A Risky Endeavor: How NASCAR’s Ownership Model Both Encourages and Discourages Buying into the Sport
Michael Jordan, Floyd Mayweather, and Pitbull. All three of these people are legends in their respective disciplines. But you are probably asking what they all have in common. Well, all three have invested in NASCAR teams within the past two years.
Why would they do this? Because contrary to popular belief, NASCAR viewership and attendance has been consistently rising for the first time in over a decade. It’s the perfect time to invest in NASCAR.
Michael Jordan is the primary stakeholder in 23XI racing, which owns the #23 car of Bubba Wallace, the only African American driver in the series, and the #45 of Kurt Busch. Pitbull is a part owner in Trackhouse Racing, which runs the #1 of Ross Chastain and the #99 of Daniel Suarez.
Floyd Mayweather has been having a little more trouble establishing his team. The Money Team runs the #50 on a part-time basis with various drivers. Why is his team not running full time? This leads into NASCAR’s biggest problem at the moment. The Charter System.
Created in 2015, the charter system was formed to give each current car owner a guaranteed spot to compete in every race along with a portion of the purse money. Teams are free to lease and sell their charters to other teams. This essentially is the equivalent to owning a sports franchise. The charter allows a team owner to sell out but still make a profit on their way out the door instead of losing millions in old racecar equipment. Teams are only allowed to have up to four charters for their entire organization.
This system worked exactly how it was intended for about six years, but then came the introduction of the Next Gen Car. Debuting at the beginning of the 2022 season, the new car was designed to shorten the gap in performance between the powerhouse teams and the back markers, giving every team a chance to legitimately compete. This revelation caused a wave of new potential owners to want to come into the sport.
However, there are only 36 charters available, and many of them belong to fully established teams with sponsors and drivers signed and no chance of them being willing to sell. Michael Jordan and his team were able to acquire their charters from the now defunct Starcom Racing. Meanwhile, Pitbull and Trackhouse took an entirely different approach.
Knowing there was a lack of available charters, Pitbull and co-owner Justin Marks went to Chip Ganassi, owner of Chip Ganassi Racing and purchased his entire NASCAR operation, with all equipment and employees included in the acquisition.
Not everyone can take this bold approach though, and the rising price of each charter is certainly not helping. It is estimated that one charter is currently going for upwards of $20 million. NASCAR legend Dale Earnhardt Jr, owner of Jr. Motorsports, which races in the NASCAR Xfinity Series, has been trying to obtain a charter. CEO of Jr. Motorsports Kelley Earnhardt Miller told Sports Business Journal that it’s “50/50 at this point… We’re just really trying to understand what it’d look like because it’s a lot to learn and put together to see if it makes business sense, and that’s really the key for us.” This is concerning because if the most popular driver in the history of NASCAR can’t obtain a charter, who can?
Dale Jr. isn’t the only one trying to make a sale happen. Brad Keselowski, who is a driver/owner for RFK Racing, said “Yeah, I mean, we want to get back to being at least a four-car team.” RFK currently only fields two cars, the #6 for Keselowski and the #17 for Chris Buescher. Additionally, Richard Childress Racing is looking to expand to a three-car operation as early as the start of the 2023 season. They currently run two cars full time but acquired Kyle Busch in a blockbuster free agency move. Plus, the aforementioned Trackhouse Racing and 23XI Racing will both have plans to expand within a few years.
The other major factor teams are considering is the upcoming TV deal that will begin in 2025. Currently, it is rumored that teams receive only 30% of the profits from the massive TV deal NASCAR has with NBC and FOX. The hope that the next TV deal will work in favor of the teams complicates purchases of charters even more. Teams are holding out to see if they will make more money by keeping their team and their charter or if they’ll just end up waiting two more years before selling out.
It's clear that just like every business model, NASCAR and their charter system has flaws. The charter system could probably even use a complete overhaul. But the one thing we know for certain is even though NASCAR’s popularity is booming, it might not be enough to break down the entry barrier.