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Pyning for balance
By Bob Margolis, Yahoo! Sports
October 31, 2005
Team ownership is the hot topic in the NASCAR garage.
Rising costs have many team owners in all of NASCAR's top levels – Craftsman Trucks, Busch and Nextel Cup – questioning whether or not the current business model for team ownership is some combination of bad and broken but perhaps fixable.
Despite owner complaints, NASCAR chief operating officer George Pyne thinks the model is fine.
Currently, team owners are independent businessmen forced to operate within NASCAR's rules. It's up to the teams to finance their own operations via sponsorships and purse money without direct assistance from NASCAR itself.
"Not only do I think that it's a viable business model, I think it's a successful and thriving business model," Pyne said.
Pyne points to the success the current team owners currently enjoy.
"I would say to you that our model works quite well and has rewarded those team owners that have been able to have the expertise to run a good business," Pyne said. "If you look at most of our team owners, they're low-debt, profitable, well-run organizations. I would ask anybody, what's wrong with the model where that's the case?"
Other sports such as professional football and baseball have built-in equity within their models via a franchise system, something that NASCAR lacks. But viewing NASCAR and other sports in the same light isn't a fair comparison, according to Pyne.
Unlike stick and ball sports, where there are only two components – team owners (who typically are aligned with league interests) and players – NASCAR racing and motorsports in general have four key components with which to deal: independent team owners, drivers, track operators and promoters and NASCAR itself.
And that's not the only difference.
"The other sports benefit, quite frankly, from public financing," Pyne said. "Hundreds of millions of dollars – billions in total – have gone to support those other sports. NASCAR and other forms of motorsports have not had those benefits."
Case in point: Racing facilities can cost upwards of $400 million to $600 million to build (Pyne uses those figures in reference to the projected cost of the planned ISC-owned track on Staten Island in New York City) and have to be built using private funding, forcing owners to raise the capital to build and run those facilities
As for the team owners, NASCAR has seen its big teams grow bigger over the past five years, with multi-car teams, once hardly imaginable, now becoming the norm. At the same time, the level of competition on the track has grown tougher, making single-car teams nearly extinct.
Recently, NASCAR chairman Brian France and president Mike Helton attempted to address several key issues concerning ownership, but their comments seemed to create more questions than answers.
France offered that in the near future, NASCAR would limit the number of teams one owner could run, with speculation centered on a three-team maximum.
Owner Jack Roush, whose five Nextel Cup teams are all in this year's Chase, has been a vocal critic of the current business model despite his organization's obvious success. But Roush also is opposed to ownership limits, as outlined in a Roush-issued document that has come known to be called "The Roush Manifesto." The proposed ownership limitations also have owners like Roush and Rick Hendrick, who has four Nextel Cup teams, joining forces in opposition.
Smaller team owners like Bill Davis and Robert Yates have gone on record as saying that the rising costs of operating a multi-car team have forced them to spend more time finding and securing the money necessary to stay in business rather than spending on performance issues.
NASCAR's Car of Tomorrow could help to cut costs in the long run. It is scheduled to debut on a limited basis late in 2006 and then be used exclusively in Nextel Cup in 2007.
NASCAR sees the development of the Car of Tomorrow as primarily being safety driven – an answer to the number of driver deaths and injuries the series experienced in the early part of the decade. While it has been designed to minimize injury to the driver, Pyne adds that it also has incorporated within its new design aerodynamic features which will lower costs.
NASCAR believes the new car will force teams to change the way they operate. Currently, teams have different cars for different types of track, leading to fleets of 20-25 cars for each driver. NASCAR believes teams will perhaps be able to run an entire 38-race season with just six cars once the COT is introduced.
The problem facing owners now is the wasted cost of their current cars.
"What that does is essentially make our entire fleet of cars obsolete," said Roush, citing that the cost of building all new cars falls in the lap of the team owners.
Also, in the past 18 months a new engine formula which featured a more technologically advanced and fuel efficient power plant was agreed upon by NASCAR officials and all of the series' participating manufacturers – Chevrolet, Dodge, Ford and Toyota.
But because of a backlash by owners – who would have to foot the majority of the costs – the plan has been shelved until 2008 at the earliest.
Is a solution needed?
Some owners have called for franchising of NASCAR's teams and with it, some kind of revenue sharing mechanism that would allow for a larger distribution of the tremendous financial windfall that the sanctioning body sees from its current and future television contracts.
Currently, NASCAR contributes 25 percent of its TV revenues to the racing purses distributed at its events.
Can franchising work in NASCAR?
"We've never had anybody present to us a system that meets our criteria of maintaining a level, performance-driven playing field," Pyne said, adding that NASCAR has little motive to abandon a system that is experiencing more success by its key participants than ever before.
In other words, if it's not broke, why fix it?
With NASCAR's skyrocketing growth in the past decade, the sanctioning body, which is still controlled by the France family, has worked diligently – although at times not to everyone's pleasure – to keep costs under control while attempting to maintain a delicate balance between the four entities that make up racing.
