NASCAR’s $7.7 Billion Bet

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1:04Congratulations, you made the Varsity podcast. My name is John Aranda, 9Pucks sports correspondent and the host of this pod. And today I'm happy to have one of the most senior NASCAR executives on the Varsity. Brian Herbst is a person who signed$7.7 billion worth of media deals back in 2023. Now, we're now in the second year of that deal, which actually started in 2025, and the media business looks wildly different than it did just three years ago. Since Herbst signed those deals, Comcast spun out NBCU, which had already spun off Versant. Paramount is buying Warner Brothers Discovery. Fox bought Roku.

1:44I'm going to get Brian to talk about how all of those things stand. But before I get to Brian, today is Wednesday, August 26, and we're just days away from the start of college football. And what a mess it is. An Ole Miss tight end signed with the Cleveland Browns as an undrafted free agent. But after spending weeks in training camp, he worked out an agreement to go back to college and play for LSU for a fifth season. On Monday, the SEC released a statement saying that athletes to sign pro deals should not be allowed back on a college team. The Big Ten, well, they should have a rule in place by the time you hear this.

2:20The Big 12, the ACC, everyone is looking to stop this. So now we have to wait and see if LSU can find a friendly local judge to throw a monkey wrench into what everybody wants. Last thing, we added Casey Washerman to the In the Arena conference that Puck is putting on with Moffitt Nathanson on October 1st in New York. Casey, as you all surely know, is the chair of LA28. That's an organizing committee around the Olympic and Paralympic Games that will be held in Los Angeles in 2028. And Casey is going to join a great speaker list. Go to puck.news for more information. As for now, let's get right to NASCAR's Brian Herbst.

3:00Brian Herbst, thank you very much for joining the pod. I have you on here. We're in the middle of – we're toward the end of the NASCAR season, which, and I mean this in the best of ways, has been just kind of, from a business standpoint, kind of a boring season, which is probably pretty good. You've been – you're the second year into the media deal. You're selling a lot of sponsorships. You're bringing fans out to the races. Give me a lay of the land right now from your position as you look at NASCAR this season. Where do you stand? Yeah, well, I appreciate you having me to start for sure. Very cool to get an opportunity to chat with you on the varsity.

3:46I'd say to be out of the storylines from a business perspective, we'll take that for the first time in a while. If you think about the last three or four years, we had a media rights deal to work through. Our version of the CBA is something called the charter negotiations. We worked through a legal case with 2311 and Front Row last year and got to a good place that I think positions the sport better in 26 and beyond to grow the sport and expand the fan base. But to have a year like this where we're going into our last race of the regular season at Daytona this last weekend and announced a new playoff format in the chase that has been really well received.

4:31It's been nice to kind of get back to basics, if you will, on the business side and have a little bit less drama, let's say, in the press. So we'll take it. Yeah, less for me to write about, unfortunately. Part of the drama is Steve Phelps, of course, left earlier this year, was replaced by Steve O'Donnell overseeing everything.

5:01This isn't a question about the business of NASCAR, but what has been different? How has the offices of NASCAR, how has that been different with Steve O'Donnell in charge? Sure. Listen, I work with Steve Phelps for 20 plus years since I was an intern at the company. Love, respect Steve Phelps as much as anybody in the business. What I would say is when he left, he left with, in my very subjective, probably very partial opinion, a great group of folks behind him led by Steve O'Donnell, who's now CEO of the company. So if you think about Steve O'Donnell, he grew up on the competition side and the marketing side.

5:45He's worked at the company for 30 plus years. I would say nothing more important to Steve than getting the sport growing again in a very thoughtful way, collaborating with the teams, the tracks. What we hear a lot from Steve O'Donnell is let's A, find a way to make the sport bigger, but do it the right way with the teams, tracks, sponsors, media partners, car manufacturers. Let's craft the vision for the company where we're going to go in the future, but let's do it alongside all the stakeholders that matter so much to our sport. So I've worked closely with Steve Phelps for a long time on the business side, but I've worked closely with Steve O'Donnell.

6:27It's funny when you're talking about two Steves, by the way. But I've worked closely with Steve O'Donnell for the better part of the last decade, anything from scheduled development through getting through COVID together, which was, I think, a period where the industry kind of rallied around ourselves to get back on the right foot. And now looking into the future to 2030, 2031, 2032, what does the future of our sport look like and how do we do that together as an industry? Yeah, we'll refer to them as O'Donnell and Phelps going forward. How about that?

6:58I can do that. Donald is a longtime NASCAR executive. He worked with Steve Phelps for, you know, forever. It doesn't appear that there have been really significant changes to the way that you've done business. To the outside eye, like at the edges, have there been changes? What have those changes been like? Sure. I think the biggest change that's a little bit more pronounced and in public view is what you'll see, not this weekend at Daytona, but next week when we come up in Darlington. It's the first change to our playoff system, which we call the Chase, in the better part of a decade. So that was another one where I would say like you have old guard drivers, new guard drivers, teams, OEMs, broadcast partners that all came together.

