NASCAR, Michael Jordan’s Racing Team Settle Antitrust Suit

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1:24If you're playing money ball with a huge bag of money, you're going to be really, really good. Bloomberg Business of Sports from Bloomberg Radio. This is the Bloomberg Business of Sports, where we explore the big money issues in the world of sports. I'm Michael Barr. And I'm Bloomberg U.S. sports business reporter Randall Williams, stepping in for Damian Sassauer and, of course, Vanessa Perdomo. Damian and Vanessa will join us later in the show. Coming up, we'll dive in on Sports Business Journal's The Influence 125. It's SBJ's annual list of the most influential figures in sports. We'll cover that and more on the Bloomberg Business of Sports.

2:04But we start with some news that broke late in the week. NASCAR and Michael Jordan just settled a federal antitrust lawsuit that could have big ramifications for how NASCAR operates. I mean, finally, it's been going on for a really long time, and I'm glad that it's over with. Joining Randall and I to break down this story and what's next is friend of the show, Martin Eadl. He's the co-chair of Goulston & Storrs Sports Law Practice and adjunct professor of law at Columbia University. Marty, welcome back to the Bloomberg Business of Sports. It's so nice to be back with you and with Randall today.

2:42There is a lots of legal stories in sports. Probably one of the biggest ones is that NASCAR settled with Michael Jordan in his antitrust lawsuit. Tell us more about that. So first, let me set the table, if that's OK. Michael Jordan and his team, 2311, ended up suing NASCAR on what's called a Section 2 claim. That's a monopolization claim. They claim that NASCAR essentially was using its monopoly power in the market for premier stock car racing to give unfair deals to teams and therefore to fans by limiting the number of competitions, limiting the way in which teams could operate. They had to use certain cars, which were only sourced by NASCAR's source, and limiting the number of events.

3:44You had to sign it. You got a charter, and you had to sign in that a non-compete that you wouldn't compete in other premier stock car racing. So Michael Jordan and his team sued after negotiations to resolve it broke down. The trial went on, I think, for about 10 days. And then all of a sudden they announced a settlement. Bingo. So here we are today. And that was Wednesday. So I guess my question is, what is the larger effect of this lawsuit going to be? How is it going to affect NASCAR? And shape this for the common fan, someone who's like, oh, NASCAR is on. Let me sit down and watch. Is there anything that is going to be different from either what you're going to see on the track or the business of it?

4:31So the business, nothing on the track, I don't think. There will be differences in the business. For example, they're going to reinstitute something called the three-strike rule, which is if a team does not want to compete in three NASCAR events, it can opt out and start to compete in other premier stock car racing events. It's pretty easy to say, I don't want to compete in Event X. So that will open the market for more premier stock car racing events. I don't know if there's going – I don't have the detail, all the details yet of the settlement, but I don't know if there's going to be a limitation on the single-source supply for how cars are designed.

5:19And that could – if there is, that could have a big effect on the economics for teams. And the third aspect which this will change is it's going to be a change in governance of NASCAR. The teams will have more input. So you might see a broader democratization of how NASCAR is run, how it's going to sell itself to fans, to the media, and the number of events it will be sponsoring. So I think the ultimate outcome is we're going to see more premier stock car racing events. You know, the media will have to decide if it wants to buy into more. Right. But fans will have lots more opportunities to see them, and teams will have the opportunity to make more money now rather than the fixed amount they can get from NASCAR, which means it should dribble down at least to drivers and race car crews as well.

6:17So maybe everybody will benefit. The settlement from NASCAR means it will give all teams permanent charters. And what that means is the settlement means 36 teams will have a guaranteed spot in every top-level Cup Series race. Which brings me to an old man observation. Back in the day, if you didn't qualify for the race, you just didn't qualify for the race. And now, you know, then they started with, you know, free passes to get in to race a certain number of free passes. now you're going to make every race i wonder marty how that's going to impact from the old school nascar fans well it will certainly change the model michael um what you will have now is you will have a guaranteed number of slots unless a team decides to use one of its strikes not to compete in a particular event so you have 36 guaranteed slots and now you have will open it up for whoever else is out there, but the teams can invest in their races knowing that they will be admitted to all these events.

7:33That's a big change. So one of my last questions is, the overall takeaway from fans is that this seems to be good for the sport in that it resembles some of the other sporting leagues like the NFL and NBA and MLB with their franchises that, you know, you have 32 in the NFL and 30 in the NBA and NASCAR will seemingly have 36, which they're calling charters. I wonder how do you view the potential team sales side of this? I mean, we've seen some people buy in and create teams, but I wonder now that this is sort of separate separating or looks looks different. Do you see different teams being like, you know what?

