NASCAR: Will Magna Charter Be Holy Grail for the Sport?

Petty  is pleased with NASCAR's new 'Charter' system.
Petty is pleased with NASCAR’s new ‘Charter’ system.

NASCAR’s anticipated charter system has been rolled out, tackling governance, economics, and participation at its premier top level series of professional stock car racing. Certainly, the Charter agreement is a seminal shift in how the sport has been managed. For fans, it may be much ado about nothing, or perhaps not.

During the announcement, no less a luminary than the King Richard Petty called it the second most important day in NASCAR history, second only to the founding of the sport’s sanctioning body back in 1948.

The nine-year life of the 36 available charters (which are fully resalable) runs concurrently with NASCAR’s television-rights deal through 2024. Currently, that $8 billion contract with Fox and NBC shares 65% of the rights money with racetracks, 25% to the competitive teams (who are paid through the race purse), and 10% to NASCAR.

The biggest breakthrough for the 36 teams possessing a charter is a guaranteed spot in the field for every race, starting with the season opening race at Daytona. These privileged teams now have more stability in their business model, which supports their quest to build their long-term brand. At a base level, an annuity revenue stream for 30th place running team participating in all the races has a floor value ranging from $3 to $5 million per year (using the total purse results for Trevor Bayne, 29th in points, and Alex Bowman, 33rd in points, as proxies from last year). That’s cash an owner can now count on.

Stronger teams may just make for a better product on track, allowing teams to invest more in their performance and their future growth in the sport. With a more secure business model, team owners may have more leverage in locking up sponsors and more willingness to take a chance on up-and-coming driving talent.

Rob Kaufmann, former owner of Michael Waltrip Racing, has several Charters in the process of being sold.
Rob Kaufmann, former owner of Michael Waltrip Racing, has several Charters in the process of being sold.

The revenue stream from purse winnings that is linked to TV rights deal ensures that Charter teams are guaranteed the ability to be on the stage of every race for the next nine years, providing a base annuity return for a Charter franchise.

As a key principal that helped broker this agreement, Rob Kauffman, majority team owner of Michael Waltrip Racing, confirmed his intent to sell two charters now that MWR is out of business. The anticipated buyers include Stewart-Haas Racing for Kurt Busch’s #41 team and Joe Gibbs Racing for Carl Edwards’ #19 team. Kauffman ventured that “If you had to ask me right now, what do I think they’re roughly worth, I would say, single-digit millions, individually.”

At face value, all seems splendid. Like many of NASCAR’s changes, fans may not ultimately care much, unless the law of unintended consequences surfaces. And this is auto racing, inherently unpredictable, where anything that can happen often well.

Play out one possible team scenario for full effect.

Sprint Cup rookie Ryan Blaney, now full-time driver of #21 Ford Fusion for the fabled Wood Brothers racing team, is one of the teams on the outside looking in who will not start the season with a charter-guaranteed spot in the Daytona 500. And most all charters this year are spoken for or already have been sold, leaving Ryan Blaney needing to qualify on speed based on the four unsecured spots in the 40-car starting grid.

If Blaney wins a regular season race, thereby qualifying for the Sprint Cup Chase playoff, the Wood Brothers could find themselves in the precarious position of needing to qualify for every Chase race to remain in championship contention. One bad qualifying effort, and they might just be packing up and going home.

As a worst case scenario, picture Ryan Blaney making it all the way to the Homestead Championship finale and suffering a mechanical issue during qualifying such that the #21 team misses the cut and is unable to compete for the Sprint Cup title in the final race of the year. It would be fascinating to see how NASCAR Chairman Brian France would justify that bizarre outcome. For sure, many fans would ridicule that travesty. Perhaps NASCAR will implement some type of provisional qualifying allowance to address such hitches.

So, what is the hidden gem in all of this? It’s called the Team Owner Council, where the Charter teams will have formal input into decisions made by the sanctioning body.

Leave it to Richard Petty to plainly call it out, “It’s sort of like the democrats and republicans, they’ve been doing their thing, we’ve been doing our thing, meeting in the middle a little bit. We’re getting rid of that. We’re all going to be in the middle of the deal now.”

The new agreement also provides Charter teams with new revenue opportunities including a greater interest in digital operations. And that just may be the golden goose for everyone.

Right now, when you check out a race team’s site on-line, there are as many approaches to fan interaction as there are race teams. Some engage with fans, some don’t. Some readily sell team merchandise, some don’t. Some have team highlights and interviews, some don’t.

And that is where the future revenue generation and engagement potential just may be. Major League Baseball is a prime model of successful integration, so much so that MLB Advanced Media is a separate business that partners with other sports leagues (including the PGA, NHL, and WWE) on the management of their digital media rights. Digital technology is huge for leagues. It allows fans to consume events when they want, how they want and with whom they want.

And that may be the blessing in this Charter deal for everyone. If NASCAR learns from the MLB model, thereby capitalizing on emerging tech developments, developing a fully integrated global hub with behind the scenes action, and capturing fans who embrace being at the forefront of these interactive media experiences with deeper access into the sport through sharing the stories of both drivers and teams.

By Ron Bottano. Let’s connect on Twitter @rbottano

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