NASCAR Antitrust Settlement Democratizes Governance, Boosts Team Valuations - Episode Hero Image

NASCAR Antitrust Settlement Democratizes Governance, Boosts Team Valuations

Bloomberg Business of Sports · · Listen to Original Episode →
Original Title:

TL;DR

  • The NASCAR antitrust settlement mandates "evergreen" charters, guaranteeing 36 teams a slot in every Cup Series race, which will likely increase team valuations and attract greater private equity investment.
  • The settlement shifts NASCAR governance towards greater team input, potentially democratizing decision-making and influencing how the sport is marketed to fans and media.
  • By opening the market for premier stock car racing events and potentially removing single-source car design limitations, the settlement could foster more competition and team revenue opportunities.
  • Private equity firms are increasingly essential partners for universities seeking to monetize athletic programs, with deals focusing on revenue generation through ticketing, sponsorship, and stadium improvements.
  • The University of Utah's deal with Otro Capital signifies a new trend of private equity firms acting as for-profit arms for college sports, leveraging sports executives' expertise.
  • While private equity can fund renovations and sponsorships, its direct impact on athletic recruiting through data or AI remains uncertain, as athlete success depends on a broader village.
  • The Sports Business Journal's "Influence 125" list reflects a significant shift in sports power, now encompassing private equity and foreign government entities alongside traditional owners and commissioners.

Deep Dive

NASCAR has settled a federal antitrust lawsuit brought by Michael Jordan's 23XI Racing team, resolving allegations that the organization monopolized premier stock car racing by controlling charter agreements. This settlement, reached after a nine-day trial, will lead to significant changes in NASCAR's governance and operational structure, granting teams more input and potentially increasing event opportunities and revenue streams.

The core of the lawsuit centered on NASCAR's charter system, which guarantees teams a spot in elite Cup Series races. Plaintiffs argued this system constituted monopolistic behavior, limiting competition and the operational freedom of teams. The settlement introduces an "evergreen" charter concept, meaning teams will have guaranteed status for the 2026 season and beyond, barring them from opting out of three consecutive events. This shift promises to democratize NASCAR's governance, giving teams a greater voice in decision-making, which could influence how the sport is marketed and how events are structured. Consequently, fans can expect more premier stock car racing events, and teams are positioned to generate more revenue, which should theoretically trickle down to drivers and crews. This change also portends a dramatic increase in the valuation of NASCAR teams, as guaranteed participation in all events enhances their stability and attractiveness to investors, potentially mirroring the franchise models seen in leagues like the NFL and NBA.

The settlement also suggests a move towards greater inclusivity within NASCAR's operations, potentially limiting the unilateral decision-making power of the France family, who privately own the organization. This shift toward diversified ownership and increased team input could foster a more robust and economically dynamic sport. The implications extend beyond NASCAR, potentially influencing how other sports leagues manage their franchise models and engage with private equity and corporate investment. The case highlights a broader trend of private equity's growing influence in sports, as seen in the University of Utah's recent deal with Otro Capital, indicating a significant shift in how sports properties are financed and operated.

Action Items

  • Audit NASCAR charter agreements: Analyze terms for "evergreen" clauses and potential limitations on single-source car supply to identify economic impacts on teams.
  • Evaluate NASCAR governance changes: Assess the impact of increased team input on decision-making and its potential to democratize the sport's direction.
  • Track NASCAR event expansion: Monitor the number of premier stock car racing events and media's response to increased fan opportunities.
  • Analyze private equity impact: For 3-5 college sports programs, assess the effectiveness of private equity partnerships in revenue generation and operational improvements.
  • Measure athlete influence beyond play: For 2-3 high-profile athletes, quantify their impact on sports business economics and cultural conversations beyond on-field performance.

Related Episodes

Key Quotes

"NASCAR on Thursday settled an antitrust lawsuit brought by Michael Jordan’s racing team alleging that the organization holds a monopoly over premier stock car racing in the US and that its charter agreements are unlawful."

This quote establishes the central event of the discussion: the settlement of a significant antitrust lawsuit against NASCAR. The author highlights the core accusation that NASCAR allegedly misused its monopoly power, impacting both teams and the broader sport.

"As a condition of the proposed deal, which came on the ninth day of a trial, NASCAR will amend the terms for existing charter holders, which will include a form of “evergreen” charters."

This statement details a key outcome of the settlement, focusing on the modification of charter agreements. The introduction of "evergreen" charters suggests a move towards more permanent and stable arrangements for teams, potentially altering the long-term business model for NASCAR.

"So the business nothing on the track I don't think uh there will be differences in the business for example uh they're going to reinstitute something called the three strike rule which is if a team does not want to compete in three NASCAR events uh it can opt out and start to compete in other premier stock car racing events."

Martin Eidel explains that the settlement's impact will primarily be on the business operations of NASCAR rather than on-track performance. He points to the reinstatement of the "three strike rule" as an example, which allows teams more flexibility to participate in other racing events, potentially opening up the market.

"The teams will have more input so you might see a broader democratization of how NASCAR is run and how it's going to sell itself to fans to the media and the number of events it will be sponsoring."

