wheeler, who was part of those negotiations in his role at SMI.
The 2015-2024 deal will average $820 million a year, which at the current split breaks down to $82 million for NASCAR, $533 million for the tracks and $205 million for the teams. That's a $47.5 million increase — about $1 million per car depending on where they finish — over this year's deal. The teams currently get $157.5 million of the current $630 million TV package. That extra $1 million probably can cover three to 10 percent of a team budget.
The tracks, which are publicly traded companies, can't afford to lose much of their projected revenue increase — the tracks as a whole will split an extra $123.5 million on average per year as part of the new agreement — because their stockholders are expecting that increase. If NASCAR cuts into their allocation, it will be tough not just from a bottom line standpoint but their stock prices surely would drop, Wheeler said.
Purses have been able to stay stable amid the decline in admissions and other revenue because of the television deal, Marcus Smith said.
"This model has been really strong and to change that really upsets a lot of that balance that currently exists," Smith said. "If you start to change television, you have to talk about (tracks charging) sponsorship fees on cars and admission to the tracks and opens up a whole box of things."
All that said, the owners are a savvy bunch and used to hard-nosed negotiations. It would be silly to underestimate such wealthy and powerful men as Roger Penske, Rick Hendrick and Gene Haas. And they have a financial wizard in Kauffman running the show.
"The announcement doesn't feel great to me only because people fear what they don't know and what they can't see," said Craven, who doesn't believe the teams would consider a boycott of any sort.
"I don't know Rob Kauffman well, but I've asked enough people that do know him and the two things that I know about him is that he's very good at raising capital and he swings for the fence." Sporting News