8:17But now that I have a little bit more leverage, I kind of want out of this NASCAR thing. What's the price on this? So that's a great, great question. I think the answer is we saw the team value for NASCAR-sanctioned teams rising during the 2010s. And then they sort of came to a halt. I think we're going to see a dramatic increase again because if you're a team and you have a charter, you're guaranteed to compete. So the value of your team, knowing that you're going to be in all these events, should go up. You'll be able to recruit better drivers, better pit teams, all of which should work to enhance the value of the team when you as an owner want to sell out.

9:06Let's go back to what really set this whole thing off in the first place. NASCAR, they, you know, they're founded and privately owned by the Florida-based France family. And according to the testimony that NASCAR chairman Jim France gave, he never really considered making charters permanent. But instead, after a two-plus-year bitter negotiation feud, NASCAR in 2024 presented a take-it-or-leave-it final offer. And that's when it all blew up, Marty. take us now to today when we saw Michael Jordan and NASCAR chairman Jim France standing side by side at the courthouse well litigation spake strange bedfellows the settlements began and this is no coincidence no small coincidence right after Jim France got off the stand You know, I think the 2311 lawyers did a very good job cross-examining him.

10:14That ought to make a lawyer go back to his client and say, look, you may not get out of this 100%, so aren't we better off trying to negotiate a resolution here? And the dynamics were that, as I understand it at least, the negotiations resumed over settlement almost immediately after France got off the stand and concluded, I think I said Wednesday, but it was actually yesterday morning. Got it. And he's going to have to see part of the settlement is NASCAR will be more inclusive of the teams in governance, which means the France family will have greater limitations on its ability to run NASCAR sort of as a fiefdom.

11:02And that's probably for the good because diversity in ownership creates different dynamics and brings different pluses economically, socially to the table than you have if you have a single owner. Well, what other sport could this spread into? Well, another great question. So if you look at, and Randall, I'll go back to your example of the NFL, how many of the teams are still owned by the family? Maybe you have the Mara's now with the Tish's owning the Giants. But basically, they're all corporate run because the amount of capital needed to create the stadium, refurbish the stadium, You have all the training facilities and hire the coaches, trainers, and, of course, the players.

11:55That amount of capital is enormous. So they're going to go to public markets or even private equity markets. The NFL this year announced they were allowing private equity to buy in. I think you'll see the same phenomenon now with NASCAR teams. They'll want to win. the incentive to win is greater because now they're part of the whole structure they can control the events they can control the purses that they get but to get to that they're going to have to invest in their teams where is that capital going to come from so we may be looking at greater investments from public and private markets as for other leagues where this may exist or could exist, look to tennis and golf.

12:45What are they going to be doing in the not-too-distant future? How can a golf team, even somebody as dynamic as Scotty Shuffler, how is he going to finance everything that he does? Well, this is definitely going to impact, forget just racing, but it's going to impact the entire sports industry. Private equity, private equity, private equity. That's all we talk about. That's all we talk about. Marty, you are so kind to join us again. We really appreciate you, man. Thanks again, sir. Our thanks to Marty Edel for joining us. He's co-chair at Goulston & Storrs Sports Law Practice and an adjunct professor of law at Columbia University.

13:34Up next, Randall Williams sticks with us to help us go over some of the other breaking stories this week in the world of college sports. I'm Michael Barr. You are listening to the Bloomberg Business of Sports Bloomberg Radio around the world. This message is brought to you by Apple Card. Apple Card members can earn unlimited daily cash back on everyday purchases wherever they shop. This means you could be earning daily cash on just about anything, like a slice of pizza from your local pizza place or a latte from the corner coffee shop. Apply for Apple Card and the Wallet app to see your credit limit offer in minutes.

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15:40It's the annual list of the most influential figures in sports. But before we get there, we need to talk some big headlines in the college ranks. The University of Utah is on the brink of a brand new deal with a relatively new private equity firm, Otro Capital. Bloomberg U.S. sports business reporter Randall Williams, he's still with us because he's got a full head of knowledge. And he's done reporting on this first of a kind deal. Randall, thanks for your time, man. Thank you for having me. Lots to talk about. Otro Capital becomes the first PE firm to win college sports deal. Tell us more about that.

16:20Yeah, they're basically, they've struck a deal with the Utah Utes, a.k.a. the University of Utah, in a deal that is going to see Otro become this essential for-profit arm for the university. They've talked about ticketing. They've talked about sponsorship. They're talking about all sorts of ways that they're going to be able to make money. and private equity has been hovering around college sports over the last couple of years. And so it's no surprise that one of these deals finally was inked and signed, sealed, and delivered. Well, Randall, tell us a little bit about Ocho itself. I believe it got funding from CalPERS.

