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Leagues and Governing Bodies

Charters Give NASCAR Teams Financial Flexibility, More Sponsorship Opportunities

NASCAR yesterday in "one of the most significant announcements" in its history formally presented the details of its new charter system, a program that "addresses three key areas -- participation, governance and economics -- to promote a more predictable, sustainable and valuable team business model," according to Tom Jensen of FOXSPORTS.com. The system "affords charter teams that remain in good standing more predictable revenue over the nine years of the agreement." Along with "improved financial certainty, the new framework is designed to increase the long-term market value of teams and provide the ability to plan farther ahead with existing, new and prospective partners" (FOXSPORTS.com, 2/9). While the general thought among industry execs is that charters are worth around $1M right now, sources have indicated there have been bids for charters made that were in the $5-7M range. Industry execs are keeping a close eye on this number, as it will amount to a new revenue steam created solely from the new structure of the system (Adam Stern, Staff Writer).

DETAILS OF THE DEAL: ESPN.com's Bob Pockrass noted transferring one of the 36 charters "must be approved by NASCAR, which will charge an administrative fee but not get a percentage of the sale." All NASCAR team owners "will be allowed to see the transfer application, which would include the price of the charter sold." Charters can be sold "only before the start of a season and can be transferred only once every five years." Because teams "will be able to guarantee sponsors that they will start the race and can project revenues not based on performance but the new agreement, they should have an easier time attracting sponsors as well as more money from potential investors and buyers." NASCAR "did not reveal the financials of the system, nor did it say what the performance clause would be to keep a charter." But a charter "does require a team to field a car for every race." The deal "does not include revenue sharing among the teams." However, it does give owners "more ability to make money through NASCAR's digital operations." NASCAR also "created a Team Owner Council that will have formal input into long-term decisions on rules and NASCAR policy." There is a "four-charter limit for team owners" (ESPN.com, 2/9).

FOR THE GOOD OF THE SPORT: USA TODAY's Jeff Gluck notes the charter system was approved after "complex negotiations that occurred through trying to reach the same goal: Bettering the sport." Team Owner Richard Petty said, "It (was) sort of like the Democrats and Republicans -- they've been doing their thing, we've been doing our thing, meeting in the middle a little bit. We're getting rid of that. We're all going to be in the middle of the deal now." He added, "Now we're going to be in the same room talking about the same problems and solving the problems together. From that standpoint, it's going to be one of the greatest things that's ever happened to NASCAR and Cup racing" (USA TODAY, 2/10).  JTG/Daugherty Racing Owner Tad Geschickter said, “Being able to market that we’re one of the 36 is huge. I think when you look at nine years down the line how performance relates to revenue -- which was never apparent before -- is really key so you can plan as a business." MOTORSPORT.com's Lee Spencer noted the economic benefits "are many." In addition to helping in the search for sponsors, a team owner who is "looking to cash out of the sport, will have the opportunity to do so for more than pennies on the dollar." Potential owners also can "enter the sport knowing there will be equity in their investment" (MOTORSPORT.com, 2/9).

BOOST TO THE SMALLER TEAMS: In Charlotte, David Scott writes the new charter system also will provide a "more solid footing for smaller teams that have had to scratch and scrape together enough dollars each week." Team Owner Tommy Baldwin, whose one-car team will field the No. 7 Chevy driven by Regan Smith, said, "It’s just the stability. It allows us to look so far ahead and be able to build the business, the brand. That’s the key for us" (CHARLOTTE OBSERVER, 2/10). Race Team Alliance Chair Rob Kauffman said, "Take Tommy Baldwin Racing for example. They got bumped from the Daytona 500 last year because of the qualifying procedure when they were a full-time team. I think that it's kind of hard to explain to a sponsor you may or may not be in a race, especially if you're in the getting a sponsorship business, and if you’re trying to activate and promote them or whatever. On the corporate side it's very difficult, so I think that stability helps a ton, especially for the up and coming teams trying to get a foothold in the sport" ("NASCAR America," NBCSN, 2/9). Richard Petty Motorsports Dir of Research & Development Drew Blickensderfer said the charter system is a "huge win" for the smaller teams. Blickensderfer: "It was like a championship victory for those guys. It puts a lot of value in their team. All their hard work, their blood, sweat and tears that went into building this company now has value" ("NASCAR Race Hub," FS1, 2/9). But NBCSPORTS.com's Jerry Bonkowski reported Hillman Racing Owner Mike Hillman, who was not granted a charter, "expressed his disappointment at the new system." He said in a statement, "I've poured my heart and soul -- literally my blood, sweat and tears -- into building a competitive NASCAR Sprint Cup team over the past three years, and to be told one week prior to the sport's biggest event of a complete overhaul of the framework of the Series is disheartening" (NBCSPORTS.com, 2/9).

EVERYONE WANTS IN
: In K.C., Tod Palmer notes Joe Gibbs Racing's No. 19 car driven by Carl Edwards "wasn’t among those granted one of 36 charters." However, a spokesperson for Joe Gibbs Racing said that a deal "is in the works to obtain one of two charters granted to now-defunct Michael Waltrip Racing." JGR VP/Communications Chris Helein in an email wrote, “We are working to finalize the transaction. As I understand it, it is just a matter of some final paperwork.” Palmer notes Edwards left Roush Fenway Racing after the '14 season and signed on with JGR, which "added a fourth Sprint Cup team" for the '15 campaign. As a result, it "did not qualify for a charter, which were granted to teams that had been in continuous operation for the last three seasons." Kurt Busch, who drives the fourth car for Stewart-Haas Racing, "also was caught by the same provision." Kauffman: “A basic tenet of this is use it or lose it. If you’re not going to race, you’re not going to have it. For those two slots to be available, those will have to be transferred before Daytona. I think it’s very likely JGR and Stewart-Haas will probably be acquiring those in the not-too-distant future" (K.C. STAR, 2/10).

MY, HOW TIMES HAVE CHANGED: Fox Sports' Andy Petree said the France family for more than 60 years have "controlled and governed this sport and helped it grow to what it is." He said, "I don't think you're going to see NASCAR give that up. They will listen to the owners as a council. They'll listen to the drivers. They have their own. But I don't think I'll read into that that the owners are going to be making any rules. I don't see that. I see NASCAR still having that and it should stay because it's been very successful to this point" (“NASCAR Race Hub,” FS1, 2/9). But in Greensboro, Ed Hardin writes the introduction of the charter system marks the "first time the sport has successfully taken power from the France family." The fact that NASCAR Chair & CEO Brian France, the grandson of NASCAR Founder Big Bill France, "would be forced into such an unholy alliance" with the team owners shows "just how much power NASCAR has lost in recent years." Yesterday was "one of the worst days in France family history," and Big Bill was "probably rolling in his grave" when the announcement was made." However, the deal avoids the "one thing the sanctioning body wanted most to avoid" -- the formation of a union. Meanwhile, the fact the announcement "wasn't picked up live by [a] major news or sports network shows how far off the national scene stock-car racing has fallen" (Greensboro NEWS & RECORD, 2/10).

GETTING THE DEAL DONE: Law firm Proskauer Rose LLP last night announced they represented NASCAR in charter talks. Proskauer, whose team was led by partner Jon Oram, associate Frank Saviano and included Sports Law Group co-heads Joseph Leccese and Bradley Ruskin, noted in its release that it also previously represented NASCAR in media-rights negotiations with Fox Sports and NBC Sports Group, plus the sanctioning body’s entitlement deal with Comcast’s Xfinity brand. Covington represented the RTA on the charter project, and the group still retains Jones Day for its dealings (Stern).

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