Race Weekend Central

Inside IndyCar: Hold Off on Charters

Charters may not be a good idea at this time, IndyCar. 

With recent turmoil reported from the team owners in the NTT IndyCar Series paddock, the idea of implementing a charter or franchise system may not be worthy in the current climate. 

Stealing a renowned quote from British World War II Lieutenant-General Frederick Browning, it’s just a “bridge too far.”

Charters are a good thing in auto racing for teams to have an equity stake, a valued asset that guarantees the owner revenue and if the time comes to leave the sport, a commodity to sell besides unused race equipment and broken air guns.

In simpler terms, when cash is flowing, the owner collects.

How about when there isn’t as much money coming in, what is the value then?

That’s what IndyCar is up against as it tiptoes to a decision and execution of a possible charter program, much like the NASCAR Cup Series. There is a lot of talk going on behind the scenes, and it seems the topic is one of several that has added up to angst that spilled over during this past weekend’s season opener at St. Petersburg. 

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From an outsider’s vantage point, it’s hard to lean one way or the other in deciding if pursuing charters is the right call for the open wheel series. Unless of course a charter guarantees a starting spot in the Indianapolis 500, then the passionate opinion is that’s not good for the sport – and apparently the series has listened to fan’s backlash over that, for now. 

The real question is it worth it to buy-in and receive a charter? This bemusement arose when word came out that the series was going to start the program with a required $1 million buy-in, with no exact details on how that would come together, whether an instant payment, a chunk out of the guaranteed revenue or in installments over years. Oh, to have been in the room to time how long it took the collective group of owners to spit out the words ‘no.’ Why? Let’s dive further.

It is in the team owners’ interest to have a charter program. All that they possess is buildings, equipment that is specific to racing, and probably a substantial amount of toilet paper and cleaning supplies for their shops. Not a lot of value there. With a charter though, a team owner gets a guaranteed share of the revenue from the series at year’s end, for competing in every race on the circuit and being a jolly good chap. Seems like a legitimate reason to cough up the $1 million right, because getting cold hard promised cash for running the full schedule seems like a good business decision?

Except, owners would be paying to receive money they already are entitled to through the Leaders Circle program. The key point of that program is the guaranteed $1 million payout to the teams that finish in the top 22 of the series championship. 

So, as it stands in the series’ current economic position, meaning the payout to the grid is the same as it is this year, if charters were approved as IndyCar presented, then Team Owner A is paying the series $1 million to get the right to receive $1 million. There is no reason to do that when this year they are going to get that without shelling out a dime to be given that enfranchisement. Give this equation to any Harvard business major and they are going to ask if they’re being set up for some viral YouTube video by an influencer.

There’s a lot of details that are missing in this assessment. For one, it’s not really known if revenue splits will immediately go up with a charter, but the intrepid Marshall Pruett at RACER did some digging and churned up some details, so check that out. Honestly, to make this plan worthy to teams to get their buy-in would require a critical increase in the investment back to the grid, which is one of the talking points from Andretti Global owner Michael Andretti on Friday that led to his “sell the series” line. That investment would have to come from a substantial increase in the media rights for which IndyCar is shopping this year.

In the major stick and ball sports, those leagues share massive television revenue across all franchises (and also players via collective bargaining). For example, the NBA makes $2.7 billion from television partners, the MLB makes $1.76 billion, and the king on the throne, the NFL pads their pockets with $8 billion. It’s nice to be popular. The critical point there is that the TV deals are hefty enough that a short-term investment of billions of dollars to get the keys to the, say Minnesota Timberwolves or Washington Commanders is eventually worth it, because at some point the revenue, not to mention the team as an asset itself, will pay off the investment. 

IndyCar is not even close to that situation. Their current deal with NBC is reportedly in the $20 million annual range, and it’s unknown what percentage of that is redirected into the shared revenue. How much will the next deal need to be for the series to pay out double or triple to teams so there is good value? That’s critical.

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While the Leaders Circle pays out $1 million, the teams are on the hook with closing that shortfall in their budgets. Mainly that’s through sponsorships that they spend loads of money on in man-hours to find. The risk is entirely on the team side. If they can’t find $6-8 million sponsorship, or a driver who has a mom or pops that owns a company, or actually hit the PowerBall, then the car doesn’t make the grid.

It’s not great business to ask teams to cough up a $1 million to buy the right to get such a small return. Better the series take a patient approach rather than wrangling more money from the teams. They already took a decent chunk last year from teams when approximately 10% of the Leaders Circle pot was used in an upgraded marketing effort. 

And it’s not clear that charters are really the way to go. The former CART series had something like this, called franchises but it lost effectiveness as the Split ate away at revenue. In NASCAR, the long-time France family-owned business is dealing with the consequences of charters, as the teams have gained a stronger voice than they’ve ever had, so much so that Andretti’s comments from Friday (except for the “sell” part)  would sync well with some of the frustrations with revenue sharing on the fender-bearing side of the fence.

While IndyCar has seen growth, it shouldn’t have a short-sighted view on the current situation, even as Mark Miles professes the Penske family is in this for the long-haul. It’s true that car counts are up and some tracks won’t be able to accommodate more than the current grid, but is it in the series’ best interest to put restraints in place for interested owners to buy-in when several teams run anywhere between three and five cars a piece? What if Jon Bon Jovi, who was enthusiastic about his time in the paddock this weekend for the Grand Prix of St. Petersburg, actually wanted to start his own team, but the challenges of buying-in was just enough of an obstacle to convince him it wasn’t worth his time?

In NASCAR, the series’ most popular driver of the 21st Century, and current Xfinity Series team owner Dale Earnhardt Jr., can’t get jump up into Cup because of the price of charters (this is an example of the system obviously working though). Just look across the Atlantic and witness the exclusiveness with which Formula 1 is treating any prospective party interested in joining their grid. Regardless if it was better for fans to put more than 20 cars, which would theoretically produce more racing. Andretti was told no, and look how bitter he appears to be about the situation. 

With the current dynamic and feelings in the paddock, IndyCar might be better off implementing a tactical pause to see how the landscape works out this year. St. Pete had great attendance and the Indianapolis 500 is tracking well in tickets sells, but the TV viewership took a hit for the first race. The new media deal hasn’t been signed yet, and the series hasn’t dealt with the issue of more races on cable this year over last which will effect average ratings.

The series is on a climb up, and decisions that are going to ruffle feathers might be better off being held in Roger Penske’s back pocket a bit longer. 

Like charters. 

About the author

Tom is an IndyCar writer at Frontstretch, joining in March 2023. He also works full-time for the Department of Veterans Affairs History Office and is a lieutenant colonel in the Army National Guard. A native Hoosier, he's followed IndyCar closely since 1991 and calls Fort Wayne home. Follow Tom on Twitter @TomBlackburn42.

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