Controlling the purse strings
Some feel France family fails to share NASCAR's wealthPosted: Wednesday December 25, 2002 8:27 AM
First in a three-part series
NEW YORK (AP) -- Stock car racing has made huge strides from its beginnings on the sands of Daytona Beach, squeezing in alongside football, baseball and basketball as one of the nation's sporting passions.
Television ratings keep going up. Grandstands are packed with hundreds of thousands of die-hard fans.
Still, the good ol' boys are clinging to their roots.
Confederate banners flap in the infield breeze.
Cutoff jeans, beer-packed coolers and sunburns remain the symbols of a true fan.
And the buck stops with the France family, just as it has for more than a half-century.
NASCAR is an anomaly -- a major sport that is essentially ruled by one set of kinfolk. The late Bill France Sr. founded NASCAR in 1948, giving a bunch of ex-moonshine runners a place to display their driving skills. When he retired, the organization was turned over to sons Bill Jr. and Jim. The next generation, Brian France and Lesa France Kennedy, is in place.
The strict control -- France supporters call it a "benevolent dictatorship" -- has been a major reason for NASCAR's surge in popularity.
While other sports became a cesspool of warring factions, the Frances could make their decisions freely. No player unions. No hardheaded owners. It's their way or the highway.
"I think my family and NASCAR have been terrific partners," Kennedy said. "You especially have to look to the second generation, my father and my uncle. They have given life to the sport."
But their control also has sparked some grumbling in the garage: Is everyone getting a fair share?
Of course, the France family likes things just the way they are.
"Having a dictatorship is not a bad thing," longtime driver Darrell Waltrip said with a chuckle, "if you're the dictator."
Certainly, the Frances aren't the only people getting rich. Kyle Petty, son of the greatest driver the sport has ever known, made $88 a week when he started racing. Now, seven-figure salaries are common.
But no one has claimed a greater share of the money than the France family, through a complex web of companies, subsidiaries and affiliates.
They run NASCAR, wielding enormous power with sanctioning fees, scheduling and the final word on how the billions in TV dollars are split up. They also control International Speedway Corp., a publicly traded company that owns or has a stake in 12 of the circuit's 23 tracks, including Daytona and Talladega.
"Imagine if [NFL commissioner] Paul Tagliabue owned half the stadiums where the Super Bowl was played," said Timothy Sullivan, a Southern Illinois University economist who has studied NASCAR.
ISC also runs the radio network that broadcasts races, as well as the concessions company that sells soft drinks and hot dogs at its tracks. Licensing fees on everything from T-shirts to racing-themed restaurants also put money in the France coffers.
The Frances own about 62 percent of ISC stock, Kennedy said. With shares trading about $38 in mid-December, their stake was worth more than $1.2 billion. That doesn't even include NASCAR, a private enterprise that declines to reveal its bottom line.
"They basically monopolized the sport," said Hadrian Shaw, a California-based analyst who has studied the business side of NASCAR. "A lot of money gets washed, blurred and confused. When you finally boil it down, they're very successful."
Bruton Smith, whose Speedway Motorsports Inc., owns six tracks, says NASCAR collects more than $2 million on every race weekend through sanctioning fees, its cut of the TV money and other items. This year, for instance, NASCAR doubled the "inspection" fee -- basically an entry fee -- to $3,400 per car at each race. If a team wrecks the car in practice and uses a backup, that's another $3,400. In all, that revenue stream brings about $5.5 million to NASCAR.
Where does all the money go? A lot is used for safety and testing programs. In January, NASCAR will open a $10 million research center near Charlotte, N.C., where more than 50 workers will study how to curb serious injuries in an inherently dangerous sport.
Just getting by each week is costly for NASCAR, according to its president, Mike Helton.
"We run the races and police the races and move 75 people around every race weekend from track to track to track," he said. "The hardware just for the Winston Cup Series takes five trailers to move around. I don't think NASCAR is being unfair with the balance of economics."
Forbes magazine estimated that brothers Bill and Jim France are billionaires, putting them among the 400 richest people in America.
After their father stepped aside, they forged a hugely successful partnership: Bill Jr. runs NASCAR, younger brother Jim controls ISC. Their business acumen is unquestioned, their hold on the sport essentially unchallenged, even though they have let an outsider, Helton, into their inner circle for the first time.
Helton serves on an otherwise all-France board: Bill Jr., Jim, Brian and Lesa. No drivers or car owners are allowed in, at least not officially. In NASCAR parlance, they are "independent contractors."
"Certainly, they run this place like a dictatorship," car owner Bill Davis said. "It's their deal. They started it. And they've done a fabulous job of growing the sport. We probably have more than we ever thought we would have."
