Ryan: Following the money in NASCAR merchandise is a difficult path for drivers
There is no greater evidence of Kyle Larson’s emergence as a star than how he is driving the narrative in every way on a daily basis.
Whether it’s winning every time he hops in a sprint car, leading the points in the Cup Series or fostering impassioned debates over grass-roots crossovers and stock-car traditions, the soft-spoken Larson has become one of the strongest voices in auto racing.
This week, he put drivers’ merchandising revenue front and center with a single tweet that had massive traction Monday, drawing response from drivers, fans and industry members.
So Larson is taking in more money off a night of dirt racing in Spring Run, Pennsylvania, than he has from nearly a half-season of racing around the country in Cup?
Well, yes, of course he is (and it would come as no surprise to the Chip Ganassi Racing driver, who has raced dirt for more than a decade).
Larson could have sold 25 times as much in NASCAR gear over the first 17 Cup races and possibly still lag behind his take-home pay as a dirt-track megastar.
While their grosses can be much higher, many NASCAR drivers’ merchandise income isn’t commensurate with the biggest stars in dirt-track racing. When NASCAR’s merchandising boom was at its peak more than a decade ago, a top star’s revenue share hovered at $3-4 million annually.
Now virtually all are below $1 million, and many aren’t cracking six figures.
Meanwhile, a World of Outlaws champion might pull in up to $1 million, and top dirt late model racers can make hundreds of thousands in T-shirt sales.
At the elite dirt events that run multiple days and have a festival atmospheres (such as the Knoxville Nationals), the best drivers typically can sell up to $100,000 in merchandise. In a lawsuit filed last year, dirt late model legend Scott Bloomquist and four other lesser-known drivers estimated aggregate losses of $100,000 if Eldora Speedway prevented them from selling merchandise at its prestigious World 100.
This isn’t easy money -- there are costs for hauling and staffing the trailers, as well as vendor licenses, taxes and liability insurance -- but dirt teams can keep much of the proceeds from merchandise sold as track fees are limited or often nonexistent.
Those are among the simple structural reasons for the disparity of merchandise income between Cup and dirt drivers, which is comparable to the touring revenues of rock bands playing arenas vs. those playing clubs. The latter earns a larger percentage of merchandise by designing, selling and transporting their own goods. While the crowds are much smaller, fans pay a fraction for admission and have cash left to buy T-shirts supporting the bands – which keep a large chunk of what they sell because of much less overhead.
It’s vastly different for a band that has a following large enough to tour stadiums with high-priced tickets. Much of its revenue is derived from gate sales and performance guarantees while merchandise revenue might be divided among a promoter, venue, record label and various parties. The gross is much higher, but the cut for the artist also can be much smaller.
This is somewhat analogous to NASCAR’s 10-year contract for its trackside merchandise business with Fanatics that started in 2015. Under that deal, 75 percent of the revenue goes to Fanatics, which provides the infrastructure, marketing, staffing, transportation and security.
The rest of the revenue is split thusly: 15 percent to the track, nine percent to teams (which generally is divvied into thirds between the team, driver and sponsor) and one percent to NASCAR.
That naturally spurs some questions.
Is it equitable that drivers are receiving roughly three percent of the gross? Or that tracks (which do provide the valuable real estate and incur some liability) receive five times as much?
Larson isn’t the first to call attention to this. When Danica Patrick announced the launch of her Warrior athleisure line of clothing, the impetus was the lack of income from her NASCAR gear.
“I was so frustrated with merchandise sales in NASCAR because they’re horrible, as in for the drivers, we just make no money off them,” Patrick told the Charlotte Observer in January. “I mean, I don’t know who does, but it’s not us.”
They are fair points to make, but it also is worth noting in the collaborative decision-making era of NASCAR, the Fanatics arrangement wasn’t conceived in a vacuum. Teams and drivers were consulted on reshaping a model intended to offer more options at a wider range of price points while making it easier for smaller teams to hawk their stuff through a centralized vendor (instead of having to secure their own haulers).
And while dirt racers might be netting more in merchandise, Cup drivers still are raking in far greater salaries and purse money thanks to multibillion-dollar TV contracts and weekly audiences that still stretch well into the millions.
That doesn’t preclude Cup stars from demanding a greater share. The same rumblings are being heard in the NBA as it enters an unprecedented period of player prosperity.