"If you ask those four entities – the team owners, the tracks, NASCAR and the drivers – are they better off today than they were five or 10 years ago, I think across the board you'd be very pleased with the results," Pyne said.
Costs of running a NASCAR team have skyrocketed in that time span, however, and Pyne does acknowledge that there are many challenges to owning a race team. But he offers that most teams are well run.
"I would argue that there is already built-in value and equity in the current teams that are out there today," said Pyne. "There is a revenue stream that comes from the purses. The teams keep 100 percent of the sponsorship revenues and a large share of the licensing revenue.
"There are built-in revenue streams in teams that exist and I believe that if you show up at Hendrick Motorsports, or Roush Racing or Evernham Motorsports or any of the teams, you're going to see well-run businesses that have built a substantial business enterprise."
NASCAR also uses rules changes to keep costs contained. The recently enacted rules that Pyne points to as being cost-containment driven include:
The single engine rule, which has forced teams to use one engine all weekend or be penalized by having to start at the rear of the field. Teams admit that starting at the rear of the field for most races isn't much of a penalty, but owners like the fact that they no longer have to build a special qualifying engine that then has to be replaced for the rest of the weekend.
The impound rule, which was designed to narrow the gap between the well-funded and the lesser-funded teams by reducing the amount of track time on the weekends. The rule is not used at all tracks.
Will the impound rule, which basically translates into a two-day show by eliminating all Cup activity after qualifying, lead to two-day Cup events in the future?
"In the '70s we were running 60 races a year and some of them were on dirt, so I don't think you can rule anything in or out," Pyne said. "One of the good things about the way the France family manages this is that we never rule anything in or out."
Looking ahead
Pyne believes that the sport's future team owners already are involved with the sport, perhaps as crew chiefs or drivers. He cites Ray Evernham, Robert Yates and Richard Childress as examples of people previously involved in other aspects of the sport who worked their way into team ownership.
"If you look at who at lot of our best owners are, many of them came up through the racing business and were able to live the American dream," Pyne said. "Certainly I think it's of the best interest of the sport to continue to allow people to compete at what they know."
He adds that NASCAR is looking at what can be done to make entry into ownership easier. The solution, he says, is important to the long-term health of the sport.
"We don't have any magic wand or solution other than to say it is getting tougher and tougher for guys like Ray Evernham to live that dream," Pyne said. "We want to find ways to encourage new ownership and also ways in which to reward those owners who have helped make NASCAR what it is today."
Updated on Monday, Oct 31, 2005 4:27 pm EST
By Bob Margolis, Yahoo! Sports
October 31, 2005
Team ownership is the hot topic in the NASCAR garage.
Rising costs have many team owners in all of NASCAR's top levels – Craftsman Trucks, Busch and Nextel Cup – questioning whether or not the current business model for team ownership is some combination of bad and broken but perhaps fixable.
Despite owner complaints, NASCAR chief operating officer George Pyne thinks the model is fine.
Currently, team owners are independent businessmen forced to operate within NASCAR's rules. It's up to the teams to finance their own operations via sponsorships and purse money without direct assistance from NASCAR itself.
"Not only do I think that it's a viable business model, I think it's a successful and thriving business model," Pyne said.
Pyne points to the success the current team owners currently enjoy.
"I would say to you that our model works quite well and has rewarded those team owners that have been able to have the expertise to run a good business," Pyne said. "If you look at most of our team owners, they're low-debt, profitable, well-run organizations. I would ask anybody, what's wrong with the model where that's the case?"
Other sports such as professional football and baseball have built-in equity within their models via a franchise system, something that NASCAR lacks. But viewing NASCAR and other sports in the same light isn't a fair comparison, according to Pyne.
Unlike stick and ball sports, where there are only two components – team owners (who typically are aligned with league interests) and players – NASCAR racing and motorsports in general have four key components with which to deal: independent team owners, drivers, track operators and promoters and NASCAR itself.
And that's not the only difference.
"The other sports benefit, quite frankly, from public financing," Pyne said. "Hundreds of millions of dollars – billions in total – have gone to support those other sports. NASCAR and other forms of motorsports have not had those benefits."
Case in point: Racing facilities can cost upwards of $400 million to $600 million to build (Pyne uses those figures in reference to the projected cost of the planned ISC-owned track on Staten Island in New York City) and have to be built using private funding, forcing owners to raise the capital to build and run those facilities
As for the team owners, NASCAR has seen its big teams grow bigger over the past five years, with multi-car teams, once hardly imaginable, now becoming the norm. At the same time, the level of competition on the track has grown tougher, making single-car teams nearly extinct.
Recently, NASCAR chairman Brian France and president Mike Helton attempted to address several key issues concerning ownership, but their comments seemed to create more questions than answers.
France offered that in the near future, NASCAR would limit the number of teams one owner could run, with speculation centered on a three-team maximum.
