Bob Pockrass, Sportingnews.com
NASCAR's highest-paid drivers make their money from a variety of sources
Sprint Cup drivers put their lives on the line every time they step into a racecar.
That’s why they bow their heads in prayer before each race and cherish a kiss from their wife or girlfriend seconds before they strap on their helmet.
Then they go out and participate in one of the most dangerous professions in sports.
They do it for the love of speed and competition.
And for the money. In most cases, a lot of money.
A full-time Sprint Cup driver can earn anywhere from $1 million to more than $20 million a year in salary, purse winnings and from other sources, depending on their contract.
Like most sports, a large pay disparity exists between the top stars and unproven rookies or veterans stuck with struggling teams.
But unlike most sports, no union contract dictates when and how drivers can sign new contracts or renegotiate new deals. NASCAR drivers are considered subcontractors, so they can be involved in contract negotiations or potential new deals — or potential firings — at any time.
Though their income typically pales in comparison to top athletes in other sports, those who play the game right can make millions, says agent Cary Agajanian, who has represented drivers for nearly 20 years.
“The drivers are being fairly paid — I don’t think they’re overpaid; I don’t think they’re underpaid,” he says.
“The system, because it’s such an entrepreneurial or capitalist system, a supply-and-demand system, it works. It completely works that guys negotiate and bargain and the teams have decided how much they can pay a driver and it fits in their budget.”
Where the money comes from
Drivers make their money in three primary areas — salary, percentage of race winnings and bonuses. Those at the top of the sport can significantly supplement their income with merchandise sales and personal endorsements.
NASCAR’s highest paid driver is believed to be Dale Earnhardt Jr., who, according to Sports Illustrated, made $28.1 million — $4.1 million in salary and earnings and $24 million in endorsements — in 2011. Forbes estimated his earnings at $28.2 million for June 2011-July 2012 but had a very different split — $13.2 million in winnings and $15 million in endorsements.
Insiders shake their heads at suggestions that any driver currently in the sport makes more than $10 million in endorsements. Rarely does any endorsement deal eclipse a half-million unless it’s a major endorsement for someone like Earnhardt, the sport’s most popular driver, sources in the sport say.
According to interviews with drivers, agents and a look at various NASCAR contracts, a driver who wins a NASCAR Cup championship likely makes between $12 million and $20 million that season.
In 2012, Cup champion Brad Keselowski earned $6.23 million in race winnings, $150,000 in special awards and $5.73 million from the season-ending point fund for a total of $12.1 million. So if he received 40-50 percent of that, he likely earned $5-6 million in racing winnings, plus his salary (probably between $3-6 million) and maybe another million in other bonuses and merchandise sales to likely eclipse more than $10 million in his championship year.
A driver who makes the Chase for the Sprint Cup and finishes in the top 10 in the points standings likely will earn around $10 million. Drivers who finish 11th-20th in the standings typically earn about $5-8 million, depending on their base salaries. A driver near the back of the pack likely still will clear a few million.
Compare that to the highest paid players in other sports, where salaries, not including endorsements, are known. Alex Rodriguez gets $30 million before endorsements. The top-paid hockey player, Brad Richards of the New York Rangers, earns $12 million, according to USA Today. Kobe Bryant of the Los Angeles Lakers will make $27.8 million this season. NFL quarterback Drew Brees is set to make $40 million, according to The Associated Press.
Just like ugly holdouts or disputable trades in other sports, NASCAR driver contracts can cause a stir and a driver’s livelihood occasionally hangs in the balance when their contract is up.
Carl Edwards was in the headlines throughout 2011 when he flirted with a move to Joe Gibbs Racing before re-signing with Roush Fenway Racing. This year, Roush teammate Matt Kenseth made the move, signing a contract with Gibbs that ended his 13-year tenure with Roush after the 2012 season.
