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SBJ/July 14-20, 2014/Franchises
Race Team Alliance: ‘Tons of things we can do’
Published July 14, 2014, Page 4
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In early June, representatives from the nine biggest race teams in NASCAR assembled at Jones Day’s offices in Washington, D.C. They came together with a purpose.
After years of talk about collaborating on everything from cutting costs to arranging driver appearances, the teams agreed it was time to unite.
Race Team Alliance Chairman Rob Kauffman (right), with drivers Clint Bowyer (center) and Brian Vickers
The Race Team Alliance, announced last week, is the result. The new business association was formed over the course of the last month with the assistance of Jones Day attorney Glen Nager, who represented American Needle in its antitrust case against the NFL before the Supreme Court.
The organization has bylaws, a mission statement and a chairman, Rob Kauffman, the co-owner of Michael Waltrip Racing and retired founder of Fortress Investment Group. It has the backing of the biggest names in the sport: Rick Hendrick, Roger Penske, Richard Childress, Richard Petty, Joe Gibbs, Jack Roush and Chip Ganassi.
They collectively agree the time has come for them to have a single voice and work together off the track to improve their businesses. They want to cut costs by possibly eliminating their private air fleets or finding a common insurer. They want to provide brands interested in getting involved in the sport with a turnkey way to work with some of the teams’ top drivers. They want to increase revenue by signing multiteam sponsorships in nonconflicting categories such as hotels.
“There are tons of things we can do,” Kauffman said. “Some people misinterpret NASCAR’s role. They’re a business. They operate in their own best business interest. It’s not their responsibility to help the teams. We need to help ourselves.”
The Race Team Alliance will collect dues, hire a small staff and invite other teams across NASCAR to become members. The nine founding members will be the only voting members, but rules in the bylaws allow a multicar team that fields a top-25 car to become a voting member. Similarly, if one of the founding members becomes a one-car team, it would lose its voting privileges.
“We made it a meritocracy,” Kauffman said. “We wanted to strike a balance between the nine teams and having natural growth in the future.”
Kauffman said the group came together following years of collaboration after the recent recession. NASCAR was hit harder than most sports, and several of its teams shuttered operations or merged during the economic crisis. In the wake of it, many of the teams began talking more and sharing more information.
NASCAR also encouraged the entire industry to work together and brought teams together to discuss the future of the sport.
“It’s taken time for people to get comfortable working together and delegating some authority to something outside their control,” Kauffman said. “There was a big enough need and enough pressure on teams financially that there was a feeling [teams] need to help themselves.”
The concern at NASCAR and across the industry is that the teams want to do more than collaborate and cut costs. There’s concern that they want to create a stronger voice to change the way the sport distributes TV money, which is its largest source of revenue.
NASCAR, which will begin a new, 10-year TV deal in 2015 worth more than $8 billion, now splits the revenue under a formula developed in the early 2000s that gives tracks 65 percent, teams 25 percent and NASCAR 10 percent. In recent years, team owners like Kauffman’s partner, Michael Waltrip, have questioned whether the portion they receive is fair.
There’s also a concern across the NASCAR industry that the alliance will pressure NASCAR to shift from today’s owner-operator model, where each team runs its own business, to a franchise model, where the teams have a voice in how the sport is governed.
But Kauffman said that the way TV money is split and franchising weren’t factors in forming the alliance.
“The association’s plan is to stay on the high road,” Kauffman said. “Things beyond [our] control are best not to focus on. The business model of team ownership could be improved, but it is what it is. No one forces you to [own a team]. What the team alliance is about is team owners working together.”
NASCAR’s public response to the alliance’s creation has been limited. Though the sanctioning body knew of the alliance for more than a month, NASCAR Chief Communications Officer Brett Jewkes issued a statement describing the formalized business association as a “concept.”
“It is apparently still in development and we’re still learning about the details so it would be inappropriate to comment right now,” Jewkes said. “NASCAR’s mission, as it has always been, is to create a fair playing field where anyone can come and compete. Our job is to support and strengthen all of the teams, large and small, across all of our series, and we’ll continue to do that.”
But behind the scenes, NASCAR has sent a clear message to the nine owners that it’s not pleased about the creation of the Race Team Alliance. Sources said it let the organization know that it should direct communication from its lawyers at Jones Day through NASCAR’s lawyers, an approach typically reserved for when legal issues like a lawsuit or a sale are in play.
But according to Kauffman, who declined to comment on the lawyer-to-lawyer communication, there’s no need for NASCAR and the alliance to communicate now. The alliance’s focus is on building the organization.
“We’re really at the beginning of the beginning,” Kauffman said. “Step one is to get organized. If you approach it like a business and a company buys a big division from another company, they try to figure out what they’ve got before they make lots of changes. That’s the type of overlay we’re applying. It’s about organization and process.”