• Thu. Nov 21st, 2024

UPDATES: NBA Legend Sues NASCAR: A Move that will Forever Change the Sport and Its Business

NBA Legend Michael Jordan Just Sued Nascar. The Sport (and the Business of the Sport) Will Never Be the Same

 

How did Michael Jordan arguably become (especially if I’m doing the arguing) the greatest NBA player of all time? Hard work. Remarkable drive. Relentless focus. And an ability to turn slights, snubs, and insults — sometimes real, more often manufactured — into competitive fuel. Jordan’s ability to manufacture an enemy — to take it personally — was a running theme in The Last Dance documentary.

Jordan against the Pacers? “It became personal with me.” Jordan and the Pistons? “Oh, I hated them. They made it personal.” Jordan and George Karl, simply because Karl didn’t stop by his table at a restaurant? “That’s all I needed was for him to do that … and it became personal with me.”

 

 

Sounds extreme, but competition — again, real or imagined — is also a useful tool. A study published in Frontiers in Psychology found that competition boosts performance on difficult tasks: improving focus and learning, sparking creativity and innovation, increasing productivity, and helping individuals and teams better accomplish their goals.

Jordan’s latest goal? Changing the way NASCAR does business. Jordan’s 23XI Racing team, along with another team Front Row Motorsports, just filed a federal antitrust lawsuit accusing NASCAR of being a monopoly, claiming the sanctioning body has “used anti-competitive practices to prevent fair competition in the sport.”

At issue is the sport’s charter agreement, a quasi-franchise system that provides teams a percentage of overall revenues, especially from media rights. Even though every owner wanted a better deal, thirteen of fifteen teams decided to sign an extension to the charter agreement set to expire at the end of this year.

 

 

To understand what’s at issue, all you really need to know is that NASCAR recently signed new media agreements worth $7.7 billion, a 40 percent increase over the previous deals. Jordan’s team — and make no mistake, without Jordan’s deep pockets, there is no lawsuit — wants a larger slice of that pie.

 

 

Granted, there are other factors: teams that signed the new charter agreement gave up ancillary media rights, driver appearance requirements, and a cut of charter sales. Teams had also been pushing for charters to become permanent a la other major sports franchises rather than tied to the length of the media rights deal; that’s why a charter is a quasi-franchise.

 

According to the lawsuit:

 

By continuously employing anticompetitive restrictions on racetrack access, restrictions on teams competing in other events, and other anticompetitive acts, NASCAR has unlawfully maintained its monopoly position for offering a top-tier stock car racing series in the United States in violation of the Sherman Antitrust Act.

 

No stock car racing team can compete at the top-tier level in the United States without accepting the anticompetitive terms that NASCAR imposes as a condition for the teams to compete in the input market for racing teams that NASCAR controls.

 

Therein lies the rub. Teams are required to buy car parts from specific NASCAR-approved vendors. NASCAR owns many of the tracks the series races on. In effect, NASCAR “owns” the Cup series cars, since teams can’t race those cars in other competitions. It’s NASCAR’s game, and teams have to play it.

 

That sounds like a monopoly.

But is it? Teams don’t have to participate in the sport. In fact, you could argue that teams shouldn’t participate. Racing is not a profitable venture. Hendrick Motorsports, the sport’s winningest team, is subsidized by owner Rick Hendrick’s automobile dealership empire. Ditto Team Penske, subsidized by Roger Penske’s myriad business interests.

Speed costs money, and teams pour every available dollar into on-track performance. The better you perform, the more money you earn through the charter agreement, but still: you spent all that money (and probably more) to perform that well.

 

In simple terms, a race team is more of a lifestyle business. Ultimately, you have to love racing, because you’re not going to make any money. That’s why Jordan — and every other team, even though they signed the new agreement — want owning a race team to be a financially viable proposition. They want a larger slice of the revenue their investment and effort help create.

 

You could also argue that NASCAR “made it personal” to Jordan by the way they negotiated. After two years of back and forth (according to the teams, mostly forth) NASCAR reportedly gave teams a take it or leave it, one-hour deadline offer on Sept. 6.

 

Already unhappy with a perceived lack of willingness to negotiate in good faith on NASCAR’s part, along with the sudden deadline, 23XI and Front Row declined to sign. Because they did not sign the extension, the two teams now risk losing their charters — each currently has two — valued at anywhere from $30 million to $50 million each.

Which, again, is why without Jordan, there probably is no lawsuit.

 

As attorney Jeffrey Kessler said in a statement, “How they’ve run it, where the money is really going, how it’s extracted, how the monopoly is being abused — all of that is going to be part of our discovery of the case.”

The discovery process is key. As a family-owned corporation, NASCAR finances are closely guarded. How much money does NASCAR make? Maybe a little, maybe a lot. Who knows. Filing the lawsuit means people will know unless the suit gets settled.

That’s likely what will happen.

 

But maybe not.

For decades, NASCAR has stared down challenges to its control over the sport. Unlike, say, the NBA, which you could currently argue is more of a player’s league, NASCAR’s approach has tended to be, “Don’t want to play the game our way? Fine. Then we won’t let you play.”

 

But so does Jordan. As Jordan says in The Last Dance:

When people see this (documentary), they’re going to say, “He wasn’t really a nice guy. He may have been a tyrant.” But that’s you, because you never won anything. I wanted to win, but I wanted (my teammates) to win and be a part of that as well.  It is who I am. That’s how I played the game. That was my mentality.

If you don’t want to play that way, don’t play that way.

Yep: once again, it’s clearly personal.

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