16:55I believe it's a bunch of ex-Redbird folks. I think they made an investment in F1, maybe in Alpine. Talk to us a little bit about the firm and what we could hope to expect from them and how they can hope to expand the University of Utah. Yeah, they are well-seasoned sports executives who have experience from working in the NFL at One Team Partners, which is the joint venture between the NFL PA and the MLB PA. They are some of the best in the business. And so they've made investments, as you said, in F1. Now they're the first in college. I think the numbers that are out there are about this Utah deal are a little bit up in the air.

17:33We don't know how much is the actual deal is valued. We don't know how much Otro is putting in. and what Utah is exactly going to do with the money. But I think that they are a great firm to do a deal with because of who is doing this. This was one of the larger firms. I would be a little bit weary on what their intentions are, but ULTRO has people that have worked in sports together. So if Utah was going to do this with someone, I think that ULTRO is at the top of the list. And they went to at least 60 colleges, maybe even more, before they said, OK, you're the winner. Yeah, they probably had a lot of conversations.

18:09And I think that there have been a lot of firms, even outside of private equity. I think years ago, there was the rumor that Colorado had conversations with the sovereign wealth firm and that the Big Ten had conversations with this California pension fund. And that deal has been placed on hold. And so schools have been looking for money in a multitude of ways. It's just that Utah found the right partner. And hopefully this helps them win a lot more because in college sports, it's so much different than in the NFL, but it's becoming more similar in that winning leads to a lot of money. And if you can't make the college football playoff, if you can't make things like the Elite Eight, the Sweet 16, the Final Four, then how are you going to pack out all of these arenas?

18:48How are you going to convince your alumni in a place like Utah? This isn't a state like Ohio or Indiana or even Illinois where there are tourist cities. You can book venues. Well, I mean, looking back, if I'm not mistaken, back in 2023, FSU, there was talk about FSU doing a deal with Sixth Street or an Arctus. And then I think just recently, University of Michigan and maybe even USC, there were some talks that, you know, they were going to do something with private equity. I guess, you know, the question I have, Randall, is what is private equity going to do for these universities, right? I mean, are they really going to expand their gate receipts?

19:19Are they really going to get bigger, better corporate sponsorships that are more profitable that'll flow directly to the university? And I guess more importantly, what is the premium that they're going to charge these universities for bringing those deals to bear? So, you know, just talk to us a little bit. I mean, what do you think, you know, the folks at Ocho are going to do? How are they going to improve the management of the university and its football program? I think there's a couple of ways to look at it. You look at it first in the traditional aspect of what does private equity do in other sports, which is provide solutions in the NFL, for example.

19:50It's estate planning, relationships. It's getting people who want money out of that. That side is not going to be happening because no one person owns the University of Utah. However, on the stadium side of things, let's just say that they want to do a renovation. They want to redo some suites. Ultra can come in and pay for that. On the sponsorship side of things, I do think that, again, that is linked to winning. If you are not winning, you're not on nationally televised networks, then why would a big time sponsor, let's just say State Farm, for example, want to partner with your university? I think that on the revenue generation side, we're going to have to see what sort of ways that Ultra is going to be able to provide experience and some value because it hasn't been done before.

20:34We haven't seen the sort of value that they're going to be able to provide yet. Well, one of the big selling points that I've heard from a lot of these private equity firms is their access to data and how they want to use, I don't know, AI or just, you know, proprietary data in order to maybe, I don't know, recruit better athletes, you know, or improve their, you know, their skills on the field. You know, is that something that some of these private equity firms are even going to get And then tours are going to be strictly relegated to what you rightly point out, you know, media deals, gate receipts, corporate sponsorships and the like.

21:03I think that recruiting athletes from a technological standpoint, yes, like they could invest in something and maybe help them find better recruits. At the same time, there's a double sided coin to NIL, which is that it is the great equalizer. And that's a school like Indiana can turn into the number one school in the nation tomorrow. but with the right coach, with the right program, with the right people and with the right athletes. Like this idea that, oh, you know, everybody's going to be paid and such and such school can turn into a powerhouse tomorrow is not true. Right. Otherwise, we would have seen it from San Jose State.

21:36We would have seen it from other smaller schools if you get the right people. And there are dozens of five star, four star, three star recruits, not only coming out of high school, but in a transfer portal. And we never see them play on Sundays. We don't even know some of their names because it takes a village. It isn't just a money making thing. Now, it's the greatest time for a college athlete ever because there are no stakes to your performance. If you go and, you know, let's just say you enter the transfer portal and someone offers you three hundred thousand dollars, that's life changing money, whether you make it to Sundays or not.

22:06And so I think private equity is going to have an impact. But the idea that it's going to dramatically impact recruiting, I'm not fully convinced on. I want to go back to something you said. You said that the colleges, they make the money when they make the 12 or the final for the four and all this other stuff. Which brings me to Notre Dame. Because they had been in the top 12 all this time. And then all of a sudden the committee said, nope, you're done. And of course, Notre Dame, they're upset. They're on a temper tantrum. Yeah, we're not going to any bowl. I think the entire situation is funny because of the fact that Notre Dame's conference play is a little wonky.