7:48They tried to develop the right Chase format or playoff format for our sport. I think that's been really well received in the industry. For those who are a little bit less familiar with NASCAR, the prior playoff format is if you won a single race in 24, 25, you're automatically in the playoffs. So it didn't necessarily reward season-long consistency and performance. So you were rewarded for winning once potentially and then getting into the playoffs for what we're calling the chase. Now it's if you can get a top five, a top 10, a top 15, you can do that consistently against the best class of motorsports drivers in the country, then you're going to have your spot in the chase.

8:27And that's been really well received by our core fan base, for sure. The other piece that I would say is when we look at competition changes that are made a little bit quicker, I think we're seeing that happen. You have a new super speedway package or rule set that will roll out this weekend in Daytona. So those decisions are happening a little bit faster, a little bit more nimble, and with the industry kind of support coming together very quickly, too. So I think you see that on the competition side. With respect to the business side, I think what you've seen over the last two years on the media front is you have new partners coming on board like an Amazon, TNT, and Nexstar on the CW.

9:03And then the sponsorship business has really gone to a positive uptick over the last two years as well. So record new business year. Last year we had on the sponsorship side, and we're trending towards a similar outcome in 26, 27, beyond. So I think both on the competition side of the house as well as the commercial side of the house, I think really good momentum that we've seen with Steve O'Donnell at the helm. So take me inside NASCAR offices and let's use the chase as an example. How did you come to this? Was this years in the making, months in the making? How did this get implemented so that it's coming out this fall?

9:42It was years in the making. So we started with a cross-functional group. It was led by a gentleman internally named Tim Clark. He pulled the industry together again. So it's teams, so Cup Series teams. Our Saturday series is called the O 'Reilly Auto Parts Series. And then our Friday series is called the Truck Series, the NASCAR Craftsman Truck Series. So it's teams, it's drivers. It's the most influential people in our sport. So some of those are current drivers like Chase Elliott, who was involved in the committee. some of them are older drivers like a Dale Earnhardt Jr. who's involved, you're not going to satisfy all of those industry constituents with a single format, just like you wouldn't satisfy all NFL fans or NBA fans with a format change of this kind of gravity.

10:26But I think what those conversations did do over the course of two years is they shed a light on what was important to the industry and then what was important to the fan base, which we're seeing as well to add a little more credibility in terms of how we crown our champion at the end of the day. So how we're crowning the champion now is it's the driver who performs the best during those 10 races during the chase. Over the points that you receive over those 10 races, they'll be crowned the champion. And I think that's more in line with A, the history of our sport and B, where our fan base wants to see it go.

10:58But to answer your question quickly, it's a ton of different stakeholders. It's a ton of different opinions. It's a ton of different personalities. You take all those inputs and you make the best decision that you can on behalf of the industry. You anger about 20 % of them, you elate 20 % of them, and bring everybody else in the middle, pretty much. I think on something like that, if you can bat 60 % to 65%, you're doing a pretty good job. This is usually a plurality type of decision on something like that. Now, I think the main reason I wanted to get you on the pod is because when we first met, you ran the media rights negotiations.

11:39And you are now year two into a media deal that goes through 2031, I think. Yeah. You went from Fox and NBC, you added Amazon Prime, you added TNT Sports. In the interim, NBC had a spinoff, so now you're also with Versant and you're on USA. You're toward the end of year two. Give me a state of the media business right now. Sure. I mean, it's fluid. But it's why I listen to your podcast and read your trades, because every week is a little bit different. Like, if you're thinking about what has changed in the media environment, even since we announced our deals in November of 2023, we had the spinoff that you referred to later in 2024, where our rights agreement, we worked through a rights agreement assignment from NBCUniversal to Versant.

12:41So the new company that's run by Mark Lazarus, and obviously the sports piece is held by Matt Hong. They've been a fantastic partner in the year that we work with them. So we worked through a spinoff with NBC and Versant. There's also obviously a fair amount of chatter about what the future of TNT and Paramount looks like, including over the weekend. You have Nexstar, who we're a partner with. They own the CW. They have our Saturday series, the O 'Reilly Auto Parts series that's performed really well. they're working through a merger agreement with with tegna which hopefully goes through and then you have fox as stable as they come but also buying roku and you have amazon that is buying more sports rights as well so i i think that it's one of the most dynamic industries you can possibly work in as part of why i love it so much and ultimately a lot of times when change like that happens you rely on the trust and relationships that you have with your partners to get through together and make sure that the decisions that you're making at a property level, like at NASCAR, they work for the business model of the companies and the partners that you're working with.

