August 2022 – Page 3 – Motor Sports Racing

Editorial credit/shutterstock When we look closely at the world of NASCAR, we are constantly reminded of how expensive everything must be --- the single-race engines, the rest of the car, the drivers, the maintenance and pit crews…a seemingly endless laundry list of expenses. We can also see from the sea of sponsors’ logos on the car and safety clothing of the drivers just how much assistance it takes to keep everything afloat. NASCAR Team Owners make money primarily by sponsorship, Raceday advertising revenues and merchandising the fame of their team and drivers. Prize money can also create a profit for a team owner, but like the other 3 income streams, the more successful a team is on the track the more successful should be off it. Looking at it all by and large, however, is NASCAR profitable? It must be for NASCAR team owners to be so willing to throw money at teams hand over fist, right? In this article we’re considering how it is that NASCAR team owners make their money, if indeed they make anything at all. Do NASCAR Team Owners Make a Profit? The short answer is yes, they do. NASCAR hasn’t grown into one of the nation’s greatest, if not the greatest motorsport events by accident. It’s a huge business and when team owners get the balance of drivers, equipment, and race results right, they can really clean up. Because NASCAR is still a private company, they are under no obligation to publish or report details of their end-of-year results, but there are clues as to their financial success. First, there’s their continuing operation, of course. Beyond that, however, numbers from Statista back in 2019 show that teams such as Hendricks Motorsports were worth $315 million.Close competitor Joe Gibbs Racing was worth $230 million in the same year,and Stewart-Haas Racing was worth $165 million. Only profits can generate such net worth over the years, so it’s safe to assume that in general NASCAR team owners make a profit on their investment. That’s not to say all of them are successful investments, of course. Nothing is a sure-fire deal. The next question is, how? How Do NASCAR Team Owners Make Money? There are 3 main areas in which NASCAR owners can secure profits on their NASCAR investment, each of which we will examine in more detail below: Winnings, Sponsorship, and Advertising. Winnings Another obvious way that NASCAR teams make money is by winning races. The team takes the lion’s share of the winnings, while also giving portions of it to drivers and their pit crews, of course. Each race in the NASCAR Cup Series is worth about $4-6 million on average, which when you multiply by 36 races or so in the season means a pot of around $150 million in cash up for grabs. To get your hands on that, you don’t even have to be the winner each time. Everyone on the track during race day will get at least some of that money, but of course the better you do in the season, the more you will earn. The biggest race days are major events like the Daytona 500, the prize money for which can easily exceed $10 million. In fact, back in 2018, the prize pot reached more than $15 million. The pot was so big in 2018, that even BK Racing who finished 20th overall still received around $420,000 in cash (about 2.8 percent of the total). In Atlanta, they picked up just $91,000 after a 36th-place finish, but with the total pot only $2.47 million, the proportion they received (3.6 percent) was actually higher. A good way to think of race prize money is as the “gateway revenue,” as the amount of prize money you’re earning will almost certainly dictate the value of the other main revenue streams that we’re going to introduce below. Sponsorship With a steady and healthy stream of prize money from races comes the opportunities for more lucrative sponsorship and advertising deals. It is the apparent success of a team that attracts both of these over. Let’s start with sponsorships. Unfortunately, owing to the private nature of NASCAR as a business enterprise, it’s hard to get exact details on sponsorship, but from outside media company reports and estimates we know that sponsoring a top-10 team in the cup series can cost at least $300,000 per race. Sponsors of all levels are prepared to spend $1,500-10,000 at the very least to get their logos anywhere near the car, clothing, or website of their partner team. The relationships between teams and their sponsors are absolutely essential for maintaining the financial viability of a NASCAR team. Besides winning races as we mentioned above, sponsors are also greatly influenced by team and driver reputation, public behavior and demeanor of drivers and team officials, among other things. Keeping sponsors happy means they are willing to fork over the millions of dollars each year that the teams badly need! https://motorracingsports.com/how-much-does-it-cost-to-run-a-team-in-nascar/ Advertising Finally, we come to advertising and media sales, which is the only area where there is a sport-wide profit-sharing scheme going on. Advertising sales can be made for the air time during which NASCAR races are shown. In 2022, NASCAR races are shown in TV slots, as well as being streamed live online from start to finish. Advertising spots in both the TV and online spaces are extremely lucrative. Of the advertising money made, the tracks get the biggest share of the loot at 65 percent, followed by the teams at 25 percent, and then NASCAR gets the remaining 10 percent. So teams can pocket 25 percent of advertising revenue, but of course how that money is split between individual teams depends once again on their reputation and record of success. This is why once again the race winnings are the ‘gateway’ revenue stream. Merchandising Merchandising is another revenue stream open to NASCAR Teams. Sale of items with logos and photos, or even meet and greet driver experiences can all be very profitable. However for this to work well the team will need to have a following and a fan base that will buy the merchandise and products. To get that fan base you have to also get results. What About Attendance? Some might be wondering about the apparent absence of venue ticket sales from NASCAR team profits, but as it happens ticket sales are not included in any of the profit sharing mechanisms used by NASCAR and its partner organizations. The tracks keep all the ticket venue, not to mention concessions and other revenue streams, and that obviously became a seriously sore point during the height of the pandemic. Conclusion The main income streams for NASCAR Teams come from Sponsorship,AdvertisingMerchandisingWinning and Prize Money. Although Winnings can be lucrative, once teams start scoring to 5s and top tens, they are considered more as the key to attracting sponsorship and viewership to drive up advertising revenue. Merchandise Gate receipts, contrary to popular belief are mainly for the tracks that hold the races. So NASCAR Teams have multiple revenue streams to make a profit, but the size of that profit is dependent on the teams success over the season and that success will be dependent on how much money the team has in the first place. References https://www.rookieroad.com/nascar/how-much-does-cost-own-nascar-team/https://flowracers.com/blog/is-nascar-profitable/https://www.quora.com/Do-racing-teams-earn-a-profit-through-racing-If-they-do-what-is-the-main-source-of-the-profit