Herb Part 1: Does Nascar Favor International Speedway?

Call it the best-kept/worst-kept secret, or the most overt conflict of interest. Call it whatever you want, but after looking at the conflict disclosure in International Speedway's (ISCA Quote) 10-K, you can't help but wonder how the France family, which controls and runs International Speedway, gets away with it.

Gets away with what? Gets away with controlling both International Speedway -- the country's largest operator of racetracks -- and Nascar, the chief sanctioning body for the stock car industry.

You think Microsoft's (MSFT Quote) grip on an industry is troublesome, just take a look at the conflict-of-interest disclosure that International Speedway includes, for all to see, in its financial statements. (Remember, this is nothing new; it's just that nobody talks much about it. At least not publicly.) Not only does the France family control the sanctioning body and a big track operator, but International Speedway and Nascar share office space and employees -- from the legal and risk departments down to the receptionist. (Heck, I called Nascar's public relations department for its spin on the story and even it referred me to International Speedway.)

Wouldn't that be a little like if the NBA commissioner also owned more than half the teams in the NBA and decided that his teams would be first in line on draft day? That's one way of looking at it. Such a cozy relationship may not have been much of an issue in the earlier days of racing, when tracks were private, and racing, while immensely popular, was still somewhat of a cottage industry. That changed in the 1990s, with racing's explosive growth, led by Nascar and the Winston Cup Series.

The Winston Cup is the World Series of stock-car racing, and this year, Nascar will sponsor 36 races. Sixteen, or 44% of them, will be at 13 International Speedway-controlled tracks. The rest will be at tracks controlled by Speedway Motorsports (TRK Quote) (the next-largest operator with six tracks) and several smaller operators.

That's where the conflict comes in: The Winston Cup dates are highly coveted because the stakes are huge. Last year Nascar signed a TV deal with Fox and NBC for $2.4 billion over six years to broadcast the Winston Cup event.

In the old days, each track negotiated its own race, but the network deal is more lucrative. The tracks get 65% of the profits, while Nascar gets 10% (the drivers get the rest). The more Winston Cup races a track operator can host, the more money it makes. Who decides which tracks will get to host a Winston Cup race? You guessed it: Nascar. Which track operator owns, controls or is a large investor in tracks that by the end of 2001 will have been tapped for four of the five newest Winston Cup dates? Right again: International Speedway.

International Speedway officials didn't return my calls, but in its 10-K, the company says it "strives to ensure, and management believes, that the terms of the Company's transactions with Nascar are no less favorable to the Company than those which could be obtained in arms'-length negotiations."

That may be the case. And according to one industry analyst, you won't hear anything different from competitors -- at least not in the open -- because of fears that public criticism could cost them future dates.

Isn't that what antitrust laws are for? (Gentlemen, start your engines!)

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