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Everything you need to know on High Limit's team charter/franchise plan in sprint car racing | Daily 12-10-2023
High Limit is trying to change the sprint car game, and team charters are next on their list. We'll go deep on their plans today and what it all means. Let's go.
It's Sunday, December 10th, I'm Justin Fiedler. This is DIRTRACKR Daily.
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It's been a very news-packed last few days around the PRI Show, and there are a ton of things to react to. It can't and won't happen all on this episode, but just know that we will be covering a lot of ground over the next few days. The sprint car stuff remains wild, and there are topics to discuss on the late model and modified side as well. I have a quite lengthy list of items to talk about, and I'm sure the news won't slow for a bit either. If you missed it, I did post a video yesterday showing my experience at the PRI Show on Thursday. Check that out if you are curious about the show and have never been before.
Coming out of the PRI Show, the sprint car stuff continues to be a huge point of focus for the industry in the still very new battle for territory between the World of Outlaws and High Limit. With the schedules out, the next manuevering is for the full time teams on both sides. Early on, the Outlaws had the momentum on that front, announcing a bunch of their signees not long after World Finals, but I think that PR momentum feels like it shifted in recent days in the direction of High Limit. At this moment, the Outlaws have eight in David Gravel, Gio Scelzi, Logan Schuchart, Donny Schatz, Sheldon Haudenschild, Brock Zearfoss, Bill Rose, and Landon Crawley. Schatz was the one announcement for the series to come out of Indianapolis. The teams that were out with the Outlaws in 2023 who we are still waiting on word from include Carson Macedo and the JJR 41, and the Roth team. We also don't know anything official from Noah Gass. 10 for the Outlaws seems to be the number right now, which means there could be spots for two or three more teams if anyone was looking to make the jump.
As for that High Limit momentum, back on Thursday's show, we talked about Rico Abreu becoming the seventh High Limit driver, and the series picked up three more through the trade show joining Brad Sweet, Jacob Allen, Zeb Wise, Cory Eliason, Kasey Kahne, and Brenham Crouch. Initially it was Corey Day announcing he was going to run the midweek stuff in a partnership with Clauson Marshall Racing, but Friday they pushed the deal further and announced for the whole schedule. The talk for a long time had been that Corey wouldn't go full time anywhere until high school was complete, but in talking to them at the show, they have a plan to get Corey finished up with school while still racing. High Limit also added Justin Peck and the Buch 13, and yesterday it was Spencer Bayston with the CJB 5. So they sit at ten currently, and we aren't done yet. In a video with FloRacing's Michael Rigsby, it sounded like Brad Sweet slipped up and outed Tyler Courtney as well, which makes sense as that move has been in the rumor mill. And in recent days with some of the other names floating around, I thought they'd get to at least 13 or 14, but we could see High Limit push past that to possibly 16 or more. If they get to that many, the teams further down the order could struggle with finances, and I think you would probably see a few fall off later in the year. As we've talked about many times before with any series, the economics start to break down for those teams toward the bottom. So that's where we stand at the moment with both series in terms of drivers, but the news didn't stop on Sunday.
If you watch regularly, you know I've mentioned that High Limit was talking about a different ownership relationship than the Outlaws related to money, and then late last week Rico's comments to Jeremy Elliott were the first real public acknowledgement we'd had of the charter system being discussed. It got brought up again by Rigsby in his conversation with Brad, and then yesterday it was an Adam Stern story in Sports Business Journal which outed a good portion of the plan. As a side note here, I tweeted yesterday about Stern getting to break the story. I think some viewed it as a negative reaction on my part, which it wasn't at all. I just thought it was interesting that he got the leak, especially since he doesn't cover much dirt racing. I know why it happened though, as tweets and stories from him lend a much bigger audience and a bit more credibility. He was one of the first to break the news many years ago that the World of Outlaws had signed Craftsman as a sponsor.
Back to the charter stuff. So what exactly is a charter and how is this all going to work. Think about the charter as like a franchise agreement similar to what we see in other sports. It gives the teams something of value that will guarantee them a certain amount of revenue, their spot in the series, and something that can be bought or sold in the future. NASCAR uses a similar model at the moment, but unlike what they do, a High Limit charter will not guarantee a team a spot in a night's feature. That must still be earned through the traditional path. So how are teams going to get a charter? Well it's all spelled out in the High Limit documentation that got sent to teams, and it's in Stern's story. Straight from High Limit, the procedure reads like this: "Only full-time (must field a car in every High Limit Racing sprint car event in 2024) Double Down Entrant High Limit Racing Series members shall be initially eligible to secure a High Stakes Charter, which will be granted based opon performance. The top five in year-end points Double Down Member teams at the conclusion of the 2024 season shall automatically be granted a High Stakes Charter. At the conclusion of the 2025 season, the next five best highest finishing full-time members (must participate in all of the 2024 and 2025 High Limit Racing Series races) based upon average car owner year-end point finishes during the 2024 and 2025 seasons that were not already granted a High Stakes Charter, shall be granted said High Stakes Charter at the conclusion of the 2025 season." So more briefly, top five after 2024, then the next five highest after 2025, equaling ten total charters. It's important to point out here that the second round of charters will go to teams that ran both seasons. The path to a charter becomes more difficult if you join after 2024, and would probably mean needing to buy one. The teams you see signing up now who want a charter are effectively looking at a two year commitment. I think this is a big reason why we're seeing this initial push to be a High Limit team, and it was a solid move on the series side to push this urgency. Get in now and try and be one of the ten teams, because it will be much more difficult later, and if it doesn't work out, there will be other options for series membership, like with the Outlaws. Beyond the first ten charters, the initial documentation lays out provisions for potentially four more charters after that. It reads quote "The High Limit Racing Series may award up to an additional four charters commencing with the 2026 season, to be granted to teams at the sanctioning body's discretion. In no event, however, shall more than one HL designated charter be granted per year. In order to reward founding High Stakes Charter member teams and reduce dilution over the term of the remaining streaming broadcast agreement, High Limit Racing shall implement reasonable anti-dillution measures." So in this initial setup, a total of 14 spots could be available.