13:48So the biggest risk that you took when you made that deal is that you went from, you know, basically two big broadcast networks and their cable channels to now it's on, like, you're rattling them off. I was trying to keep count. I lost count after five, I think. And that, you know, hardcore fans, not just of NASCAR, like you talk to a Yankees fan, you know, I got to buy Yes Network and I have to buy Amazon and I have to buy Apple and I have to buy whatever Fox might be on. You spread it across so many. How has that been? Is that something that has worked well for you? Or is that something that you do wish that you had called back a little bit?

14:30Yeah, I think if there's one thing that I'm always pleasantly surprised by in the 20 plus years that I worked at the company, it's the loyalty and dependability of that NASCAR fan base. So if we're shifting fans from Fox or FS1 to Amazon, if we're shifting fans from USA and NBC to TNT, we're taking the Saturday series and moving it off of FS1 and USA and moving it to a new broadcast network at CW, what we've seen is our fans will follow. So I think they're the most loyal fan base in all of sports. The numbers that we're doing on cable in 2026 are essentially the exact same numbers that we're doing in cable in 2022, despite a declining universe.

15:16I will tell you that on the Amazon side of the house, the viewership numbers that we're receiving from them over the first two years of the deal are surpassing our internal expectations when we of this deal out in 2023 and they've been a great promotional partner for the sport as well so did i think when we were going into the meteorites negotiations in 2023 that we would end up with five partners i would i would have not taken that bet for sure but what i think we've seen is that you have the promotional megaphone of five different media companies fox nbc uh slash person amazon tnt and and the cw they're promoting our sport they're getting in front of eyeballs that are probably unexpected, for sure.

15:58And we're also future-proofing our sport for the next generation of consumption. So it was intentional for us to have a digital streaming strategy when we went into the Rice negotiations in 2023. And I think that strategy has paid dividends so far. That is why I get these complaints from friends, from people that respond to my private email all the time about how difficult it is to find these events. I've had Jessica Berman of the NWSL, the commissioner of the NWSL, come on and say that she likes being across multiple networks for what you said. You get major media companies that are marketing your own product.

16:42Gary Bettman, who is now with TNT and ESPN, said he wouldn't, he didn't actually say this, but if you read into his remarks, he wouldn't mind getting another big media company in there to help market the games and get them out there. And based on your answer there, that pretty much is how you see the market right now. Yeah, it is. And I would also say that the deals that a lot of the media or sorry, a lot of the properties struck in this, let's call it 2018 to 2026 window, it was when there was a lot of fluidity in the environment in general. So I think if you look at the deals that were done in any given year, you can almost understand what was important to that company at that period of time.

17:27So was somebody like an ESPN launching ESPN Plus? Was Paramount trying to close and then move forward a merger between Paramount and CBS and betting big on the UFC, for instance? Is NBC trying to grow Peacock? Like every two or three years, now it's ESPN Unlimited. But what's the strategic imperative for each one of these media companies? And you can always trace that back to the properties and the big picture sports rights deals that they signed during that time. And I would say the only other piece that when you have long-term partnerships like we have, so we have seven-year deals that we're under right now, we had a 10-year cycle that we were previously under with Fox and NBC.

18:07As those businesses changed, then your rights need to evolve with it. So I think we worked out five or six different digital rights agreements with Fox on the last term from 2015 to 2024, probably four or five with NBC. So again, it sounds cliche, but if there's a good trust and a solid relationship from a partnership perspective, you can usually involve your rights portfolio and distribution strategy alongside the partner that you're working with.

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19:41I don't want to pretend like this was a big risk when you did the deal, but when you cut the Amazon part of the deal, when we reported on that back when it happened, we heard from a lot of NASCAR fans that weren't conditioned to streaming races. And that was something sort of new and it was a little bit different. What have you learned in the, what is it, year and three quarters, almost two years of having races on Amazon Prime? Sure. I would say, not to go back to the last point, I would say I would never, can't overstate like how loyal that fan base is, the NASCAR fan base. And as you move from Fox to Amazon, and we have a race this year during the Coke 600 that drew over 3 million viewers during the Coke 600 on Amazon Prime.

20:35I think there was a healthy amount of skepticism that our fan base would transition to digital streaming when we did the rights deal in 2023. We thought Amazon was the right digital partner for us to move into the next chapter of our media distribution strategy. I particularly like that there's not a separate paywall for Amazon Prime, especially for our fan base. So if you look at some of the other streamers, it's a separate a la carte subscription that you're buying for X digital product. for the Amazon Prime audience, most of our fan base already had access to Amazon Prime. We knew that through internal studies.

