By David G. Firestone
I’ve got a couple of stories this week about IndyCar. Sadly, neither of them paints the series in a good light. Last week, I discussed the new NASCAR charter system, and the seemingly never-ending series of issues it seems to cause. It’s been like that since the beginning, and it just keep getting worse. It all came to a head when NASCAR pretty much strong-armed the teams into signing the new charter, which all but two teams did.
Well, what better time for IndyCar to announce their own charter system? On September 23, IndyCar announced the formation of a charter system. According to IndyCar.com:
“INDYCAR confirmed today the establishment of a charter system across the NTT INDYCAR SERIES. In total, owners of 10 teams have accepted charters for 25 entries competing in North America’s premier open-wheel racing series, beginning immediately.
“This is an important development that demonstrates an aligned and optimistic vision for the future of our sport,” Penske Entertainment Corp. President and CEO Mark Miles said. “I want to extend my sincere appreciation to our team owners for their collaboration and ideation throughout this process. Ultimately, we’re pleased to have a system in place that provides greater value for our ownership and the entries they field.”
This is the first charter system to be introduced in the history of the NTT INDYCAR SERIES. A chartered entry is guaranteed a starting position on the grid at all NTT INDYCAR SERIES races, excluding the Indianapolis 500 presented by Gainbridge. An entry also must be chartered to qualify for the annual NTT INDYCAR SERIES Leaders Circle program – an annual award program that compensates the 22 top finishers in the prior year’s NTT INDYCAR SERIES championship. The terms of the initial, long-term charter agreements are committed through the end of 2031.”
The next day, IndyCar also issued a self-asked “Q&A” about the system, but that really didn’t add much. Racer.com and Marshall Pruett actually gave some more information:
“The charter creates an exclusive club for the NTT IndyCar Series’ season-long entrants, the first of its kind for IndyCar — different to the franchise system from the former CART IndyCar Series — that provides its members with a range of benefits, including the ability to sell or seek investors in their charters.
Penske Entertainment retains permanent ownership of each of the 25 charters that were distributed. With its approval, which also includes receiving a percentage of any sales, Penske will welcome new entrants to the series, or the sale of charters from one member to another, which grants guaranteed participation in every IndyCar race for those who ‘own’ charters, barring the Indianapolis 500.
The structure is an important one for the 10 teams as each of their two to three charters bring a new monetary aspect to participation in the series. Prior to the charter, teams entered and left the series at will, and in the case of teams that were voluntarily shuttered or simply went out of business, they had nothing of significant value to sell, other than their cars and racing equipment, to recoup their losses or profit from on their way out of IndyCar.
As RACER has chronicled throughout the year, the charter — which runs through 2031 — uses a numerical structure of 25-22-3.
The number 25 was selected as the total amount of charters to be created. The number 22 refers to the decades-old Leaders Circle program, which pools the majority of each season’s prize money and splits it evenly across the top 22 entries in the annual Entrants’ championship. Where every team that participated in the most recent season was eligible to receive a $1 million Leaders Circle contract, only the teams with charters are capable of securing contracts starting in 2025.
Of the 25 charter entries, the top 22 will continue to get the $1 million contracts, leaving the three lowest charter entries on the outside of the Leaders Circle payouts; the process resets at the start of each new season.
The Leaders Circle program is not a profit-sharing system. Teams, despite receiving money from the series for being in the top 22, have had no ownership stake in Penske Entertainment to receive profits from, nor does the new charter program come with an ownership component within the company for the 10 teams.
A maximum of three charters per team have been released, with the results of the 2023 IndyCar Entrants’ championship results being used by Penske Entertainment to determine which teams and how many charters would be given to those teams.
The breakdown of charters per team starts with AJ Foyt Racing (2), Andretti Global (3), Arrow McLaren (3), Chip Ganassi Racing (3), Dale Coyne Racing (2), Ed Carpenter Racing (2), Juncos Hollinger Racing (2), Mayer Shank Racing (2), Rahal Letterman Lanigan Racing (3), and ends with Team Penske (3).
The last number of interest is 27, which will be enforced starting next season as the new entry limit per race, except for the Indy 500, but RACER has confirmed the 27-car cap is not contained within the charter. If it had been included in the charter, Penske would have been obliged to honor that number through 2031.
By leaving it out and making it the domain of IndyCar’s sporting regulations, the series’ parent company has given itself the latitude reduce the cap in the coming years to no more than 25 cars — to match the number of charters – which is expected throughout the paddock.”
First off, the timing of this announcement could not have been worse, given the issues and “resolution” of the NASCAR Cup Series charter negotiations. Did this announcement really need to be announced when it was with all of this bullshit going on? You really couldn’t have waited a couple of weeks for the official announcement?