Eidel further elaborates on the governance changes resulting from the lawsuit. He suggests that teams will gain a greater voice in NASCAR's decision-making processes, leading to a more democratic structure in how the sport is managed and marketed.

"I think the answer is we saw the team value for NASCAR sanctioned teams rising during the 2010s and then they sort of came to a halt I think we're going to see a dramatic increase again because if you're a team and you have a charter you're guaranteed to compete so the value of your team knowing that you're going to be in all these events should go up."

This quote from Eidel addresses the potential financial implications for NASCAR teams. He predicts a significant increase in team valuations due to the guaranteed competition status provided by charters, making team ownership a more attractive investment.

"Well what other sport could this spread into well another great question so if you look at and Randall I'll go back to your example of the NFL how many of the teams are still owned by the families maybe you have the Maras of now with the Tischs owning the giants but basically they're all corporate run because the amount of capital needed to create the stadium refurbish the stadium have all the training facilities and hire the coaches trainers uh and of course the players that amount of capital is enormous so they're going to go to public markets or even private equity markets."

Eidel draws a parallel between NASCAR and other major sports leagues like the NFL. He suggests that the increasing capital requirements in sports will likely drive NASCAR teams towards public and private equity markets, similar to how NFL franchises are now largely corporate-run.

Resources

External Resources

Books

  • "Moneyball" by Michael Lewis - Mentioned as an example of data-driven decision-making in sports.

Articles & Papers

  • SBJ's newly released Influence 125 (Sports Business Journal) - Discussed as an annual list of the most influential figures in sports.

People

  • Michael Jordan - Mentioned as the owner of 23XI Racing, a plaintiff in an antitrust lawsuit against NASCAR.
  • Jeffrey Kessler - Mentioned as the lead attorney for 23XI Racing and Front Row Motorsports Inc. in the NASCAR antitrust lawsuit.
  • Jim France - Mentioned as the Chairman of NASCAR, who testified in the antitrust lawsuit.
  • Arvind Krishna - Mentioned as the Chairman and CEO of IBM, who discussed using AI for business.
  • Bryce Underwood - Mentioned as a highly sought-after college football recruit.
  • Jerome Moore - Mentioned as a former Michigan football coach who faced legal issues.
  • Jim Harbaugh - Mentioned as the former head coach of Michigan football.
  • Bill Belichick - Mentioned as a potential candidate for the University of Michigan head coaching job.
  • Coach Prime (Deion Sanders) - Mentioned in comparison to Bill Belichick's first year coaching.
  • Al Michaels - Mentioned as a notable broadcaster.
  • Bob Costas - Mentioned as a notable broadcaster.
  • Jim Nance - Mentioned as a notable broadcaster.
  • Sandy Montag - Mentioned as an agent representing on-air talent.
  • Arthur Blank - Mentioned as the owner of the Atlanta Falcons and Atlanta's MLS team, noted for his influence in sports business.
  • Robert Kraft - Mentioned as the owner of the New England Patriots, noted for his network and influence.
  • Serena Williams - Mentioned as an athlete who changed the economics of her sport.
  • Tiger Woods - Mentioned as an athlete who changed the economics of his sport.
  • Simone Biles - Mentioned for her role in driving cultural conversations and advocacy.
  • Alex Morgan - Mentioned as an athlete.
  • Michael Phelps - Mentioned for his role in driving cultural conversations and advocacy for mental health.
  • Allyson Felix - Mentioned for her advocacy regarding Nike's treatment of pregnant women.
  • Andrea Brimmer - Mentioned as a representative from Ally, a sponsor focused on women's sports.
  • Chuck Fruit - Mentioned as heading media and sports marketing at Coca-Cola and Anheuser-Busch.
  • Yassir Al Rumayyan - Mentioned as being from the Saudi Public Investment Fund.

