NASCAR’s Best Teams Require Massive Investment

NASCAR (the National Association for Stock Car Auto Racing) is a family-run business that was founded in 1948. The founder, “Big Bill” France, wisely saw the demand for a car racing circuit in the Southern U.S. states. His son turned the business into a giant that is now run by the third generation. NASCAR has built sweeping popularity among racing fans far outside the South. Races are now often held in cities outside of southern states.

However, attendance and viewership of NASCAR races are dropping. So are top team valuations. The top ten teams were worth an average of $137 million in 2017, down 7% from 2016. The costs of running a team are large. It takes as much as $10 million to hire a winning driver for one year and $25 million to keep a car on the track. Primary team sponsorship costs between $350,000 and $500,000 per car per race, while top race series sponsorship runs in the millions.

Hendrick Motorsports, a team owned by Rick Hendrick III, leads the sport in value at $350 million, which was down from 2016’s $375 million, according to Forbes (the team earned $200 million in 2016 revenue). Hendrick has top drivers Jimmie Johnson and Dale Earnhardt, Jr. They lead the sport in earnings at $21.8 million and $21.1 million respectively. Joe Gibbs Racing driver Denny Hamlin had the number three spot in 2017 with $15.2 million. Forbes reported that Joe Gibbs Racing was number two in team values at $225 million, with $135 million in 2016 revenue. Overall, the top 12 drivers earned $168 million in 2016 in salaries, endorsements, purses and licensing, down from $192 million earned in 2013.

Another telling sign is that NASCAR’s sponsorships have dropped dramatically. After about 12 years as a title sponsor, Sprint cancelled its sponsorship, for which it paid about $50 million per year during recent seasons. Monster Energy is the current title sponsor, paying only $20 million per season in a two-year deal, according to industry sources.

NASCAR’s deals with television networks have been extremely lucrative. Although network ratings fell 7% in the 2016 season to 4.6 million viewers per race, NASCAR extended its agreement with Fox for the first 13 races of each season. The eight-year agreement totals $2.4 billion, up 36% from the previous Fox deal. In late 2013, NASCAR completed negotiations to extend its $2.7 billion deal with TNT and ESPN. NASCAR has a 10-month schedule of races each year.

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