Given the life-and-death stakes faced by NASCAR drivers, it’s arguable they are the most underpaid of professional athletes.
But as long as they remain loosely organized in a council instead of the union representation found in most professional sports, drivers probably won’t get far in squeezing greater wealth from the industry. Collective bargaining on complicated financial matters is best left in the hands of lawyers and MBAs.
There are ways to circumvent the model and earn more directly. Some drivers use websites to sell their own products (sometimes tied to their own brands, such as Tony Stewart’s “Smoke” moniker) and keep a lion’s share of profits – though it isn’t always a cost-effective choice. Clicking on the link for Monster Energy Cup gear on Kyle Larson’s website takes one to the NASCAR.com Superstore – which is run by Fanatics and where online revenues are split the same way as for at-track merchandise.
The root problem for a NASCAR driver’s take, though, isn’t how the pie gets divvied (which hardly changed with the move to Fanatics).
It’s how large the pie is.
Merchandise sales fell off a cliff with the Great Recession and continue to sag for multiple reasons, including that simply fewer people are attending races. In International Speedway Corp.’s annual reports, revenues in the food, beverage and merchandise category fell from a peak of $87.2 million in 2005 to $41.9 million last year. The Sports Business Journal reported in 2014 that merchandise sales plummeted from more than $2 billion in 2008 to $1 billion in 2010; diecast sales particularly were hit hard, according to the New York Times.
Top stars still might be grossing in the mid-seven figures annually, but they feel a larger pinch because their cut remains roughly the same as when their total revenues were much greater.
And there are other economic forces at work.
Dirt racing fans might buy more of their drivers’ gear in part because they have more disposable income after admission. Prices for the prestigious Kings Royal World of Outlaws event at Eldora Speedway range from $34-38 (compared with $36-40 for the Camping World Truck race at the track), and ticket prices for most dirt races are often less than half of that.
The average ticket price for a Cup race is roughly $70 (according to Monday’s ISC investor analyst call). For a largely middle class fan base more gun shy about spending over saving since the downturn, there seems less inclination to splurge on a $20 hat or $200 diecast.
Meanwhile, consumer traffic patterns that would encourage impulse buys at tracks also are changing. The midways for Cup races, once synonymous with a carnival-style atmosphere, are more deserted. As sponsors change their activation strategies and redistribute their marketing dollars in the age of social media, there has been a de-emphasis on a large trackside presence.
The Fanatics deal was a big factor in altering the midway landscape, mostly eliminating the once ubiquitous individual driver merchandise trailers in favor of a large climate-controlled tent for all merchandise.
That model has begun shifting back toward trailers this season, but the long-term solution likely will be a hybrid. Sales were up at Daytona International Speedway stores adjacent to the grandstands during the 2017 Daytona 500, perhaps because it was the first with predetermined stage breaks that fans took advantage of the same way they might at halftime or between periods of a hockey game. Meanwhile, the return of merchandise trailers at Charlotte Motor Speedway didn’t produce massive gains (some big-name drivers significantly were down).
As the NASCAR industry seeks ways to regain its footing on moving merchandise, this is where Larson’s voice also can matter.
No one knows better than the 24-year-old that fans also spend proportionately larger sums on gear associated with dirt track drivers because they find their heroes infinitely relatable. There is a special kinship formed at many dirt tracks that allow fans to upgrade their tickets with access to the pits, where some teams also sell merchandise directly from their race haulers.
Aside from dwindling attendance and tighter wallets, NASCAR merchandise revenues also might be waning because drivers are more insulated from their supporters.
There is great opportunity for the next crop of 20-something stars to make an impact on fans’ purchasing consideration. Larson’s Cup merchandise sales are up by triple-digit percentages this year, and Chase Elliott, Ryan Blaney, Daniel Suarez and Erik Jones also are enjoying signficant spikes.
As their popularity grows, they would be wise to capitalize on it by being as aggressive with fan outreach as dirt-track drivers, who regularly sign autographs before and after races to maintain personal connections with the crowds that return the favor by buying their stuff.
What if emerging personalities such as Larson advocated earning more money while also proving they help generate it by sticking around for a few hours after every race? By spending less time in the walled-off confines of the motor home lot?
Larson is proving this year he can drive the narrative in NASCAR. He also might be able to help drive revenue again by instilling some of the principles he’s seen in dirt racing.
