Since 2016, NASCAR’s premier division has operated with the charter system, leading to 36 full time teams. And I am of the opinion that, if NASCAR wants to improve competition in its top division, the charter system has got to go.
So, what are charters? A charter is an intangible item put into place by NASCAR with the intention of creating an inherent value in the ownership and operation of a race team. Before the charters, a team’s worth was judged purely on the race shop and what was inside of it, so a charter creates value in the concept of owning a team. Ownership of a charter entitles one car to a guaranteed entrance spot in every race in the calendar, and teams can own up to 4 charters for 4 cars.
Since their introduction in 2016, there have been 36 charters floating around the cup series garage, with the total field length being shortened from 43 cars to 40, leaving 40 unchartered (or open) cars to compete.
So far it all sounds good, creating a value to owning a team beyond equipment? Guaranteeing a spot for each race? All are, admittedly, very good ideas. However, in my eyes, this is where the charter system’s positives end, and the systemic problems begin to rear their ugly heads.
The original charter deal was meant to last for 9 years, and recent negotiations between NASCAR and the RTA (Race Teams Alliance) have revealed that the sanctioning body is eyeing to get rid of the system, while team owners are advocating for the system to become permanent in the top series.
- The Charter System is getting far too expensive
The most recent charter exchange happened in the latter half of the 2021 season, as Denny Hamlin and Michael Jordan’s 23XI Racing team purchased a second charter from the now defunct Starcom Racing team, for their #45 car, currently driven by Tyler Reddick. It is reported by SBJ that the price for this deal was $13.5 Million, the most expensive deal since the system’s introduction.
And, according to people within the industry, current asking prices for charters are around the $20 Million figure, as teams assume that charter prices will spike due to the upcoming TV deal.
While this is beneficial for those on the selling end of the deal, the problem lies with the purchaser or, in one case, the lack thereof.
With these prices skyrocketing, many prospective owners may have been turned away from the idea of operating in the cup series, as the financial barrier to entry is too high for many to muster.
As a matter of fact, Dale Earnhardt Jr. has said many times that he and sister Kelly Earnhardt-Miller are waiting for charter prices to decrease after the new TV deal in 2024 before moving their Xfinity series team JR Motorsports to the cup series.
While many may be optimistic about this, it has been shown in many other sports that the prices of franchises go up immediately following a TV deal, so we may have to wait even longer to see JRM in the cup series. And even if that weren’t the case there was still no guarantee that prices would decrease. After all, like many things in the open market, the system is still dominated by supply and demand. If there remain only 36 charters, then prices are likely to remain high as long as there is a need for them.
- Purse Payouts
Prize money is the simplest form of revenue for a motorsport; compete in the race and earn money based on your finishing position. This would also be on top of money earned through various sponsorship deals. This money would then be funneled into the team for various things such as better equipment, paying wages, fixing damages etc.
All sounds good right? Well, it does if you have a charter.
Charter teams and open cars have different purse payouts, with chartered cars being awarded more prize money. However, in 2020, owner of MBM Carl Long went on to Sirius XM and disclosed a few things about the changes NASCAR was going to make to the business side of the sport.
Long reported that the original amount that NASCAR had allocated to open teams, $20,000 per race, was to be axed for 2021. The total of over $700,000 a year was lost for the open teams.
Essentially, this eliminates the value of running any form of NASCAR Cup series race for any potential member, as the only money that would be earned from the venture would be any potential sponsorship deal. Even then however, the venture would still be a net loss as the sponsorship money would be solely spent on equipment, wages etc.
Now some of you might be thinking: “So what? It’s always been said that the quickest way to make a small fortune in racing is to start with a large one.” And I will admit, racing has always been seen as a passion project rather than a wise business investment, but even the most dedicated potential owner could see that operating in the cup series without a charter would be financial suicide.
- Competition
As mentioned earlier, owning a charter allows for instant qualification for every race in a calendar season. And prior to this, the cup series followed the top 35 rule, where any car in the top 35 in owner points would be immediately qualified for the next race. A system similar to this is used in the xfinity and truck series’ today.
Since the introduction of the charter system, the cup series field numbers have been dwindling, from 32/36 races having a full field in 2016, to only 9/36 in 2021 (the final year of the gen 6 car), to only 1/36 in 2022.
Meanwhile, the two lower series of NASCAR have seen field numbers remain relatively stable with all Xfinity series races in 2022 having a full field of cars.
This highlights one of the most important flaws in the charter system, new full-time teams are only viable at the expense of another one. With NASCAR’s removal of prize money, there is little to no incentive or reason to run a full-time season without a charter. So any new teams that want to enter the sport would have to push out another full-time team to do so, meaning that field numbers will not grow, leading to field numbers stagnating.
And from a competition perspective, the charter system allows for complacency. If a team performs poorly in the opening rounds of the year, their charter means they do not run the risk of missing the show the next week. Whereas the top-35 rule actively encourages those in the backend of the field to strive for constant improvement. This is because, if they do not, they will face the consequences of not qualifying for a race.
Therefore, the charter system actively discourages improvement from the latter half of the field because, if they do perform poorly, they will face no consequences for it.
- Solution
However, complaining without offering a solution isn’t very helpful at all.
I propose that NASCAR move the cup series away from a charter system and back towards the top 35 rule. I believe that this would actively encourage cars in the back half of the field to improve in order to continue competing in the top level of motorsports.
In addition, NASCAR should return to offering prize money based almost entirely on finishing position, as opposed to whether or not the car being driven has a charter or not. Once again, this would encourage teams in the back half of the field to be more competitive and would provide a financial incentive for new teams and cars to enter the cup series. Additionally, increasing the payout given to each team would lessen the chokehold sponsors have on the sport, as teams could pick drivers that are best suited for the job rather than the ones who can bring the biggest paycheck to the organization.
However, I don’t want to be entirely unfair to the charter system. It could be argued that the charter system has helped sponsorship negotiations for teams, as teams can now guarantee that the companies logo will be visible during the race rather than only just for qualifying. And the charter system’s emphasis on stability for teams has allowed several organizations to grow.
Although, I do still believe that the positives brought in by the system are vastly outweighed by the negatives imposed, and that the careful removal and transition back to the top 35 rule would result in net positives for both the fans and the drivers.
Featured Image Credits: Patrick Vallely
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