Owner Jack Roush, whose five Nextel Cup teams are all in this year's Chase, has been a vocal critic of the current business model despite his organization's obvious success. But Roush also is opposed to ownership limits, as outlined in a Roush-issued document that has come known to be called "The Roush Manifesto." The proposed ownership limitations also have owners like Roush and Rick Hendrick, who has four Nextel Cup teams, joining forces in opposition.
Smaller team owners like Bill Davis and Robert Yates have gone on record as saying that the rising costs of operating a multi-car team have forced them to spend more time finding and securing the money necessary to stay in business rather than spending on performance issues.
NASCAR's Car of Tomorrow could help to cut costs in the long run. It is scheduled to debut on a limited basis late in 2006 and then be used exclusively in Nextel Cup in 2007.
NASCAR sees the development of the Car of Tomorrow as primarily being safety driven – an answer to the number of driver deaths and injuries the series experienced in the early part of the decade. While it has been designed to minimize injury to the driver, Pyne adds that it also has incorporated within its new design aerodynamic features which will lower costs.
NASCAR believes the new car will force teams to change the way they operate. Currently, teams have different cars for different types of track, leading to fleets of 20-25 cars for each driver. NASCAR believes teams will perhaps be able to run an entire 38-race season with just six cars once the COT is introduced.
The problem facing owners now is the wasted cost of their current cars.
"What that does is essentially make our entire fleet of cars obsolete," said Roush, citing that the cost of building all new cars falls in the lap of the team owners.
Also, in the past 18 months a new engine formula which featured a more technologically advanced and fuel efficient power plant was agreed upon by NASCAR officials and all of the series' participating manufacturers – Chevrolet, Dodge, Ford and Toyota.
But because of a backlash by owners – who would have to foot the majority of the costs – the plan has been shelved until 2008 at the earliest.
Is a solution needed?
Some owners have called for franchising of NASCAR's teams and with it, some kind of revenue sharing mechanism that would allow for a larger distribution of the tremendous financial windfall that the sanctioning body sees from its current and future television contracts.
Currently, NASCAR contributes 25 percent of its TV revenues to the racing purses distributed at its events.
Can franchising work in NASCAR?
"We've never had anybody present to us a system that meets our criteria of maintaining a level, performance-driven playing field," Pyne said, adding that NASCAR has little motive to abandon a system that is experiencing more success by its key participants than ever before.
In other words, if it's not broke, why fix it?
With NASCAR's skyrocketing growth in the past decade, the sanctioning body, which is still controlled by the France family, has worked diligently – although at times not to everyone's pleasure – to keep costs under control while attempting to maintain a delicate balance between the four entities that make up racing.
"If you ask those four entities – the team owners, the tracks, NASCAR and the drivers – are they better off today than they were five or 10 years ago, I think across the board you'd be very pleased with the results," Pyne said.
Costs of running a NASCAR team have skyrocketed in that time span, however, and Pyne does acknowledge that there are many challenges to owning a race team. But he offers that most teams are well run.
"I would argue that there is already built-in value and equity in the current teams that are out there today," said Pyne. "There is a revenue stream that comes from the purses. The teams keep 100 percent of the sponsorship revenues and a large share of the licensing revenue.
"There are built-in revenue streams in teams that exist and I believe that if you show up at Hendrick Motorsports, or Roush Racing or Evernham Motorsports or any of the teams, you're going to see well-run businesses that have built a substantial business enterprise."
NASCAR also uses rules changes to keep costs contained. The recently enacted rules that Pyne points to as being cost-containment driven include:
The single engine rule, which has forced teams to use one engine all weekend or be penalized by having to start at the rear of the field. Teams admit that starting at the rear of the field for most races isn't much of a penalty, but owners like the fact that they no longer have to build a special qualifying engine that then has to be replaced for the rest of the weekend.
The impound rule, which was designed to narrow the gap between the well-funded and the lesser-funded teams by reducing the amount of track time on the weekends. The rule is not used at all tracks.
Will the impound rule, which basically translates into a two-day show by eliminating all Cup activity after qualifying, lead to two-day Cup events in the future?
"In the '70s we were running 60 races a year and some of them were on dirt, so I don't think you can rule anything in or out," Pyne said. "One of the good things about the way the France family manages this is that we never rule anything in or out."
Looking ahead
Pyne believes that the sport's future team owners already are involved with the sport, perhaps as crew chiefs or drivers. He cites Ray Evernham, Robert Yates and Richard Childress as examples of people previously involved in other aspects of the sport who worked their way into team ownership.
"If you look at who at lot of our best owners are, many of them came up through the racing business and were able to live the American dream," Pyne said. "Certainly I think it's of the best interest of the sport to continue to allow people to compete at what they know."
He adds that NASCAR is looking at what can be done to make entry into ownership easier. The solution, he says, is important to the long-term health of the sport.
"We don't have any magic wand or solution other than to say it is getting tougher and tougher for guys like Ray Evernham to live that dream," Pyne said. "We want to find ways to encourage new ownership and also ways in which to reward those owners who have helped make NASCAR what it is today."
Updated on Monday, Oct 31, 2005 4:27 pm EST
