profit – Motor Sports Racing

The sport of NASCAR may not be as rich as the multi-billion-dollar NFL, but that doesn’t mean it’s poor, either. The average NASCAR team is still worth something like $140 million, and the sport pulls in more than $600 million in revenues. Money generated is generally split either between NASCAR, teams, and the tracks, or within teams internally between drivers, pit crew and the team itself. NASCAR racing can be profitable for teams, with revenues from sponsorships, race winnings, advertising, and merchandising. However, balancing expenses and financial success is challenging. While top teams have significant valuations, concerns about sustainability and the need for additional revenue continue in NASCAR. Does this model create a profitable enterprise for teams? The numbers and proportions seem to suggest that owning a NASCAR team can be a very lucrative venture, but is that the reality? In this article, we will explore these questions. Is NASCAR Racing Profitable for Teams? Profits are never guaranteed, but when NASCAR teams can get the right balance between drivers, equipment, and sponsors, they can greatly improve their chances of making large profits. In December 2022, Hendrick Motorsports was valued at $315 million, making it the most valuable team. It’s hard to build value like that when no profits are showing. One issue that arises from trying to attribute financial wealth and success to NASCAR and its teams is that none of them are obligated to publish their annual financials. NASCAR to this day remains a private company, which means it doesn’t have to make public its accounts for each year, therefore knowing for sure how much they make or not is mostly something only known by NASCAR officials and their close investors. The same is true of teams, but we can get a sense of their financial success by looking at various indicators like their success each season, the reputation of their drivers and pit crew, and the number and kinds of brands and companies who choose to sponsor them. As we mentioned, when all things are balanced properly, the bottom line can be quite attractive for team owners. How Do NASCAR Team Owners Make Money? Broadly speaking, there are three main areas in which the owner of a NASCAR team can generate profits. These are: Sponsorships Race winnings Advertising and merchandising Sponsorships It’s easy for anyone to see that sponsors are a critical factor in any team’s financial success. While it’s possible to know the approximate prices of various sponsorship levels from figures published by the media companies that mediate these deals, it’s impossible to know with 100-percent accuracy or certainty how much each sponsor that you see has given to the team. We know that sponsors contribute anything from $1,500 to $10,000 at the lowest level, raising to $300,000 or more at the highest level, and these figures are the per-race prices. we have an article on the link that gives more detail on this. https://motorracingsports.com/how-much-is-it-to-sponsor-a-nascar-car-or-driver/ When you then look at the sheer number of sponsors logos that you can see on the drivers’ clothing, their cars, and all over the race location, then you can start to imagine just how much money is changing hands. Whether or not these sponsorships contribute to actual profits is harder to say, but with the amounts possible, it’s certain that teams put the money to good use at least covering the many expenses that they endure in the running of the team. Race Winnings If sponsorships cover all the expenses, then perhaps it’s race winnings that more likely provide the profitable “cherry on top.” Each race can be worth anything from $4 to $7 million on average depending on its size, scale and prestige. Over a season with 36 races in it, that builds up to a fair pot of $150 million dollars or so in total. The biggest portion of race winnings go to the teams, part of which they then use to pay drivers and pit crews, sure, but with most staying in their hands. While NASCAR fans may well think that every race matters, some are “more equal than others.” The Daytona 500, for instance, is arguably the single biggest race of the season, and includes a prize pot of $10 million, sometimes more. Back in 2018, the total winnings pot at the Daytona 500 grew to an astonishing $15 million, which meant that even those teams placing as low as 20th could still win half a million dollars. Race winnings also come with additional value, however, since they have the power to influence a team’s other revenue streams. Sponsorships in particular are greatly affected by a team’s winnings in a season, with premium sponsors looking to make deals with successful teams with a good record of victories or at least high placements. Advertising and Merchandising Teams can get some of the share of broadcast advertising --- 25 percent to be exact --- which is a lot less than the 65 percent that tracks receive. However, it’s nothing to be sniffed at. It might only add a relatively small amount over the course of a season compared to sponsorships and race winnings, but it all helps to make the model work. Merchandising includes the sale of goods with the team’s name, logo and whatnot, as well as for paid meet-and-greets with drivers. Whether or not a team can turn merchandising into a truly successful revenue stream depends almost entirely on the reputation and “star quality” of drivers and their team name. What Are the Biggest Expenses for a NASCAR Team? So far, it all seems to be very profitable, but there's a growing feeling within NASCAR from the various team leadership groups that change is required to make team ownership more profitable and therefore attractive. We’ve mentioned the many expenses that team owners face, but what are those? Here is a quick rundown of some of the largest expenses for NASCAR team owners: Cars - $120,000 each (not including the engine costs) Engines - $2 million per car per season, leased from the manufacturers Tires - $250,000 per season Main and backup car system - $980,000 per season Fire suits for drivers and crew - $1,000 each Cleaning of fire suits after each race - $2,400 Hourly payroll, contract payroll, driver pay - 30% of all annual income …and so it goes on… Each race is predicted to cost a team about $1.4 million, and there are something like another $125,000 each season in purely sundry expenses. So with all this in mind, how are teams coping? In October 2022, it was reported that teams were calling for the ability to create more revenue streams, or they would have to consider major layoffs. Jeff Gordon at Hendrick Motorsports has described the system as “broken” and that team executives and NASCAR officials are “very far apart” on their ideas on how to make the system work better. Conclusion, While NASCAR racing can be profitable for teams, it is a delicate balance between revenue streams like sponsorships, race winnings, advertising, and merchandising, and the substantial expenses involved in running a team. The sport's profitability is further obscured by the fact that NASCAR and teams are private entities, not obligated to publish financials. Although top teams like Hendrick Motorsports have achieved significant valuations, there's growing concern within the industry about the sustainability of the current model. Team executives and NASCAR officials are reportedly divided on the best way forward, as teams seek additional revenue streams to maintain profitability and viability. References https://flowracers.com/blog/is-nascar-profitable/ https://www.foxsports.com/stories/nascar/nascar-teams-far-apart-on-proposal-for-revenue-increase https://motorracingsports.com/how-do-nascar-team-owners-make-money/