Earnhardt, arguably the sport’s biggest star, shocked the NASCAR world in 2007 when he decided to leave his family’s Dale Earnhardt Inc. team — a move that led to the organization’s demise — and signed a long-term deal with Hendrick Motorsports, a deal he has since renegotiated.
Such moves can be tricky and get ugly.
Clint Bowyer had negotiated a sponsorship deal with 5-Hour Energy last year but couldn’t convince team owner Richard Childress to keep him at the salary he wanted. Instead, he took the sponsorship to Michael Waltrip Racing, a team that needed Bowyer’s star power more than Richard Childress Racing and was willing to make it work.
“We knew what our financial model was, and Clint knew where he needed to be, and we just couldn't never come together to make it work," Childress said at the time. "We had the car completely sponsored, but it just didn't work out."
Rob Kauffman, co-owner of MWR, made it work for his team, adding a third car for Bowyer. He liked that the sponsor was an up-and-coming company with a product that aligned well with NASCAR and a driver who could win races. So while RCR wouldn’t do the deal, MWR did.
“Those are the kind of calculated risks you take as a business person,” Kauffman said. “We’re in a different position — Richard is a champion. He’s forgotten more about NASCAR than I know. … They were just in a different place.
“For us to be able to compete with guys that have been in the business for decades is hard.”
Bowyer made it pay off for MWR, winning three races, making the Chase and finishing second in the final standings in 2012. And he brought in more than $5.5 million in race winnings for himself and the team.
Negotiating the deal
Sports is a performance-based business. And compared to team sports, NASCAR drivers know that better than other athletes.
The top drivers get paid handsomely just to strap into their cars, while those trying to prove themselves
typically rely on performance-based incentives.
Base driver salaries typically range from $500,000 to $10 million annually, according to those familiar with contracts, with some of the top drivers possibly even eclipsing $10 million a year. In 2008, Robby Gordon was coming off a season in which he finished 26th in the Cup standings and agreed to sell his team to owner George Gillett. His salary would have been a $3 million base if the deal had not fallen through.
A top-10 driver likely earns at least $5 million in base salary, according to Chad Warpula, the former in-house attorney at Dale Earnhardt Inc. and a current partner at K&L Gates, which represents several race teams and a few drivers.
Obviously, the better a driver performs, the more money the driver can attract in base salary. Sometimes a team will base the salary of a driver on the team’s sponsorship. Roger Penske said at the beginning of the year that sponsorships for top teams currently bring in $12-15 million, although it is believed that top drivers can attract more sponsor dollars. The SportsBusiness Journal, a sister publication to Sporting News, estimates NAPA’s newest three-year deal with MWR and Martin Truex Jr. at $16 million a year.
Drivers typically command between 30 and 50 percent of what the sponsor pays the team, with the more the sponsor pays, the more that can go to the driver. The base costs to field a team doesn’t increase and generally ranges from $7-10 million.
“I feel like every driver should be paid based on the sponsorship,” four-time Cup champion Jeff Gordon says. “That’s a little bit more of how mine is done. … In my case, I know I’m getting a percentage and (exactly) what percentage I’m getting of the sponsorship.”
Virtually every driver — with the exception of stars such as Edwards, Denny Hamlin, Kasey Kahne and Jimmie Johnson — took a pay cut if he signed a deal in the last three years, when the downturn in the economy has led to a decline in sponsors and reduction in the price sponsors will pay.
“I think in general everybody out there right now has taken a pay cut, no different than the cost of a seat in the grandstands is down,” Ryan Newman said after signing a new deal with Stewart-Haas Racing in September.
Teams now complete deals knowing they have the sponsorship to cover the costs. Only a highly marketable, highly talented driver, such as Kahne, can sign a contract as he did with Hendrick Motorsports — he signed a contract in April 2010 that did not go into effect until 2012.
“Starting in 2008, and definitely today, you see a big change in the industry where the teams are unwilling to sign those fixed amount contracts and put a little more risk on the drivers,” Warpula said. “Now you’re seeing more contracts that say, ‘You get a percentage of the sponsorship dollars.’
