Across the professional sports landscape financial mechanisms are used to prevent stick-and-ball teams from spending themselves into oblivion while at the same time leveling the playing field to improve competition.
Not too long ago the notion that a salary cap or luxury tax similar to what Major League Baseball, the NBA, NFL, and NHL utilize could ever be applied to NASCAR would’ve induced laughter and eye rolls. Teams, after all, are regarded as “independent contractors,” essentially separate business entities who even though they share certain revenue streams are still autonomous of one another and keep their respective financial records private.
But what if NASCAR, at a time when costs to compete remain astronomically high while television ratings and attendance are flat, implemented a cap or tax akin to what others sports leagues have in place? Perhaps this would serve as the conduit to overcome the financial gulf brought about by Corporate America not as enamored with NASCAR as previously.
The exact framework of the budget cap is still being crafted, but a rough outline has emerged that will serve NASCAR and its teams on two primary fronts: 1) It will help teams reduce and better manage operating costs that are no longer practical in an economic climate where teams face a sponsorship deficiency, and 2) A way to induce better competitive balance and bridge the gap between the powerhouse organizations and the minnows.
“For any professional sport to be viable long term, it needs to be a reasonable business to the team owner,” Chip Ganassi Racing co-owner and Race Team Alliance chairman Rob Kauffman told SB Nation. “You look at football, baseball, English football, Formula One, and there are a variety of models and ways – some more successful than others – to make that happen. NASCAR is no different.
“Part of trying to have a reasonable business, revenues and costs have to balance. In general, revenues within [NASCAR] are not going up and like in any business, you have to address your costs.”
What is covered under the budget cap remains undecided, though it is unlikely to encompass salaries for drivers or even key high-level team personnel. Under the most-often-discussed proposal, teams would have a yet to be determined dollar amount that could be allocated toward engineering, research and development, equipment, and crew members who travel to races.
— SB Nation —