NASCAR ultimately decided that it was done negotiating with the teams that compete in the Cup Series and simply chose to issue a take it or leave it, 105-page offer with just six hours to make a decision on Friday prior to the start of the playoffs.
It seemingly reached that conclusion with the intent that a decisive resolution would end the distraction from crowning a champion over the ensuing 10 weeks.
The team owned by Michael Jordan, business partner Curtis Polk and veteran driver Denny Hamlin was one of two that refused to sign it and what comes next could prove an even larger distraction until a resolution is or isn’t reached.
After all, at face value, this is Michael Jordan versus NASCAR.
Many of the teams that signed it issued semi-public conviction that, at worst, they were ‘coerced’ and ‘under duress’ over a threat of having their revenue sharing provisions revoked or, at best, felt no better deal was going to be reached than the ultimatum issued on Friday night.
This is uncharted territory … and potentially … un-chartered territory.
How the NASCAR charter system works
What is this about?
NASCAR, which has been gridlocked in stagnant negotiations with the teams that compete at the highest level, issued a final revised charter system offer to the teams around 6 p.m. on Friday evening and told them that they had until Midnight to sign it.
The two parties have been volleying back-and-forth for two years over what would go into the document that governs the sport:
- Teams had received around a minimum of $5 million in overall revenue from the league over the previous agreement for the lowest-ranked charter and will now receive around $8.5 million (Sports Business Journal) after seeking closer to $10 million
- It takes roughly $18 million per season per car to race at the Cup level
- Race teams have said they are all losing money and that they at least wanted a system that provided them break-even revenue that made them less reliant on sponsorship
- Teams wanted the charter system to be made permanent as opposed to running the course of each television contract but NASCAR would not budge on this
- Charter permanency could make the system akin to a franchise model used in stick-in-ball sports and NASCAR rejected that conceptually
- The above concept comes down to governance as teams wanted a greater say in rules changes
- NASCAR wants to be able to field teams, at least for now, using charters pocketed for release when and if a fourth manufacturer enters the sport
- There were differences over intellectual property rights, where teams would shoot media content (in-house versus the new productions facility)
- How new revenue, like sports betting, would be split in addition to legacy revenue like broadcast rights
- NASCAR put in an anti-disparagement clause which limited critical commentary about the sanctioning body that was met with skepticism
- The core issue at play is that teams believe they are not financially rewarded for the value its cars and drivers bring to the NASCAR brand at large.
“I think it’s more just a frustration of a lack of acknowledgement that the teams have built this sport. (Rick) Hendrick and (Joe) Gibbs putting superstars on the race track – that is what has built the sport,” Hamlin said last week during NASCAR Playoffs Media Day. “Fans do not come to see cars going around in circles. If they would, then we would sell-out ARCA races, but they don’t. They come to sellout on Sunday to watch Chase Elliott and Kyle Larson and Kyle Busch.
“So, who provides them the cars? And that’s the teams. Who spends the money? That’s the teams. Whose sponsors go buy a suite? That’s the teams. Whose sponsors activate in their midways? That’s the teams,” he said. “That’s the tough part that, they just don’t value us.”
All told, there was still a lot for teams and NASCAR to work through, even after bypassing several deadlines and extensions over the past nine months. The conviction has been that that this would take until the end of the year to sort out with both teams playing a figurative game of chicken approaching next season.
The current charter system runs from 2016 to 2024 and an agreement not being reached would hypothetically lead to the sport as everyone knowing it changing in a drastic way.
Without an agreement with the teams, NASCAR would not be able to use their likenesses and image and vice versa. Without an agreement, the teams could pick and choose when to race with NASCAR or could even go out and race in other stock car divisions or theoretically create its own.
Ultimately, the belief within the sport was that NASCAR can’t be viable without the teams and its drivers that represent the primary draw for fans but that teams would not be viable without the historic foundation and brand awareness the Sanctioning Body provides.
With that in mind, a deal being reached always seemed more likely than not, but how this agreement was reached seemed brazen … and in the eyes of the teams that did not sign it, unreasonable, unfair and potentially legally dubious.
What happened?
Simply stated, 23XI Racing and Front Row Motorsorts were the only two teams of 15 that refused to sign the take it or leave it offer from NASCAR.
A report in The Athletic had some incredible anonymous quotes from team owners that took the deal, ranging from calling NASCAR ‘a communist regime,’ and ‘they held a gun to our head and we had to sign’ while others did concede that this deal was directionally positive over the previous agreement while expressing conviction that league CEO Jim France and president Steve Phelps has the best interest in the holistic health of the sport in their decision-making process.
“I don’t know where that’s coming from but forced is a really strong term,” RFK Racing co-owner and driver Brad Keselowski said. “We are getting to a spot where it’s important to get things settled.”
NASCAR threatened teams with revoking charters, which is good for guaranteed value plus its enterprise value, and a vast majority of teams was not willing to test the waters of what would come next if the papers were not signed.
Jordan, Polk and Hamlin, plus national Yum Foods restaurant owner and franchisee Bob Jenkins are seemingly willing to test those waters even as it is unclear what this means in the short term and long term.