Second, does IndyCar see what is happening in the racing world and think “This idea suck, let’s make it worse?” I challenge anyone to find those in NASCAR who have anything good to say about the Charter system. It was a terrible idea, it was poorly implemented, and it didn’t really help the smaller teams, given how many charter teams have gone under since its inception. Even the top teams in the sport are struggling to turn a profit under the old system, and I fail to see this new charter having any other effects.
Except that the revinue-sharing aspect. Going back to the Racer.com article:
“The Leaders Circle program is not a profit-sharing system. Teams, despite receiving money from the series for being in the top 22, have had no ownership stake in Penske Entertainment to receive profits from, nor does the new charter program come with an ownership component within the company for the 10 teams.”
Unless there is some details which haven’t been made public as of the time of writing, there doesn’t seem to be any financial gain for the teams with this new charter system. I could be wrong here, and if I am, I apologize, but outside of some guarantee spots and something called the “NTT INDYCAR SERIES Leaders Circle program.” To quote another Marshall Pruett Racer.com article, this one from July:
“With Penske Entertainment’s guaranteed prize money distribution system — one that was devised in the mid-2000s by the Hulman George family, the former owners of the series — the top 22 entries in the final standings are eligible to receive the contracts worth approximately $1 million apiece.
The Leaders Circle structure limits eligibility to a maximum of three cars per team, which only affects the five-car Chip Ganassi Racing squad, so outside of CGR’s No. 4 entry for Kyffin Simpson and the No. 11 for Marcus Armstrong, its other three entries, along with the full-time cars at IndyCar’s nine other teams, are in play for those 22 payouts next year.”
Again, unless there is something I’m missing here, there really isn’t that much to gain from this new charter, except guaranteed entries to races. So what’s the point? Remember that of the 25 charted cars, only 22 can be part of the Leaders Circle, so three teams are getting hung out to dry. Also the guaranteed entry into the Indy 500 doesn’t really make sense, since it’s rare that any of the top teams fail to qualify. So, again I ask, what’s the point here? If there is some financial gain from this system I could agree with it, but the one thing that makes the most sense seems to be absent. I hope that I’m wrong, but this makes no sense.
Speaking of bad press and bad looks, IndyCar was also dealing with more serious issues. On September 18, 2024, The FBI raided the headquarters of Rahal Letterman Lanigan Racing shop in Zionsville, Indiana. According to Marshall Pruett and Racer.com:
“The Federal Bureau of Investigation dispatched agents to the Rahal Letterman Lanigan Racing shop in Zionsville, Indiana on Wednesday morning.
The FBI is alleged to have instructed employees within RLL to leave their computers and related electronic devices in place, gather their belongings, and depart the building as agents began an investigation.
The source of the investigation is alleged to involve a former employee of the Andretti Global IndyCar team, who left the team to join RLL in a senior engineering role, and the alleged transfer of intellectual property from their former team to their current team.
“We are cooperating fully with investigators,” said the team in a statement issued on Wednesday evening. “Given that this is an ongoing investigation, we are limited in what information we can share right now, but we intend to provide additional information as soon as we can.”
The FBI is also alleged to have visited the Andretti shop in August to look for proof of possible IP-related improprieties.”
If all of this is true, and given the fact that there is clearly enough evidence for a search warrant to be issued here, Rahal Letterman Lanigan is in deep shit right now. If there is enough evidence that this employee did transfer confidential information, then there are serious charges a coming! The team isn’t in the clear, since this information was uploaded to their computers. Personally, if I were a member of Rahal Letterman Lanigan, I’m sweating bullets right now. If I’m a sponsor, I’ve got more than a few questions. I think there may be serious issues a coming, and IndyCar does NOT need any more bad looks right now.
But this also brings to mind the moronic idea of banning non-compete clauses. This is why. An employee got fired from one race team, stole confidential information, and brought it with them, and uploaded it after getting hired by another team. This is the exact reason a non-compete exists in this day in age. Companies are really worried about the security of their information and intellectual properties, and a situation like this is proof.
The FTC and their chair Lina M. Khan stated the following for the ban:
“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned. The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”
I get FTC Chair Khan’s reasoning. But if individuals have access to top level information, not meant to be seen by the competition, this approach could do more harm than good. I really think that this story will be interesting, and I’m going to follow this as it happens.
With that, I’m done for the week, and I’ve got some stuff for next week.
Sources Cited:
https://www.indycar.com/News/2024/09/09-23-Charters
https://www.indycar.com/News/2024/09/09-24-Charter-QA
https://racer.com/2024/09/23/indycar-charter-program-launches-after-final-team-owners-sign/
https://racer.com/2024/07/19/indycar-leaders-circle-race-heating-up/
https://racer.com/2024/09/18/fbi-agents-carry-out-operation-at-rll-headquarters/
https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes
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