Denny Hamlin obviously wasn’t pleased about an inadvertent trip through the frontstretch grass that ripped the front of his No. 11 Toyota to shreds near the end of the Coke Zero 400. But that spin could have a major silver lining for Hamlin or another winless veteran two months from now when the 16-driver playoff field is set.
On the Lap 158 restart, Ricky Stenhouse was fourth on the outside behind Ty Dillon, and his No. 17 Ford didn’t launch well and quickly got disconnected from the leader. It then seemed the race could be decided among three other winless drivers: Dillon, David Ragan and AJ Allmendinger – until the caution for the wreck involving Hamlin and Erik Jones set up the overtime finish.
This time, Stenhouse restarted in third from the bottom lane and rocketed past Ragan for his second victory of the season.
“My car seemed fast on the bottom,” Stenhouse said. “It all worked out. When David restarted the restart before on the bottom, I was on top (in fourth) and pushing Dillon as hard as I could get, but the shorter radius around the corner helped David get out front.”
If Dillon or Ragan had won Daytona, it greatly would have increased the likelihood of squeezing a major name from the playoffs. There currently are 10 drivers qualified with wins and six have provisional slots through points: Kyle Busch, Chase Elliott, Jamie McMurray, Denny Hamlin, Clint Bowyer and Matt Kenseth.
Joey Logano, whose Richmond win isn’t eligible because of a postrace violation, is three points behind Kenseth for the last spot.
It is possible that all of those drivers could win over the next nine races and eliminate a lower-ranked one-win driver (such as Austin Dillon, Ryan Newman or Kurt Busch). But every regular season since the advent of the 10-race championship run has featured fewer than 16 winners – and Sunday’s result at Daytona helps ensure that the trend is likely to continue, allowing some teams to qualify on points.
With the exception of Allmendinger winning next month at Watkins Glen International, or another felicitous occurrence of a well-timed fog rolling in at Pocono Raceway, the clock virtually has struck midnight on another Cinderella making the playoffs as Chris Buescher did last year with Front Row Motorsports.
Whether it was the impact of divergent strategies, a softer tire that drew decidedly mixed reviews or even the lunar cycle, several theories were floated about the furious racing that produced a record 14 caution flags Saturday night.
“It’s been a wild night,” Dale Earnhardt Jr. said about his final start in the July race. “I didn’t anticipate this much action and this much torn up sheet metal.”
Said Danica Patrick: “All I can say is that you all are getting your money’s worth tonight. From lap one, it has been crazy. It should be a full moon because that is how crazy it is out there.”
What if it was as simple as just that Cup drivers had more to race for than ever before?
Between championship contenders trying to gain stage points and wins – the last few laps of the opening segment of Saturday’s race featured the most frenetic action for a Stage I win since Kyle Larson and Joey Logano’s duel at Phoenix -- and underdogs desperately trying to make the playoffs with an upset victory, the aggression on the 2.5-mile was as charged as it’s been since the second half of the 2014 Daytona 500 (which concluded in optimum handling conditions at night after a six-hour rain delay).
“Everybody has got a good shot at winning here, and you want to gain as many stage points as you can and try to win a stage,” Stenhouse said. “So I think everybody was just trying to get out front and lead the race.”
It also was indicative of some sublime performances by drivers (Dillon, Ragan, Michael McDowell) who aggressively were maximizing their ability and equipment while trying to capitalize on a rare opportunity at contending.
“Guys like David Ragan that just drove a superb race,” Jimmie Johnson said. “Put his car in the right places all day long. I could tell at times he didn’t have the fastest car, but he did a phenomenal job working the draft.”
Despite recent threats to limit race tire allotments for inspection failures, teams will be bracing for NASCAR’s laser beams to be set on stun this weekend.
Kentucky is the first visit in nearly two months to a 1.5-mile track, where aerodynamics are at a premium. In four races this season at the 1.5-mile ovals of Atlanta Motor Speedway, Texas Motor Speedway, Kansas Speedway and Charlotte Motor Speedway, 27 cars missed qualifying because of inspection problems. Much of it has been related to rear-end suspensions designed to enhance steering by testing the boundaries of the rules.
Road courses and restrictor-plate superspeedways aren’t as aero-dependent as the 1.5-mile tracks, as borne out by the past two races where every car cleared inspection in time for qualifying. At Daytona, 31 cars passed the Laser Inspection Station on the first attempt. At Sonoma, 31 cars passed every inspection station on the first attempt.