Polk addressed the media on Sunday morning in the garage area at Atlanta Motor Speedway, with sheets of papers in his hands with his talking points, detailing why this decision was made without publicly commenting on what it will do next.
“We understand that some teams may have felt pressured and compelled to sign the agreement under significant duress,” Polk said. “While other teams may have signed the charter agreement, 23XI Racing faces our own challenges that make these terms particularly harmful to our operations and our ownership groups, interests and intellectual property rights.
“This isn’t the 1960s and these predatory practices will not withstand scrutiny and be accepted in 2024.”
Polk used that word that Keselowski said he wasn’t sure where it was coming from.
“This is a business, and we’re not going to be coerced into signing something that we’re not comfortable signing,” Polk said.
Does that include a legal challenge?
“I’m not going to speculate as to what we’re going to do,” Polk said. “We’re going to protect our rights, and whatever we have to do to protect our rights is what we’ll do.”
Polk has been adamant all along that teams with a stronger financial grounding will be able to invest more heavily into marketing and activating the sport, but that right now, they are all focused on merely surviving.
Of the 19 teams that signed the inaugural charter deal in 2017, only seven of them are left.
“We’re not trying to do something that benefits 23XI to the detriment of the sanctioning body, the France family, or any of the other teams, the drivers, the fans,” Polk said. “We wanted to do something that would help everybody. … We think that the contract that was presented to sign had terms that we could not sign.
“It is a very one-sided contract that is going way backwards from the charter that we’ve currently been operating under, and we just cannot sign something and do business in an environment where one side has so much power over the other side.”
Jenkins echoed those sentiments.
“You know, I don’t think you can give somebody a 105-page document at six o’clock on a Friday night and expect them to sign it by midnight,” Jenkins said. “I think it’s very unreasonable and there, you know, there been some things that have happened through the negotiation process that quite frankly, we just don’t agree with. And, you know, we’re obligated to negotiate in good faith and we feel like we did and I don’t know that everything on the other side happened that way. But you know, my hope is that we’ll continue the conversation. We’ll get it figured out.
“I don’t know that it’s necessarily bad. I mean, you think about over the years, there’s been a lot of disagreements and you know, you learn to just work through them and as you know, as I was saying, I’m friends with those guys. You know, I’ve been doing this, I think,17 years now and I’ve become friends with Steve Phelps and Steve O’Donnell and all those guys. So I think we’ll figure it all out, hopefully. And you know, it’ll be fine. I’m not that concerned about it.”
Polk and Hamlin have routinely said that they have four key requests they have made of NASCAR and that those pillar issues have never been addressed to their satisfaction and wasn’t with the take it or leave it deal.
Jenkins expressed that too.
“You know, in in February of 2023, you know, we started this process and the owners kind of acquiesced around four things that we want to see in the next charter agreement, we wanted, you know, charter agreements that were more permanent,” Jenkins said. “There are four things that were really the four objectives that we had. So here we are almost two years later and we didn’t get any of those objectives. So, in areas where we had hoped to move the ball forward and do some things, we actually regressed and it’s just been tough.
“I think it’s been a concerted effort to pull back a lot of the teams’ rights as far as governance and we just feel like it was kind of repressive.”
Jenkins was surprised that NASCAR moved to make an offer with such finality and on such short notice.
“I don’t think anybody expected that NASCAR would take such a strong stance and we don’t understand why,” Jenkins said. “I honestly don’t understand what the, what the motives are because we felt like we could grow this sport, together. And really, when you look at it, you know 23XI and Front Row Motorsports, we’re probably two of the more bullish teams in the garage as far as wanting to expand and buy another charter and grow.
“So, like, we’re passionate about it. We love the sport. We love the people involved in the sport. You know, we want to continue on. There’s nothing about the sport that we don’t like that I don’t want to be a part of. It’s just we just need a contract that works for everybody because that’s ultimately how the sport is going to succeed and we need to figure a way to make the sport bigger, not keep it small and not keep the teams where they are powerless.”
What now?
Both sides have decisions to make now.
NASCAR said it would move to revoke charters for teams that didn’t sign. 23XI and Front Row now don’t have agreements for the 2025 to 2031 seasons. If NASCAR moves to revoke those charters, how do the teams respond?
Hamlin said last week he suspects that would result in a legal question.
If 23XI and Front Row somehow lobby for a better deal, is that deal extended to all the teams?
These are unanswered questions and it’s not clear what happens next.
Charter negotiations timeline
What the charter system is
Why it’s a doomsday scenario if a deal is not reached
Teams hired top antitrust lawyer against NASCAR
Jeff Gordon on why the business model needs to change
Michael Jordan says NASCAR will die without charter permanence
Denny Hamlin says teams just want break even revenue
NASCAR’s June offer to teams ‘was worst yet’
Denny Hamlin on why charters need to be permanent
Smaller teams unified with larger teams
NASCAR, teams making progress on charter deal but hurdles remain
Steve Phelps speaks to Kevin Harvick in wide ranging interview
How drivers feel about the state of the negotiations
Hamlin says negotiations will continue until NASCAR is reasonable
23XI, Front Row refuse to sign NASCAR’s final offer
Denny Hamlin defers to 23XI statement
Brad Keselowski said time was right for a deal