Rick Burton, director of the University of Oregon's Warsaw Sports Marketing Center, compares the family to Pete Rozelle, who almost single-handedly transformed the NFL into its leading role.
"I think it really comes down to two words: strong leadership," Burton said.
But some question if enough money is trickling down.
"I just don't think that Bill Sr. would have been quite this greedy," said Dave Marcis, now retired after a career that included 881 starts and $7.2 million in winnings. "I believe he probably would have seen to it that the drivers got a little more."
Shaw, in a study conducted for Kagan World Media, projected that nearly $1.9 billion in revenues would flow through NASCAR in 2002. He also found that Winston Cup drivers get a much smaller share of the revenues than athletes in the four major team sports.
NFL players are assured of about half the total revenue under their salary-cap arrangement. The figure is around 60 percent for major league baseball, 63 percent for the NHL and 57 percent for the NBA, Shaw said.
In NASCAR, driver salaries are harder to pin down. In addition to guaranteed contracts, drivers bolster their pay with a percentage of the winnings, merchandise deals and personal-service contracts with sponsors. The late Dale Earnhardt essentially became the richest driver by selling more T-shirts than anyone else.
Waltrip, now a TV analyst, estimates the top four or five drivers are taking home at least $8 million to $10 million annually, the rest of the upper echelon is in the $5 million-$8 million range, and even the back markers are making around $3 million.
It's hard to feel sorry for millionaires. Still, assuming the 40 or so Winston Cup regulars are making an average of $5 million a year, that means they take home no more than 12 percent of the Shaw-projected revenues.
The numbers are skewed because there are more players on just one NFL roster than you'll find in a Winston Cup race.
But it doesn't hurt that NASCAR has set up a system where driver salaries aren't its concern.
"Our sport is unique in that there's an ability to make an enormous amount of money, but it's all competition driven," Helton said. "If you perform well, you benefit. That's the mainstay of our success. I think it's going to stay that way."
No one balks at that arrangement with a unified voice, but there are a few signs of dissension. Longtime star Rusty Wallace contends Winston Cup drivers should get the big contracts of other sports.
The racing season begins in early February and runs until mid-November, with events on all but three weekends. And there are testing sessions to get the car running well, and promotional appearances for sponsors and fans.
"Compared to other sports, we've got a long way to go," Wallace said. "We're out there for four or five hours a race, 36 or 38 weeks a year. In a perfect world, we would be making more money."
Helton concedes NASCAR has the upper hand over drivers who put on the show each weekend.
"The desire of drivers to become part of Winston Cup is fairly significant now," he said. "That's a good thing for us. If a driver doesn't think he has a good deal, he has a choice [to leave]. And we have a lot of other guys who want to do it for a living."
Sullivan said NASCAR benefits from a "cultural psychology."
"A lot of these guys are used to driving on Friday nights at all these different small tracks," he said. "To make a million dollars driving a car, they can't imagine complaining about something like that."
Maybe they should. It's the individual teams, not NASCAR, that provide everything from 401(k) plans to health insurance.
Longtime car owner Robert Yates, who has a payroll of 160, said his team pays some $2 million in insurance premiums before it even leaves the garage.
"I wish there was a little more money on this side of the fence," he said.
Bill France Jr. doesn't want to get mixed up in that discussion, saying the teams should control their costs. Again, those words: "independent contractors."
"What's a tire-changer getting?" France said before a July race at Daytona. "That's not up to NASCAR. This is America."
France, who has been in poor health, was not available to comment on other financial issues, said NASCAR spokesman Jim Hunter, who referred all questions to Helton. Jim France did not reply to several requests for an interview; Kennedy spoke on behalf of ISC, where she is an executive vice president.
Car owner and driver Brett Bodine thinks NASCAR should consider setting aside money for pensions that would benefit not only the drivers, but also low-paid crew members.
"Does it fall under NASCAR to set up a pension or does it fall to the team?" Bodine said. "Well, you have to be a member of NASCAR to be here. I'd like to see that looked at."
A pension would have helped Bobby Allison, who won 84 races -- third-most in Winston Cup history -- before a wreck ended his career. At the time, NASCAR covered only $50,000 of his medical bills; Allison was wiped out financially when the cost soared to more than $200,000.
Today, NASCAR provides a $500,000 umbrella policy for drivers injured in a race. Still, Allison blames himself more than NASCAR for making bad business decisions when he was at the pinnacle of the sport.
"I should have made sure I took care of my earnings and had the proper insurance," he said. "I didn't do that."