“That protects the team if the sponsorship goes away or goes down, they’re not stuck with a contract they can’t afford to pay. Psychologically, it aligns the driver with the team in making sure they deliver the best product to the sponsor.”
Jeff Gordon says that’s the way it should be.
“It’s in my best interest to do the best I can, be the best spokesperson I can because the better I do on the track and off the track for my sponsors, the better I’ll do financially as well,” he said. “When the economy hits, it affects the team, with sponsors cutting back. It should affect me, too. I shouldn’t be oblivious to that.”
A team might have to go beyond what it has locked in for sponsorship, however, if a driver can command more money on the open market.
“Car owners deserve to do well,” said Rod Moskowitz, whose Fuel Sports Management represents drivers Kahne, Hamlin, Kenseth and Jamie McMurray. “They are exceptionally dedicated and committed to their massive operations. Car owners should be rewarded for their performance, which includes making a profit.
“At the same time, the driver wants to be paid his market value. He wants to be rewarded based upon his performance.”
With fewer Cup rides to go around, team owners sit in the drivers seat as far as contract negotiations.
“There are a lot fewer teams around and a lot more teams with multiple cars so there are much fewer people to negotiate with,” Agajanian said. “That has reduced the negotiating strength of a driver.
“There’s no question that has changed the playing field.”
It has changed across the board. Two-time Nationwide Series champion Ricky Stenhouse Jr. likely will earn much less as a rookie next season than Joey Logano when he entered the sport in 2008.
“It costs $10 million-plus to put the car on the track when it’s all-in, excluding the driver’s salary, so that’s a significant expense and I think the younger drivers are seeing lower salaries than they saw five to 10 years ago,” Warpula said.
How about the length of driver contracts? Typically it depends on the length of the sponsorship. Most deals cover two to three years, although top drivers such as Earnhardt Jr. can attract five-year deals.
“You want to keep your agreement where it’s long enough to have good stability with the team but short enough where if market conditions change, both the car owner and the driver can re-visit the arrangement,” Moskowitz said.
Percentage of winnings
Look at a NASCAR box score after a race, and it lists pretty much all the essential data. Where a driver starts and finishes and how many laps completed can give fans an idea of how the driver performed.
And then, at the end of the line, is how much money the driver “earned” for that event.
That amount doesn’t really tell how much a driver really made for the race.
Drivers typically get 40 to 50 percent of their race winnings. The team owner gets the other 50-60 percent, with a small percentage going for team bonuses.
Keselowski earned $12,106,255 in race winnings (before the team split) and point-fund bonuses for winning the Sprint Cup championship this year — Tony Stewart earned $12,633,171 for winning the 2011 title — while fifth-place Greg Biffle earned $7,416,099. Stewart, thanks to one more race win than Biffle and contingency awards, actually earned $7,932,181 this year despite finishing ninth in the standings.
Earnhardt, who finished last in the 12-driver Chase, earned $5,816,567 but because he missed two races with a concussion actually ranked 15th in overall winnings. Kyle Busch, who didn't make the Chase but had 13 top-five finishes — more than eight of the 12 Chase drivers — was eighth overall in winnings at $7,202,891.
Aric Almirola, who finished 20th in the standings, earned $5,132,521 in race winnings, while 30th-place David Gilliland totaled $3,494,350.
Sometimes a driver’s percentage of winnings goes up depending on where he finishes in the final standings. According to his 2009 contract with Red Bull Racing, Scott Speed was to receive 40 percent of his winnings if he finished worse than 20th in the standings, 45 percent for 11th-20th and 50 percent for a top-10 finish. Warpula said the standard on most current driver contracts is 40 percent, with an increase to 50 percent for a race win.
Drivers with underfunded or less competitive teams make less money as far as percentage of winnings because the team needs to race off the money it generates week to week rather than sponsorship.