21:11The penetration rate across our fan base was actually higher for Amazon Prime than it was for cable. So we thought that audience would be there. The marketing and promotional horsepower that they've provided the support has been a really, really pleasant surprise. So if you're on the homepage of Amazon.com, you're on the hero image for NASCAR practice and qualifying sessions or the race itself on Amazon Prime. Showing up in unexpected places was really important to us, but doing it the right way where there wasn't, for most of our fan base, a separate paywall and that they were already subscribing to that platform was a nice, easy entree for us to get into the streaming space.

21:52And I thought it's been well executed so far. And in fact, Amazon picked up the rights, correct me if I'm wrong, to the San Diego race, right? They did. Yeah, they ran, for the first time in NASCAR's history, we ran a race at an active military base earlier this year in San Diego, which was awesome. And Amazon picked up that race and broadcasted their pre-race show live from a battleship inside the San Diego battle, which is insane. What I wanted to get into with that is that NASCAR has been great. You had the Coliseum race, you know, the race through Chicago on the military base. How did you pick Amazon?

22:36Was it just a factor of the schedule that would sort of fit in with their schedule? Was it something that was new and unique and we want to bring the new partner in? How did you pick Amazon to be the one to carry that race? It was a little bit of both. So I think when going back to the Rice negotiation in 2023, if you think about the lead up to that Rice negotiation, you touched on a couple of them. But we were racing and we tore up a football field in the L.A. Coliseum. We ran a race there. We ran a street course race for the first time in sports history in Chicago. and we had we kind of brought a level of innovation and bold thinking to the schedule over the prior five or six years that just simply hadn't been the case in decades prior so when we went to the to do the rights deal both the incumbents fox and mbc as well as the newcomers so cw tnt and amazon they said this is great what you've done from a scheduling perspective we want to see more of it and that needs to continue into the next deal.

23:40So we're going to make a big bet on you, NASCAR. We need to make sure that you're going to continue to invest and innovate from a scheduling perspective. So there are commitments to innovate the NASCAR schedule that are baked into the agreements that we have with our media partners. So that's number one. Number two is San Diego specifically. When you work with local governments, state governments, and then the military itself in this case, you have to find a weekend that works for that particular entity, whether it's the city of Chicago or it's an active military base in Coronado. And so when we go to schedule, especially like those summer races that are a little bit more novelty and uniqueness to them, we have to work with the stakeholders that are on the ground.

24:24So it could be a city, could be a state. In this case, it was the military itself. So your first year, and again, this is not just NASCAR, it spans sports, but Amazon always talks about how the viewers are younger than broadcast television, certainly younger than cable television. I'm assuming that's still the case. I haven't dived into the numbers, really. That's still the case for year two. What else is different about the Amazon viewer? Yeah, definitely younger. So six years younger on average than what we see on the traditional linear TV side. I would say the other two pieces that stick out when I look at quarter-hour data, so quarter-hour data is like how many people are watching for each quarter hour of the race.

25:10So at 3.15, how many people are watching at 3.30, how many people are watching at 3.45? So you can kind of see the natural ebb and flow of our audience from tune in through checkered flag. When I look of that quarter hour data, there's a couple of things that jump out. One, it's a little bit more stable on the Amazon side. So I think once a fan clicks on Amazon Prime and they're within that app, there's not as much jumpiness within that quarter hour trend line as we may have with some of the other linear guys. And then the other piece that was new last year that we typically don't see is there are some properties that we compete with in terms of competitive programming that may be a little bit more overlap with that Amazon audience.

25:51So for instance, like when I think about the NBA conference finals airing against us and we're on FS1 or Fox, I'm usually not going to see much of a dip at that eight o 'clock hour during a night race for conference finals. With Amazon, you actually do see a little bit more of a dip. So there's things that from a competitive programming perspective, like we usually, we try to program around the golf majors because there's overlap in that audience. But with Amazon, there's some other properties that we compete with a little bit more than we would on the traditional side. So we think about that from a scheduling perspective as well, since we control the calendar and the race dates.

26:24Why would there be a dip for the NBA finals? I mean, conference finals is what we usually have. So we'll usually come up for like the Coke 600 is a big tentpole event for us. We would start that race at six and it's a long race. It usually ends at 10. so we can see competitive programming at each kind of top of the hour. So like if it's NFL for instance and there's a big four o 'clock matchup so it's Bill's Chiefs that are on at four o 'clock for instance we're usually gonna see a little bit of a dip during that period of time that we're aware of it and we can program around that to the best of our ability.

27:00On the Amazon side if it's this is unique to the Amazon audience I would say like the NBA conference finals We'll start at eight and it is the Knicks Celtics. We usually wouldn't see a dip on the linear side. We'll see a little bit of a dip with that Amazon audience, I think because you have a younger audience that's tuned in to the NASCAR Amazon showcase or presentation as well as the NBA conference finals. I also think it's part of Amazon's special sauce of sorts where you can't channel surf. And so people go on and they always talk about the post-game shows as being, you know, maintaining such a big audience.