PGA Tour golfers have benefited from a pension plan since 1983. Under current projections, Tiger Woods would be eligible for up to $300 million in deferred compensation beginning at age 60 if he became fully vested. Even a 26-year-old golfer who started in 2001, played 17 seasons and averaged 75th on the money list could stockpile an account of nearly $43 million -- without ever winning a tournament.
Helton said NASCAR has looked at the pension issue but hasn't found a system that makes financial sense.
"It goes back to the fact that, from NASCAR's perspective, they're not employees of NASCAR," he said. "They're employees of the race team."
Thirty years ago, some of the sport's biggest names -- including Richard Petty and Allison -- tried to form the Professional Drivers Association to represent their interests.
"We were going to try to get a retirement benefit program, insurance, health protection, things that a lot of professional sports and businesses already had," Allison said.
Bill France Sr. ignored the PDA, and it quickly collapsed. "We were more competitors than we were comrades," Allison said. "The few guys that were making good money were taking care of their own stuff and not worrying about the rest of the guys down the line."
Today, there's still no union, and Helton said there's no need for one.
"Every owner, every team member in that garage, has a voice that's loud and clear to us," he said.
Still, a couple of battles could be looming -- on dividing TV money and a lawsuit over the NASCAR schedule.
Fox and NBC just finished the second of six years in a landmark $2.8 billion contract with NASCAR. When it was signed, some drivers and owners wanted the formula revised. The Frances refused, sticking with the split of 65 percent to the tracks, 25 to the car owners and 10 percent for NASCAR itself.
Considering the France-affiliated tracks host half of the 36 races, the family steered more than 40 percent of the TV money in its direction -- the biggest cut of all.
Kyle Petty calls the arrangement "a decent starting point," indicating it could be reopened in three or four years.
Helton said no changes are imminent. He pointed out that ISC had only two tracks -- Daytona and Talladega -- when the formula began, so NASCAR is not playing favorites. He also said track owners deserve most of the TV money for investing in facilities that weren't always lucrative.
"No one was complaining 10 or 12 years ago when NASCAR was going in and buying these tracks to keep them from going out of business," he said.
A shareholder for Texas Motor Speedway, which is owned by Smith's company, has sued NASCAR, alleging it reneged on an agreement to grant a second Winston Cup race to the track. The suit says NASCAR has added five races to its schedule since the start of the '97 season -- four of them to tracks with ties to the Frances.
Imagine how the operators of Kentucky Speedway must feel. They built a $160 million, 66,000-seat track that has drawn overflow crowds for two NASCAR Busch races -- a step below Winston Cup -- and still can't get a big event. NASCAR already has passed over Kentucky on the 2003 schedule.
In contrast, ISC-affiliated tracks in Chicago and Kansas City got Winston Cup races as soon as they opened.
Kennedy said ISC gets no advantage when NASCAR draws up the schedule.
"First of all, NASCAR sets the schedule. It's done on a year-to-year basis," she said. "I don't really view us as being in a favorable position compared to the others."
While NASCAR releases its schedule on an annual basis, Chicagoland Speedway signed a four-year deal with Tropicana as the title sponsor of its Winston Cup race, and Kansas Speedway sold four- and five-year luxury box packages and licensing fees ranging from $400 to $1,200 to guarantee premium seating for 30 years. Obviously, those fans and sponsors are counting on a Winston Cup event.
NASCAR's fan-friendly philosophy -- most evident in garages overrun with autograph seekers -- has helped the sport grow, but there's some grumbling there, too.
A Kagan study found the average ticket price in 2001 was $64.81 -- the highest in sports. Smith worries about the impact on NASCAR's fan base, even though attendance averages some 120,000 per event.
"It's getting too expensive to attend a race," the track owner said. "We all ought to be ashamed of what we're charging the fans."
NASCAR fan Robert "Daytona Bob" Hoehne also contends ISC used post-Sept. 11 fears to carry out another revenue booster: banning coolers from the grandstands so it could sell more beer and sodas at concession stands run by a company with ties to the France family. ISC said the move was designed to improve security.
Despite the complaints, the France method clearly works.
"Everyone has done very well," Helton said. "We're not going to set up a welfare system. But there are opportunities for people to make a lot of money for themselves. A lot of people have done a lot of great things in this sport through the guidance of the France family."
Can the Frances can maintain their grip? A new generation of stars, including 2002 Winston Cup champion Tony Stewart, are making more money in a year than the oldtimers did in a career.
"NASCAR is having a harder and harder and harder time controlling this young breed of drivers we've got right now," Waltrip said. "If they can't control that, then there's a chance there's going to be some cracks in other parts of the armor."