NASCAR Antitrust Trial Exposes Unsustainable Business Model and Team Financial Strain

Key Quotes

"The best way to learn how a business or industry really works is to pay attention to an antitrust trial over the last week and a half alone this trial has provided exclusive access to team and league financials including annual profit and loss statements for example we now know exactly how much money michael jordan has invested in 2311 racing over the last five years 40 million the average expenses required to run a nascar cup series car each year 20 million how much money nascar lost on its three chicago street races 55 million the total amount of money front row motorsports owner bob jenkins has lost since entering the sport in 2005 100 million and even how nascar strategically moves around its revenue to reduce its on paper profits plus like any discovery process some juicy emails and texts have emerged"

The author highlights that antitrust trials offer unique insights into an industry's financial operations, far beyond typical public disclosures. This specific trial has revealed detailed financial figures for NASCAR teams and the league itself, including significant investments, losses, and financial strategies. The author points out that this level of transparency is unusual and valuable for understanding the business dynamics at play.

"while others were unwilling to risk the tens if not hundreds of millions of dollars that they had invested in the sport through cars factories drivers equipment and employees michael jordan was uniquely positioned to take on the challenge michael jordan has more money than he'll ever need and is a lifelong nascar fan he isn't scared about what the france family will do to him because nascar isn't his primary business so while every other team signed nascar's 2024 charter agreement more on that later 2311 and front row refused to sign it instead those two teams joined forces to file an antitrust lawsuit against nascar hiring jeffrey kessler to represent them"

The author explains that Michael Jordan's financial independence and passion for NASCAR allowed him to challenge the sport's established practices, unlike other team owners who were hesitant due to their substantial investments. The author notes that Jordan, through his team 2311, along with Front Row Motorsports, opted to pursue legal action rather than accept NASCAR's 2024 charter agreement. The author emphasizes that Jordan's personal wealth and non-primary business status in NASCAR provided him the leverage to initiate this lawsuit, supported by renowned sports lawyer Jeffrey Kessler.

"what exactly is the problem here well many people seem to believe that this trial will determine whether nascar is considered a monopoly but that's not accurate judge kenneth bell has already ruled pre trial that nascar holds monopoly power the jury in this trial is now tasked with determining if nascar used that power to engage in anticompetitive conduct 2311 and front row are upset about many things they don't like that nascar is unwilling to open its books to show teams how much money it is making they don't like competing with nascar for sponsors and they also don't like nascar owning roughly 50 of the tracks that the cup series races on each year"

The author clarifies that the central question for the jury in this trial is not whether NASCAR possesses monopoly power, as that has already been established by Judge Kenneth Bell. Instead, the author explains that the jury must decide if NASCAR has exploited this monopoly power through anti-competitive actions. The author lists specific grievances from the plaintiff teams, including NASCAR's lack of financial transparency, competition for sponsorships, and ownership of a significant portion of the race tracks.

"The problem today is that these same owners now believe the charter system hasn't evolved enough during the last round of negotiations to extend charters teams requested several changes with nascar signing a new 7 7 billion media rights deal teams wanted to receive more than 12 5 million in guaranteed revenue per car teams also requested that charters become permanent providing them with equity value that extends beyond the current rolling six year term and something that nascar can't just take away because it feels like it outside of financials teams also want periodic access to nascar's books and a governance vote on business and competitive decisions"

The author details the current dissatisfaction among NASCAR team owners regarding the charter system, arguing it has not sufficiently adapted to the sport's financial realities. The author explains that during recent negotiations, teams sought increased guaranteed revenue per car, permanent charter status to establish equity, and greater transparency through access to NASCAR's financial records and a voice in business decisions. The author highlights these requests as key points of contention in the ongoing dispute.

"according to a nascar commission study that doesn't include 23xi or front row due to litigation as well as one other team only three of nascar's remaining 12 teams made a profit last year one nascar team finished the year with 3 08 million in profit while the other two barely made any money at 130 grand and 143 000 respectively as for the other nine teams that participated in the study they collectively lost 33 4 million last year alone if you add in 23xi and front row's losses to those numbers at least 11 of nascar's 15 teams lost money last year with the average unprofitable team losing 4 1 million in 2024"

The author presents financial data from a NASCAR commission study, indicating widespread profitability issues among the sport's teams. The author notes that excluding the litigating teams, only three of the remaining twelve teams were profitable, with two making minimal gains. The author further states that the other nine teams incurred substantial collective losses, and when the losses of 23XI and Front Row are included, a significant majority of NASCAR teams are operating at a financial deficit. The author quantifies the average loss for unprofitable teams in 2024.

"if nascar wins 23xi racing and front row motorsports will likely shut down and leave the sport entirely having to go through this trial is bad enough if the outcome leads to the country's most popular athlete exiting nascar altogether that's even worse however if the jury finds that nascar has been using its monopoly power to limit race team finances and restrict competition several other outcomes are possible monetary damages could exceed 1 billion as an economist testified during the trial 23xi and front row are owed 364 7 million in damages the jury would then decide if that is the correct number but a judge can triple the damages under us antitrust law if that happens 23xi and front row would get paid a huge amount of money but still likely leave nascar"

The author outlines the potential consequences of the trial's outcome for NASCAR and the involved teams. The author explains that a NASCAR victory could lead to the closure of 23XI Racing and Front Row Motorsports, potentially resulting in Michael Jordan's departure from the sport. Conversely, the author details that a jury finding in favor of the teams could result in substantial monetary damages, potentially exceeding $1 billion due to antitrust law's provision for tripling damages. The author also notes that even with significant financial compensation, these teams might still exit NASCAR.