DIRTRACKR Daily Podcast - Episode Transcript

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How the business deals work when your favorite track schedules a big dirt racing series | Daily 12-18-2023

We keep hearing that big time dirt racing series should just raise the purses. But it's not that simple, and today I'll run you through how it all works when big sanction like the Outlaws or High Limit comes to your favorite race track. Let's go!

It's Monday, December 18th, I'm Justin Fiedler. This is DIRTRACKR Daily.

If you are watching this, and there has been some sort of big dirt racing news that dropped over the weekend that I'm not touching on today, it's because this show was recorded a few days ago. Whatever it was, or if there was nothing, we'll talk about on the Tuesday Daily tomorrow. So stay tuned for that.

On this Daily show, I wanted to go inside a track deal for a big sanctioned, series race. Think about a big World of Outlaws show, or High Limit, etc. coming to your favorite race track. What do the tracks need to pay, who shares what revenue, and just generally how it all works. Over the last several years as we've been bombarded with non-stop commentary about how drivers and teams need to make more money, and things like revenue sharing when it comes to streaming, we keep being told that purses need to go up. The common line is that these races pay the same that they did 20 or 30 years ago. It's not quite true, but hey, never let the truth get in the way of a good story. Yes, a lot of races have still been $10,000 to win, but there are a lot that aren't, and more money is available down through the field. If you want to see a great year-by-year breakdown of sprint car money, for example, sprintcarratings.com has a great page for that, that shows purse money paid from 2015 through 2023. While the number of races has remained pretty similar, the payouts have gone up substantially. Are the increases enough? I have no idea, but I do know that the more teams make, the more they will also spend. Race teams at any level are their own worst enemy when it comes to spending money to go fast. But as we talk about purse increases, which we are set for from the World of Outlaws Sprint Cars in 2024, the Lucas Late Models have seen some increases, and High Limit has pushed the boundaries as well, I think there is a large portion of the fan base, and even some in the industry, who don't quite understand where that money comes from. The series don't pay race purses. The race tracks do. Let me say that again. Tracks pay purses, series do not. So when fans complain about "oh the Outlaws need to raise purses," it's not that simple. Brian Carter can't necessarily just wave his hand and have purses go up. Any extra dollar added to a race payout has to come out of the money a track makes on an event like that.

So here we go. We are going to use the Outlaws here a lot, because these are the numbers I have available. I spoke to a friend for this episode to get a bunch of information, and while I won't reveal who they are, they've seen the sport from all sides, including promoting races, and they know well the going rate for big time sanctioned events in 2024. There are basically three models that are available to hold a series race. You can have a straight sanction, a joint venture, and a track rental. On a straight sanction, the series gets their sanction fee, which the track pays along with the night's purse. For the Outlaws, that also means a couple thousand dollars in insurance. A standard Outlaw purse, $10,000 to win and $1000 to start, was $55,800 in 2023. Add to that a $25,000 sanction fee, insurance, and a few other odds and ends, and you're pretty close to $85 or $90,000. On a straight sanction, the track keeps all revenue from tickets and concessions for the night. So between concessions, pit passes, and the grandstands, a track needs to cover that $90,000, plus any other nightly expenses like their own marketing and staffing costs, and then they get to keep whatever is left. While there are still a few of these types of events around the sport, they are becoming fewer and further between. The most likely model, is the second one, a joint venture. This is where the track and series split the night. It obviously takes some risk away from the tracks, but they also can't benefit as much, because they need to split ticketing profits with the series. This is good though, because it means both sides have some skin in the game and incentive to make it as good as possible. Under most circumstances, the concession stand revenue stays with the race track, and is not split. And on a lot of these JV nights, that's an important part of the track's money making ability. But any expenses for the night, like marketing for example, get split between the two sides, and you hope that you sell enough tickets to cover everything, and have a profit to share. As the World of Outlaws Sprint Car Series has grown, and WRG has become more knowledgeable and better staffed, JVs have become a very important part of their model. I was told that any new tracks that get added to the schedule at this point must be at least a JV. And there are some benefits there for the tracks, like WRG's ability to sell tickets through a common platform, and their expertise and knowledge with marketing and promotion. They've created significant infrastructure over the years when it comes to promoting events, and that is a key benefit for getting involved with them. The third option is a track rental. In this case, there is very little risk for the track, they get a fee for the rental, help with staffing, and usually get to keep concession stand profits. Usually a solid payout will be on the cards for the track, with very little downside. But anything that comes through the front gate in ticketing revenue goes straight to the series. So if it's a big night, packed grandstands, the race track doesn't get to share in any of those profits. Much less risk, but also the potential for much less reward.

So there are you three current models being employed by the big players. Now, as we talk about a number in the $90,000 range for a single night, know that was for 2023, based on a standard Outlaw purse. If the purse is elevated, $20k to win, $1500 to start, or something like we saw at Huset's or elsewhere, with bigger money on the line, then the expenses are obviously much larger. For 2024, where we are seeing a bump in a lot of places, that difference in the purse is being made up by the race tracks. So they either eat the added purse, they need to sell more tickets, or raise prices to cover the raise. None of which are easy decisions, or easy to implement. Eating it is going to sting, selling more tickets isn't a guarantee, and raising prices is going to draw the ire of your race fans. There are other ways to offset costs, like event sponsorships, but those don't exactly grow on trees, and can be difficult to track down for promoters that are often working with very small groups of employees, or maybe alone.

If we focus on the sprint cars for 2024, Brian Carter's comments to Jeremy Elliott at sprintcarunlimited.com pointed towards a 12% purse increase, which would take that $55,800, and make it about $62,500. That's like a $1200 to start and $12,000 to win show. For comparison, the $10k to win shows for High Limit are a $49,650 purse, the $15k shows are $68,250, and the midweek $20k to win races have a total purse of $74,774. High Limit, while also offering those better purses than we've seen in the past from the Outlaws, have also come to tracks with a lower sanction fee. I've been told $20,000 and $15,000 for the second of a two day show. There is also talk of some of that being subsidized as well to make the deal even sweeter for tracks. As I was told, all this purse money being raised and better point funds, and bonuses is great for the racers. But it does put an added burden on the race tracks that must be made up somewhere. One thing that is a big question mark for High Limit at the moment, is some of that promotion infrastructure we talked about with WRG. Ticketing, customer service, marketing, all of those things take time to staff up and get working in positive directions. They will get there, but it will take some time and there will be bumps in the road along the way. I think that's one thing that probably hasn't been talked about enough around High Limit, is all of the things they need to do to have a series ready to roll by February. A schedule and drivers are obviously key, but there are so many details behind the scenes that need to be worked out, and as they say, they devil is always in the details.

On the late model side, I've been told the sanction fees are often dramatically smaller than those we've talked about with the sprint cars, at least at the national level. But a lot of the other details remain the same. I wanted to talk through all of this though, so at least my audience has a better and more educated view of how the system works, and what is taking place on a nightly basis. We've got drivers and series talking big money at the top, but there are other players and other consequences involved, and we absolutely cannot forget about the race tracks.

I hope you learned something here, and if you have questions I didn't answer, let me know, and I can try and track down the information from my industry friends.

We'll call it there for the day. Hope you guys have a great Monday out there, we'll see you back here tomorrow for more regularly scheduled programming.