Kevin Conway, who brought his sponsorship to the underfunded Front Row Motorsports team in 2009 and earned 10 percent of the sponsorship ($540,000 for the $5.4 million deal) — the standard 10 percent cut for someone who brokers a sponsorship — had his percentage of race winnings at 15 percent if he finished outside the top 20, 30 percent from 11th-20th, 35 percent for sixth-10th and 45 percent for a top-five finish.
Drivers typically get bonuses for where they finish in a race and in the final season standings. Making the 12-driver Chase usually elicits a bonus — partly because it could kick in a clause in the sponsor’s contract for extra money going to the team.
When Sterling Marlin drove for Ginn Racing in the mid-2000s, his bonus structure included $5,000 for each pole, $10,000 for every top-10 finish, $25,000 for every top-five and $50,000 for a win.
He had a $500,000 bonus clause for winning the Sprint Cup championship, $250,000 for finishing second through fifth, $150,000 for sixth-10th, $100,000 for 11th-15th and $50,000 for 16th-20th.
The more experienced drivers generally can negotiate better bonus structures.
“There’s some drivers in here that have enough success and enough following that they get to write the terms,” driver Jeff Burton says. “And then some of them are pretty equal. It just depends on the situation.
“If you’re a young team without a lot of success and you’re trying to do a deal with a driver that has won a lot of races, that is going to look a little different than if you did it with a young guy that has an upside.”
Additional revenue sources
Drivers often get 33 percent of the apparel and merchandise profits that bear their likenesses (with the team and sponsor also getting 33 percent), although sometimes it’s 30 percent as the team takes a little more as an administrative fee. Some drivers, if the sponsor does not take a cut, will get 40-45 percent.
While the most popular drivers on the circuit can earn more than $500,000 in merchandise sales, only a driver such as Earnhardt could crack more than $1 million a year in merchandise royalties, according to sources familiar with merchandise contracts and royalties.
Drivers can also supplement their income in several ways.
Many will drive in other series, such as the Nationwide Series or Camping World Truck Series, if their Cup team owner allows it. Typically a Cup driver gets paid a guaranteed rate to run a truck or Nationwide race, likely from $10,000 to $30,000, plus a percentage of the race winnings.
Though NASCAR limits the purse money for Cup drivers who compete in those series, a star driver like Kyle Busch can still earn almost $1 million for racing part-time in those divisions. Busch, who won 21 Nationwide and truck races in 2010 and has 64 victories in those series in the past five years, likely earns much more.
Some drivers can also attract personal endorsements, which could include a spot on a driver’s uniform or the car. Those endorsements could pay a driver anywhere from $25,000-$250,000, depending on the number of appearances.
Most average drivers would earn between $250,000 to $750,000 for endorsements, with a driver who consistently wins races earning between $1 million and $2.5 million. The top three or four endorsers might reach $5 million, according to sources.
According to multiple sources, estimates by Forbes of Jimmie Johnson and Stewart making $7 million in endorsements while Jeff Gordon makes $10 million and Earnhardt Jr. makes $15 million are “laughable.”
Rarely does any endorsement deal crack $500,000. There are other items drivers can get — such as NASCAR licenses, garage passes, seats on a team plane, personal vehicles, insurance and other travel expenses — that might be worth another $100,000-$150,000.
And, of course, driver contracts and salaries change depending on performance.
Jeff Gordon said when he first started out as a Cup driver in 1993, he made $1 million in base salary and more than a million in bonuses.
Hendrick renegotiated Gordon’s contract before it was even up. Gordon, who won three Cup championships from 1995-98, didn’t even need to hold out to get a new contract.
“It was a very good, very fair deal and made me have to keep working hard at it but yet get paid very well,” Gordon said. “When sponsorships are good, it’s good for me. When we win races, win championships, it’s even better.
“That’s the way it should be. It should be performance-based, that should be a critical part of it. … (All the drivers) make money off their performance. Because if they don’t perform, they’re going to be gone.”