22:47Their schedule is a little wonky. That's right. They had a cake schedule. Exactly. I mean, let's be clear. Look, they lost two games by a total of four points, Michael Barr. One of them was to University of Miami, and they got the at-large bid. Right. So, I mean, look, there is something to be said that when you line them up against, you know, Miami. Now, what I think you're probably looking at is you've got to have a few more teams in the playoffs. I think they will expand it eventually. But I think going back to the big picture conversation about private equity, let's talk about these big money schools.

23:15Notre Dame has no issue with NIL money. Miami has no issue with NIL money. And yet they're still complaining about, oh, we didn't get in. This isn't right. Yada, yada, yada. And so the idea that private equity could come in and tomorrow strike a deal. Well, if Notre Dame needed money, I can guarantee you they would have it right now. They would have their choice at what private equity firm they would want to partner with. And so this temper tantrum, I think, is funny right now. But in a couple of years, it'll be solved. It'll be 16 teams. And I really think that should be the cap. We don't need to turn college football into March Madness.

23:46It just doesn't need to be that. Well, I tell you where there is a major problem. I'm flabbergasted. Former Michigan football coach, Sharon Moore, he went to jail and they started because the university said that he was having an inappropriate relationship with a staff member. And then that bled to police arresting him because of what they only said was an assault. How much does this damage the University of Michigan football program? It's a big hit, of course. I mean, I think we've been talking a lot about recruiting and who's been the person recruiting. I mean, where does he go? Who? Bryce Underwood.

24:26Exactly. And you remember, Bryce was committed to LSU for many, many months until the likes of Allison and Tom Brady and Portnoy put together some money to go and get him. Does he leave? We don't know. I think the impact on the university is huge because, one, it is a smear right now that Michigan would have something like this going on, not only for the university, but also for him. At the same time, it is now the most highly sought-out job in college football by far. So it's a very unfortunate situation. I think that there's a lot of details that remain very murky right now. I'm sure we'll discover in the days and weeks to come.

25:02Well, I hate to put it like this. Does everybody from former head coach Jim Harbaugh and that era, do they need to clean house? Good question. I think that whoever comes in will need to be a general manager of the program in a better way than Harbaugh was. I mean, Harbaugh is, of course, going to be remembered for a national championship win because the scandal, the scandal. However, I think winning just dilutes anything that goes on. And so there will be people outside of Michigan will remember, oh, he cheated, yada, yada, yada. But there are people within Michigan will remember, we won 15-0.

25:38We won undefeated and won a national championship. I do think that whoever comes in needs to be a better culture setter than both of them. Deflategate who? Oh, I'm sorry. Winning does help. But I mean, if you just think about Sharon Moore, I think he's getting paid something like$6.1 million a year. He just locked into a five-year contract. This is big money. I think the buyout, if I'm not mistaken, was like double digits, like 13, 14 million dollars if he was fired. But this is obviously for cost. So it's just the way these coaches are getting paid. That's the single most stuttering thing about it is that there are a multitude of ways you can be fired in college football nowadays.

26:11And this is just not one that you would put on the list for any coach, college football, basketball or any other sport out there because of the payouts. If you are going to be a bad football team, then guess what? Do not resign. Don't take another job. just wait and wait and wait until they get sick of you. Clip your coupon, right. And then they will send you away and pay you out. And granted, they're going to try to decrease that money down the same way that's happening at LSU. But we're talking about$50,$40,$30 million to go sit on a beach somewhere. And now, because of this inappropriate relationship, allegedly, that he's going to get nothing.

26:44Yeah. Crazy. Oh, okay. I know we got to wrap. But now I'm just going to play that media reporter role. Do you ever think that Bill Belichick could be the next head coach at the University of Michigan? I was thinking you'd ask Tom Brady. No, I mean, I think that Belichick's contract and just the way that things have gone at UNC, I think the perception was that because Bill Belichick is a football mastermind, that he would have stepped foot in Chapel Hill and they would have at least had a winning record. And it goes to show that his first year went very similar to Coach Prime's first year. It was trials and tribulations.

27:23Now you take that and you bring him to Michigan where you have donors. He's not the biggest name there anymore. There are people funding this that will be like, what are you doing? And also, you know, the treatment of kids. And, of course, we have yet to mention Miss Jordan Hudson. How would the university handle that? I don't think it's a headache that Michigan wants. Randall, you are the man. Thank you so much for joining us. Thank you for having me. Big special thank you to Bloomberg U.S. sports business reporter Randall Williams for jumping in with us this week. Coming up, our partners at Sports Business Journal are putting out its annual list of influential figures in sports.