As NASCAR enters its 2024 racing season with the running of the Daytona 500 this Sunday, in many ways the circuit finds itself ascendant: NASCAR remains the most popular motorsports league in the U.S., with an expanding slate of races, notions of pushing harder into Canada and/or Mexico, and a billion-dollar-a-year media rights deal.
But for all the good vibes around the stock car league, there are rumblings of discontent among some of the teams, primarily around NASCAR charters. The exclusive negotiating window for extending the charter expired in January, and the original charter agreement will expire at the end of this year. NASCAR can then change the program at will and teams can bolt for new circuits if they wish.
What, Exactly, Is a Charter?
To understand charters, you first have to understand NASCAR’s ownership structure.
Unlike most leagues, which feature a group of franchise owners who form a league along the lines of MLB or the NFL, or a group of team operators who legally invest into one central business that owns all the teams, like Major League Soccer, NASCAR is owned by one group: the France family. Race car driver Bill France Sr. formed NASCAR in the late 1940s and soon built his first speedway—Daytona—in the early 1950s. Today his descendants own NASCAR and most of the racetracks on its circuit.
For most of NASCAR’s existence, that meant that the France family collected any profits the league made (as well as bearing the expenses of owning the racetracks.) It has made at least one family member a billionaire. Stock car racing isn’t cheap—there’s a reason drivers and cars are covered in sponsor logos—so last decade the family introduced the concept of charters to provide extra incentive for teams to invest in racing regularly and make the effort to win. Basically, a charter guarantees a team can participate in each NASCAR race and collect money for doing so.
Under the charter structure, NASCAR and the teams pledged exclusivity to each other—the circuit wouldn’t create more charters and teams wouldn’t race for other leagues. The current charters are in effect through the end of 2024, when NASCAR’s current media rights deal expires.
How Were Charters Distributed?
In 2016, when charters were introduced, NASCAR said it was to reward teams that raced regularly. To determine that, they said they looked at team participation and performance for the prior three years and handed out 36 charters to the three dozen teams it felt represented a base level of commitment it wished to see. That means for most races, comprised of 40-car fields, there are four at-large slots for non-charter holders.
How Much Do Charters Cost?
When NASCAR first handed them out, nothing. Since teams can lease or sell their charters, they have since risen in value. Most recently, it was widely reported the Spire team paid $40 million for its charter before the 2023 season ended last fall. That price was about triple the price said to have been paid by 23XI Racing in 2021 for its charter. The 23XI team is owned by Michael Jordan and Denny Hamlin.
How Much Money Do Charters Generate?
Officially, NASCAR won’t say. We do know every charter team receives some payout for every race it runs, and the payouts are unequal, with winners getting the most followed by lesser amounts depending on how teams finish each race. Multiple press reports that don’t disclose sources put the annual revenue generated by a charter at around $8 to $9 million.
Why Are Teams Unhappy?
Despite the $9 million per team payout figure, it’s generally seen as not enough to cover teams’ operating costs. Teams believe the charter revenue still leaves them beholden to finding sponsors to help them break even. Rough estimates are that it costs $10 million a year to run a single car.
On top of that, teams see NASCAR inked a new media rights deal starting in 2025 that is much more valuable than the current one. The new deal will pay NASCAR $1.1 billion on average a year through 2031, about 34% higher than the $820 million deal the circuit had the past decade. Teams want to be paid more given NASCAR will be making more.
Like in other sports, the dispute is the age-old struggle over money between owners—NASCAR—and participants—the teams that race in NASCAR. Since NASCAR is privately held, no one outside the France family is sure how much revenue it generates each year. A 2024 bond rating note from S&P Ratings on NASCAR debt said the business, excluding the France family-owned racetracks, generates about $140 million in free cash flow a year—an accounting convention that could be a close reflection of NASCAR’s profitability (but not always). Even though NASCAR will be generating about $1.8 billion annually in total revenue in coming years, S&P says the league’s revenues are “modest” and heavily reliant on consumer discretionary income for things like ticket sales.
What Is Going on Now?
Teams will race at Daytona and the rest of the season and get paid while negotiations with NASCAR continue. Teams want NASCAR to about double the current payouts.
For NASCAR’s part, it contends teams don’t see all the costs involved in owning and maintaining racetracks, and that, combined with the prize money doled out for each race, the split is equitable.
NASCAR also wants to retain the ability to take away team charters if they’re consistently poor racers and seem to not be investing enough to improve. The league also wants to be able to eliminate the charter system or change it as they see fit down the line. (NASCAR declined to comment for this story).
What Leverage Do the Teams Have?
Not a lot. Even with no consensus from teams for beyond 2024, NASCAR can decide to extend the system as is, change it at will or even eliminate it, something teams owners perhaps fear most. Teams do ultimately have the option not to race—there are other racing leagues in North America. If widely followed teams and drivers moved to other leagues, it would seriously diminish the appeal of NASCAR races.
Wait, Isn’t Sportico Owned by a NASCAR Team?
Not quite. Sportico is published by Penske Media Corp., the owner of which is related to the owner of the Penske NASCAR team. Sportico is editorially independent.
Does the Dispute Over Charters Mean NASCAR Is in Trouble?
Team owners showed their displeasure last year by not showing up to a NASCAR-arranged meeting to discuss the charters. But in reality, the charter dispute is over money in a league that by all appearances is making more of it than ever, so probably not.
For its part, NASCAR has been vocal in saying it wants and needs teams to make more money and lower their costs while being more competitive up and down the field. The league points to cost controls such as the more standardized Next-Gen car as lowering costs and says the charter system has rewarded teams for their consistent efforts.
There seems little chance NASCAR eliminates the charter system anytime soon, based on public pronouncements. “If we’re going to optimize the growth of this sport, we need to continue to do that in ’24 and ’25 and beyond,” NASCAR president Steve Phelps said in his November State of the Sport address. “We’ve acknowledged that we want to change the paradigm for our race teams and we need to make sure our race teams are profitable, competing on the racetracks. We are interested in having their enterprise value climb.”
(This story has been updated in the second and sixth paragraphs to correct when the charter agreement expires.)