If Friday’s qualifying session goes as smoothly, expect an evening of Kentucky bourbon toasts – but it’s more likely to be an evening of shots for a frazzled brigade of officials and crew members recovering from another contentious dance through the inspection line.
Also worth watching: NASCAR will be scrutinizing the thickness of splitters this weekend by enforcing existing rules on teams pushing the boundaries. If splitters display excessive wear beyond the specified thickness of 0.46 inches, teams might be ordered to replace the part.
In another sign of the strength of the youth movement afoot in NASCAR, 10 of the top 15 finishers Saturday were born after 1980, and five were born after 1990.
Those numbers would have been higher if Larson, 24, and Blaney, 23, hadn’t been involved in a wreck with six laps remaining. Blaney led nine laps and briefly was at the front just ahead of good friend Darrell Wallace Jr., who finished a career-best 15th in his third Cup start and delivered the Peak Millennial postrace quote of the year.
“It was great to battle Ryan there for a while,” Wallace, 23, said. “I was wondering what the fans were tweeting.”
Chalk up another addition to the “Things That Cale, Bobby, Donnie, David, Richard, Rusty, Bill and Dale Never Would Have Said” file.
Speaking of the younger set, even “The King” wonders about kids these days.
Asked about how he assuages the old-guard fan base that clings to traditions, Richard Petty deferred to the short-attention span society.
“You’ve got to figure there is so much going on for young people, old people,” Petty said last weekend. “Nobody’s got time to set for four to five hours and watch a race anymore. If it lasts more than 15 to 20 minutes, we’re going to get our Google machine out and start punching buttons and doing something else.
“So we’ve got to get the next generation. How do we do that? Everybody’s looking at trying to figure that out. This is a whole different generation of people, and they’re looking at things so much different than what we did 10 to 15 years ago. So how do we tap into those people to keep our sport alive? It’ll take everybody to do it. Takes (the media) to do it, takes us to do it, takes NASCAR, takes TV, takes everybody in order to get to those people. There are 330 million people out there, we ought to be able to get to 50-100,000 every weekend. That’s what it’s going to take.”
Sage words from a seven-time champion the next time the endless debate reignites about whether there are too many 500-mile races on the schedule.
There are three tracks remaining in the regular season where Ricky Stenhouse Jr. believes he can earn his third win (and first on an unrestricted track) and one reason why: With two victories locking him into a playoff spot, Stenhouse and crew chief Brian Pattie can afford to gamble.
New Hampshire Motor Speedway, Bristol Motor Speedway and Richmond International Raceway are opportunities to “do something crazy strategy-wise and add another five playoff points” for a victory, Stenhouse told NBC Sports. “I feel that’s our best opportunity to win.”
Even with Roush Fenway Racing still struggling at 1.5-mile tracks, Stenhouse views Kentucky as the first of many chances for stage wins. “We’ll use strategies throughout (at) places like Pocono, Michigan and Kentucky,” he said. “You can play different strategies, give up Stage 2 to win Stage 1 and set yourself up for the win.”
Pattie has targeted Bristol, where Stenhouse has two runner-up finishes (March 2014, August 2016) and five top 10s in nine starts.
“I’m hoping Indy, I’ve got some demons there I need to get rid of, but we have a good shot at Bristol,” Pattie said. “Bristol and Richmond are probably our two best.”
Pattie was the crew chief at Indianapolis Motor Speedway in 2009-10 with Juan Pablo Montoya, who led the most laps in the Brickyard 400 each of those seasons but lost a shot at victory because of a pit speeding penalty and a crash after getting mired in traffic by a decision to pit for four tires.
NASCAR executive senior vice president and chief racing development officer Steve O’Donnell appeared on Wednesday’s NASCAR on NBC podcast. Besides discussing a possible change in the overtime line, O’Donnell also discussed:
--Attempting to fill the shoes of Mike Helton as the supervisor of day-to-day competition issues;
--A childhood in which he spent several years growing up overseas;
--Dealing with negative feedback as a weekly voice for NASCAR;
--The importance of swagger from drivers;
--An emphasis on technology with the upcoming Gen 7 car;
--The plan for new helmet cams on every driver at races in the future;
--What might change with lug nut monitoring, pit speeds and debris cautions in the future.
The podcast is available on AudioBoom, Apple Podcasts, Stitcher and other podcasting apps.