The folks behind the popular NASCAR racing franchise have just released their annual financial report, and it shows that the company is doing quite well. Thanks to sky-high TV ratings and packed stadiums, fans of the sport have plenty to cheer about. But what does the financial report say about the future of NASCAR? How much does it cost to operate a race team? How much revenue does NASCAR earn annually? Let’s take a closer look.
How Much Does NASCAR Operate On A Yearly Basis?
First off, let’s look at how much NASCAR actually spends on operating a race team. According to the financial report, the company spends about $13.5 million annually on driver salaries, crew chief salaries, rent, travel, and administration. That’s a lot of money, but when you compare it to the size of the organization, it pales in comparison.
The budget for next year is already been set, so it’s a given that some of those costs will be passed on to the fans. We’ll likely see ticket prices go up and pay-per-view prices increase as a result. It seems that without competition from streaming services and the rise of superfamilies, broadcasters have little choice but to charge more for their content.
Which Teams Are Profitable?
The next thing that interests us is which teams are profitable and which ones are losing money. The short answer is, not a lot of teams are losing money, and the ones that are are in the minority. According to the report, the top ten teams bring in a combined $80.85 million annually, and the bottom thirty teams lose a combined $5.9 million. That’s a wide margin, but in today’s sports world, it’s better than you’d expect.
What’s interesting here is that several teams owned by well-known businesspeople are among the top-ten money makers, including the Hendrick Motorsports organization, which is led by millionaire Rick Hendrick. It seems that successful businesses can be just as involved in sports as successful athletes and sports teams can be. That’s something to think about.
How Does TV Rating Compute?
One of the most interesting parts of the annual financial report is the calculation of TV ratings. The folks at NASCAR decided to switch from the traditional Nielsen methodology to an adjusted form of the Nielsen system known as the ION Rating. The reason for this is that NASCAR fans are so passionate about the sport that they’ve taken to watching races on multiple devices, including mobile phones. That combined with social media and real time updates via text messaging have made it challenging for Nielsen to isolate and measure the audiences of traditional TV sets.
The ION rating is then adjusted for household size, so even if you have one person in the house, your TV rating will be multiplied by 2.3 to account for other members of the family. The folks at NASCAR say that the change will help them “understand the true impact our competitions have on the public, and adjust our strategy going forward.” Interesting that they would make such a change without any precedent or contractual obligation. It would seem that the TV audience is now a hot topic, and it’s the duty of the league to provide the best numbers they can.
Overall Revenue And Profits
The final item in the financial report that we’ll examine is revenues and profits in comparison to the previous year. Overall, revenues are up by about 6% and profits are up by about 28%. That’s excellent news for NASCAR, and it shows that even with the increased costs and growing TV revenue, they’re still able to remain financially stable. The increase in profits comes mainly from an increase in licensing revenue, which is now worth more than video game revenue.
What Does This Mean For The Future Of NASCAR?
It’s always interesting to examine the future of a sport from a historical perspective, and this year’s financial report allows us to do that. Looking at previous years and comparing them to this year offers up interesting perspective. In 2021, revenues were up about 6% over the previous year, but that’s mainly because there were fewer fans at the races due to the pandemic. Attendance was down, and that lowered the take from TV rights fees and merchandise.
The drop in attendance had a domino effect, as it also led to a drop in ticket sales, which in turn led to a drop in merchandise sales. That’s not a good sign for the future of NASCAR, and it highlights how valuable fan engagement is to the sport.
Based on history, we know that as soon as fans get back into the habit of going to the races, ticket prices will go up and merchandise sales will increase. The question is, will the TV rights fees follow suit, or will they remain steady given the growing popularity of the sport? It’ll be interesting to watch how this year’s race season progresses before answering that question. Still, it’s nice to see that even during a time of great uncertainty, NASCAR has managed to keep most of its key revenue streams intact. That’s a good sign for the future of the league.