Organizations & Institutions

  • NASCAR - Mentioned as the organization that settled an antitrust lawsuit.
  • Michael Jordan's racing team (23XI Racing) - Mentioned as a plaintiff in an antitrust lawsuit against NASCAR.
  • Front Row Motorsports Inc. - Mentioned as a plaintiff in an antitrust lawsuit against NASCAR.
  • Winston & Strawn LLP - Mentioned as the law firm representing 23XI Racing and Front Row Motorsports Inc.
  • Goulston & Storrs - Mentioned as the law firm where Martin Edel is co-chair of the sports law practice.
  • Columbia University - Mentioned as the institution where Martin Edel is an adjunct professor of law.
  • Bloomberg News - Mentioned as the source of reporter Randall Williams.
  • Sports Business Journal (SBJ) - Mentioned as the source of reporter Ben Fischer and the publisher of the Influence 125 list.
  • NFL (National Football League) - Mentioned in discussions about team ownership, capital, and league structure.
  • NBA (National Basketball Association) - Mentioned in discussions about team ownership and league structure.
  • MLB (Major League Baseball) - Mentioned in discussions about team ownership and league structure.
  • University of Utah (Utah Utes) - Mentioned as entering a deal with private equity firm Utra Capital.
  • Utra Capital - Mentioned as a private equity firm entering a deal with the University of Utah.
  • CalPERS - Mentioned as a fund that provided funding to Utra Capital.
  • Redbird - Mentioned as a private equity firm with past investments in F1 and Alpine.
  • One Team Partners - Mentioned as a joint venture between the NFLPA and MLBPA, where Utra Capital executives have experience.
  • F1 (Formula 1) - Mentioned in relation to Utra Capital's investments.
  • Alpine - Mentioned in relation to Utra Capital's investments.
  • Colorado - Mentioned as a university that had conversations with a sovereign wealth firm.
  • Big Ten - Mentioned as a conference that had conversations with a California pension fund.
  • California pension fund - Mentioned in relation to conversations with the Big Ten.
  • FSU (Florida State University) - Mentioned as having talks about a deal with Sixth Street or Arctos in 2023.
  • Sixth Street - Mentioned as a firm that FSU had talks with in 2023.
  • Arctos - Mentioned as a firm that FSU had talks with in 2023.
  • University of Michigan - Mentioned in discussions about private equity talks and a scandal involving a former coach.
  • USC - Mentioned as having talks about private equity deals.
  • LSU - Mentioned in relation to NIL money and coaching buyouts.
  • Notre Dame - Mentioned in discussions about playoff rankings and NIL money.
  • University of Miami - Mentioned in relation to playoff rankings.
  • USAG Gymnastics - Mentioned in relation to Simone Biles speaking out against sexual abuse.
  • Nike - Mentioned in relation to Allyson Felix calling out their behavior toward pregnant women.
  • Coca-Cola - Mentioned as a company represented by Chuck Fruit.
  • Anheuser-Busch - Mentioned as a company represented by Chuck Fruit.
  • Saudi Public Investment Fund - Mentioned in relation to capital and influence in sports.

Tools & Software

  • Adobe Acrobat Studio - Mentioned as a tool with AI-powered PDF capabilities.
  • Odoo - Mentioned as an all-in-one integrated business software platform.

Websites & Online Resources

  • mastercard.com/commercialacceptance - Mentioned as a resource to discover Mastercard's B2B acceptance solutions.
  • adobe.com/dothatwithacrobat - Mentioned as a resource to learn more about Adobe Acrobat Studio.
  • cmk.co/stories - Mentioned as a resource to learn how CVS Caremark helps members save on medication.
  • ibm.com/smarttalks - Mentioned as a resource to listen to a full conversation with IBM's Chairman and CEO.
  • spectrum.com/freeforever - Mentioned as a resource to learn more about Spectrum's offer of free home internet.

Podcasts & Audio

  • Bloomberg Business of Sports - Mentioned as the podcast hosting the discussion.
  • Smart Talks with IBM - Mentioned as a podcast hosted by Malcolm Gladwell.

Other Resources

  • B2B card payment landscape - Mentioned as an evolving area for corporations.
  • Virtual card payments - Mentioned as a demand from buyers for B2B invoices.
  • Mastercard's adaptive approach to B2B acceptance - Mentioned as a solution for merchant acquiring businesses.
  • Supplier lifecycle - Mentioned in relation to Mastercard's solutions.
  • AI-powered PDF spaces - Mentioned as a feature of Adobe Acrobat Studio.
  • Prescription plan with savings - Mentioned as a concept offered by CVS Caremark.
  • AI for business - Mentioned as a tool for companies to use.
  • Scalability of AI - Mentioned as a key consideration for AI implementation.
  • Developer productivity with AI - Mentioned as a goal for AI adoption.
  • NIL (Name, Image, Likeness) - Mentioned in the context of college sports and athlete compensation.
  • Private equity - Mentioned extensively in relation to investments in sports organizations and college athletics.
  • Franchise model - Mentioned in comparison to NASCAR's charter system.
  • Evergreen charters - Mentioned as a condition of the NASCAR settlement.
  • Three strike rule - Mentioned as a rule being reinstituted in NASCAR.
  • Single source supply for cars - Mentioned as a potential economic factor for NASCAR teams.
  • Democratization of governance - Mentioned as a potential outcome of the NASCAR settlement.
  • Sovereign wealth firm - Mentioned in relation to potential college sports deals.
  • College sports deals - Mentioned as an area where private equity is becoming involved.
  • Ticketing - Mentioned as a revenue stream Utra Capital will focus on for the University of Utah.
  • Sponsorship - Mentioned as a revenue stream Utra Capital will focus on for the University of Utah.
  • Revenue generation - Mentioned as a key aspect of private equity involvement in college sports.
  • Recruiting athletes - Mentioned as an area where technology and data might play a role.
  • Transfer portal - Mentioned in the context of college athlete movement.
  • Playoff rankings - Mentioned in relation to college football and basketball.
  • Cultural conversations - Mentioned as a driver for athlete influence beyond their sport.
  • Mental health advocacy - Mentioned in relation to Michael Phelps.
  • Women's sports spending - Mentioned in relation to Ally.
  • Fiber-powered internet - Mentioned as the type of internet Spectrum provides.
  • Limited series "Little Disasters: Happy Families" - Mentioned as a streaming show on Paramount+.

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