Veteran NASCAR driver Denny Hamlin made news at a charity event back on October 3rd when he suggested that drivers are underpaid. His feeling is that drivers subject themselves to risk and should be paid accordingly.
“We’re way underpaid as race car drivers,” said Hamlin. “There’s no doubt, doing what we do, the schedule that we have and the danger that we incur every single week, NASCAR drivers should be making NBA, NFL money. There’s got to be a reset, and it doesn’t come from the drivers. It comes from NASCAR helping the teams survive on a better basis. There just has to be different revenue-sharing.”
Hamlin isn’t necessarily saying that he’s underpaid but he’s got the back of the back end of the driver field and believes that the system needs to be fixed. While he drives for Joe Gibbs Racing, Hamlin’s comments have been echoed by the majority owner of another team who has a vision for how NASCAR can fix the problem.
“I saw Denny’s quotes, and think he’s right,” said Andrew Murstein, Majority Owner of Richard Petty Motorsports. “I have been saying for a long time that NASCAR drivers are underpaid. The reason I can say that even though it clearly doesn’t benefit me is it’s just the truth.”
A big piece of the NASCAR financial pie centers around their current ten-year television deal with FOX and NBC that is worth roughly $820 million per year. From that revenue, NASCAR keeps 10% and distributes 65% to the tracks and 25% to the teams. From there, the teams have to do business and survive on sponsorship dollars that make up about 75% of their revenue.
The television ratings and attendance figures suggest that NASCAR drivers should be making the same if not more than players in other sports like the NHL.
“If a star player in hockey has a salary of $15 million per year, a NASCAR driver should be making at least that amount,” said Murstein. “On top of that, you have to add in items like the length of the season, independent contractor status for NASCAR drivers, and the safety issues involved.”
So the issue is how to give the 40 or so men and women that make up the small fraternity that is the NASCAR driver roster a bigger piece of the action. Murstein agrees with Hamlin that the NASCAR business model has to be fixed and the solution could be in the way of a redistribution of the television money as well as the elimination of duplicating services.
That includes the construction of race cars.
“The whole system should be restructured perhaps that one central facility supplies the cars each week and that the various teams don’t have to reinvent the wheel and build a single car from scratch,” said Murstein. “Car companies go out of business if they can’t sell a minimum of one million cars per year and here race team owners have to build two cars per race week and have enormous infrastructure doing it.”
Murstein, who is also the President of Medallion Financial Corporation and the owner of the New York Lizards of Major League Lacrosse, has made a pretty good living analyzing financial information and making wise investment decisions. According to publicly available information, his net worth had been estimated over $600 million before Uber. He’s personally invested over $5 billion into various companies over the years and thinks the time is right for NASCAR to take a long look at their system and make the necessary changes to help out its teams.
And the way to go about that is right in front of them.
“There’s too much positioning and hot air out there and I like to think my partner Richard Petty and myself always call it like we see it and are honest,” said Murstein. “In my mind its simple. All you have to do is look at figures like attendance and TV viewership.”
Murstein points out that there are 500 players who “get to live out their dreams in the NHL” but the NHL, along with Major League Baseball, the NBA, and the NFL all have better franchise systems in place than NASCAR.
“They have guaranteed money coming in from their media contracts and for the most part they have a fixed number of teams,” said Murstein.
There is optimism that NASCAR, including CEO Brian France, will take a long look at their system and work towards adjusting the model. They did back team owners when they accepted the “Racing Team Alliance” so the feeling is that the France family will make the necessary changes that will ensure all of the teams can stay competitive and profitable.
“The Frances are very smart and open minded, and are working with team owners towards accomplishing this,” said Murstein. “I believe NASCAR realizes this and that a rising tide will lift all ships. I am hopeful that over time we will be successful and that NASCAR team values will rise and NASCAR drivers will undoubtedly start receiving much higher salaries. They deserve it.”
It’s very uncommon and telling when an owner believes that players, or in this case drivers, are underpaid. But even if an owner feels that way, the numbers have to work and in the case of NASCAR, the distribution of revenue needs to be looked at, particularly as it pertains to how media rights and other revenue is allocated. There are other ways to fix the business model and NASCAR fans will also benefit as competition becomes better and gets put into the drivers’ hands rather than which owner spends the most money.
