JR Motorsports is looking to enter the NASCAR Cup Series; That’s put on hold with a wild charter valuation and a ‘broken business model’
About a decade ago, NASCAR introduced a charter system. 36 were issued to NASCAR teams and the value is now judged in the free market.
Charters are basically franchises. It was NASCAR’s way of helping add value to their race teams.
For years, the value of those charters was minimal. For 2022, NASCAR released the Next Gen car. The spec machine levels the playing field, drastically. That’s created wide interest in becoming a team owner.
At the same time, the business model still isn’t working. Currently, teams only get 25% of the tv revenue. Tracks get 65% with NASCAR taking the remaining 10%.
With the costs of operating a team, they are required to go out and seek sponsorship to fund their franchise. NASCAR teams are saying 60-80% of the revenue it takes for them to race is coming from sponsorships that they sell directly.
NASCAR is currently in negotiations regarding a new tv deal which begins in 2025. The Race Team Alliance is an organization that handles those negotiations with NASCAR. Months ago, they submitted a proposal to NASCAR. Last week, the series responded with a very minimal increase in tv revenue for the teams.
At the same time, the cost of a charter has skyrocketed.
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Dale Earnhardt Jr looking to become NASCAR Cup Series owner; Not at $30m
Dale Earnhardt Jr currently owns a NASCAR Xfinity Series team. For over a year, he’s expressed interest in joining the NASCAR Cup Series but there’s one major hurdle to do so.
“I’m a potential owner in the Cup Series,” Dale Earnhardt Jr stated via the Dale Jr Download.
“We are actively out here talking to these teams about what these charters are worth. Who’s willing to sell one? How do we become an owner?”
“The RTA is basically telling me that this charter that I want to buy is a losing proposition. It’s broken. That I don’t want to buy this charter now, because it’s not a successful business. They basically said they can’t make any money, they’re all losing money.”
“When I heard NASCAR’s offer was very minimal. It made me go, ‘Oh wow.’ “
“Instead of maybe getting 5 million, they want that to go up significantly. So, the TV money comes to the teams and they aren’t solely responsible to depend on the sponsorships to race.”
“As a future owner, I expected the RTA to be able to get this done. When I heard that NASCAR came with a very minimal increase, it freaked me out a little bit.”
“It put pause on a lot of people that might be interested to buy into this sport.”
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Cost of a charter: $28-30 million?
“In less than a decade, a charter has went from $2 million to $28-30 million,” Dale Jr added.
“Everybody is wondering if that $28-30 million evaluation is real or if it’s a bubble. For me, I went from being able to somewhat justify that purchase to saying, ‘No way! Not at that number.’ “
“No way I’m going to spend $30 million for a charter that’s going to operate at a loss. And I’m going to get a very minimal amount of money out of the tv deal.”
“I don’t think they’ll ever be any kind of a work stoppage or anything like that. So, I don’t know how much leverage the RTA really has. So, if they don’t have a lot of leverage, how do they get the number they want?”
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NASCAR charter value going up or down?
With the Next Gen car, there’s a lot of things that could shift the entire business model. One of those is the size of team operations. Is it beneficial to have 4 cars at the track with limited practice and identical cars?
Dale Jr himself has previously explained that going from a 1 to a 2 car team drastically trims the costs of operating a team with shared resources. Adding a 3rd car reduces things a bit further. When you add a 4th car, he’s stated that you need to hire additional people and the costs per team go back up.
“There possibly, in 5 years, could be new charters available. Is operating at 4 teams the smartest financial situation?”
“Will it be more appealing to be a 3 car team or even just a 2 car team? Then, there might be a lot of charters in the market, at that point.”
“There’s not many charters for sale right now. There’s only a couple willing to consider selling, there’s maybe one, even. So, you’re negotiating with one person that knows they have, the only one.”
“This is fascinating. Yeah, I don’t love the current price tag on the charter, at all. To get in there a little lower would be pretty nice.”
“We had a chance not very long ago to get a charter at $6m, to get one at $12m. It was months ago. Is that $30m real?”
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