So now that we have how the charters will be awarded out of the way, what exactly does the charter get you as a team owner. In 2024 and 2025, High Limit will pay tow money and a point fund, just like you see everywhere else in dirt racing. But beginning in 2026, that model will start to change. The teams that hold charters will no longer receive tow money and the point fund, but instead get their share of cash through regular, fixed, monthly payments through the season. High Limit has decided they will share 50% of their streaming revenue with the teams through this program, but not everyone will get an equal amount. On this point, the High Limit document says "Beginning in the 2026 season, with the initial grant of ten High Stakes charters, the High Stakes charter system shall commence, with the High Stakes Charter teams being rewarded 50 percent of the streaming monies. The new system will operate by providing the teams with monthly fixed fee payments, which shall be weighted based upon factors that may include average finishing positions over the initial two year period, championships and race wins. The result will be an elimination of tow money and the year-end point fund. However, in no event, shall Charter teams collectively receive less than 50 percent of the streaming revenue." To summarize, a team's cut of the streaming revenue will be based on their performance. So if you win races and championships, you'll get more than the guy that finishes further down the order. Where this got a bit confused yesterday I think, is that point on tow money and the point fund. I had a 40 minute conversation yesterday with Brad Sweet to get some clarification, and the point fund and tow money effectively get eliminated for those charter teams. But not everyone else. So if you are the 11th team or further down and didn't get a charter, but are still full time with High Limit, tow money will still be available, and some version of a point fund will be up for grabs. I also want to clarify a bit on the word streaming. That 50% revenue share is really on the broadcast rights fees. Right now that means the streaming dollars from Flo, but in the future it means any rights fees, like potentially television.
There are some rules that have been placed on charters to start, like team owners can't have a stake in more than two, and charters can't be leased. We saw that in NASCAR where one team owned the charter, but they effectively rented it out to another. High Limit is not allowing that. As long as teams continue to have perfect attendance though, they will keep their charters, until they decide to sell them. And it's that value of selling them that Brad and the High Limit leadership hopes will create equity for the teams. Because of payouts being based on past performances, not all of the charters will be worth the same. For example, say Brad rips off a few championships, but then Kasey Kahne decides to sell the 49 charter. Whoever buys that charter will have payments for the next season based on Brad's titles, so their revenue share will be larger, thus making the charter more valuable then say a team that sells after running 10th. With no point fund, and outside of purse money, that's the incentive to continue running well and winning.
Going forward, there are still a lot of question marks about all of this. Yes, we know it's 50% of streaming revenue, but what exactly that number is, and what will be on offer to teams we don't know. At this moment, I think it's important to understand this isn't more or new money available. When compared to the Outlaws, this will be a different way to pay out the same money. High Limit hopes this turns into there being enough cash coming from the series that teams won't need significant sponsorship dollars to participate, but that will depend on how the series grows and what they can secure for future rights deals. Brad acknowledges they still have things to figure out, and a lot of the details and an actual, legal agreement are still needing to be ironed out fully. They have a year before the first charters will be granted anyway, and two years before this system will take effect according to their plans. Where the race tracks lie in all of this with streaming revenue was a question I had for Brad as well, and while he wouldn't share specific details, did say they have a plan for that. Other questions will be what a charter will be worth on the open market, but that will ultimately be dictated by demand. We've seen NASCAR charters sell for huge sums, but I wouldn't expect that here, at least early on. Businesses usually sell for some multiple of revenue, and that could be true with these charters down the road. I think overall, we'll just have to wait and see how this plays out in the coming years. This type of model has created value in places like Formula 1 and NASCAR, but it doesn't get used everywhere, and sprint car racing isn't NASCAR or F1. It does create some measure of a barrier to entry, and incentive for teams to stick around longer, but it's hard to predict how that could affect things in the next several years. And if rights fees don't increase versus the Outlaws, then I'm not sure how this model really differs all that much from that side. If though, High Limit is able to justify more streaming revenue from Flo, or if they are able to secure some version of a TV deal, then that will change the dynamic.
I know this was a lot of information, but there was a lot to share, and I wanted to try and give as much of a complete picture as possible. Feel free to leave your comments below.
We'll call it there for today, and we'll have plenty of other topics to dive into in the coming days.
Hope you guys have a great Sunday out there, we'll see you back here tomorrow.