NASCAR must soon deliver the terms of a renewed charter system to teams, who will find out if they will get an increase in league revenue from 2021 through 2024, according to sources.
First introduced in 2016, the charter system is the governing document that binds the series’ top teams to exclusively race in NASCAR. The system, which has 36 charters that are analogous to franchises and each attached to a specific car, gives chartered teams guaranteed starting spots, governing power and payments for being charter owners.
The charter agreement was for an initial five-year period from 2016 through 2020, and it included a renewal option that would extend from 2021 through 2024 if enacted.
But while the end of the first term is more than a year away, NASCAR has until Nov. 1 of this year to give teams details on how much money they can expect during the renewal period, according to information learned by Sports Business Journal. Under the current deal, teams this year will get about $260 million in total to be distributed among themselves, with the money coming from media rights, tracks and NASCAR.
The deadline had not been reported, and the fact that it is coming more than a year before the end of the first term underscores the magnitude of the decision that teams will face on whether to renew the agreement amid issues with sponsorship and the sport’s overall business model.
NASCAR and the Race Team Alliance did not comment.
After NASCAR informs the teams of the new terms, the teams then need to give NASCAR notice of whether they intend to accept the renewal offer sometime between Jan. 1 and March 1, 2020, according to information reviewed by Sports Business Journal. Each team votes individually and has the right to opt in or out of the agreement. However, NASCAR has structured the financial benefits of the charter system in a way where a team would have little incentive to compete without a charter. And teams in the Race Team Alliance could choose to vote the same way, deterimining the outcome.
If team owners accept the terms, their deal will be automatically extended through Dec. 31, 2024.
The revelation of the deadline comes as teams have been in negotiations with NASCAR in recent months to get the sanctioning body and tracks to chip in for the changeover costs that will come with switching to a new car model in either 2021 or 2022. It is expected to cost teams a seven-figure amount for each car to change to the new model, between developing and buying new parts plus retiring obsolete parts.
There’s a feeling among teams that NASCAR and tracks should pitch in to help defray the cost of the car model change, given that teams believe they are the only one of those three entities that is struggling to turn a profit. Some team executives think it is unlikely that NASCAR will allot any new revenue to teams, while others are holding out hope. One team executive who reviewed International Speedway Corp.’s proxy statement related to its acquisition by NASCAR said the document suggested that teams’ revenue disbursements will remain the same.
The second term of the charter agreement would expire after 2024 to coincide with the end of NASCAR’s current media rights deal.
Meanwhile, tracks are also waiting on NASCAR to deliver the terms of their sanction agreements starting in 2021. Theoretically, as a way to get teams more money, NASCAR could require tracks to pay more to host races or potentially even try to rework the media rights distribution, which now sees tracks get 65% while teams get 25% and NASCAR gets the remaining 10%.
However, many track executives are privately opposed to giving teams more money, with a rationale that the teams would just spend the added money on competition anyway and that over-spending is the problem.
