By Michael Folger, Skadden, Arps, Slate, Meagher & Flom LLP and affiliates
(Editor’s Note: The following article appeared in Esports and the Law, a publication produced by Hackney Publications.)
All sports leagues have been facing unprecedented challenges while dealing with the coronavirus pandemic. Some have acted proactively to maintain their connection with their fans, while others have not.
NASCAR has clearly been in the proactive camp, finding great success using esports to stay connected with fans through the eNASCAR iRacing Pro Invitational Series.
We sought out NASCAR’s legal team, General Counsel Tracey Lesetar-Smith and Assistant General Counsel Jason Weaver (Marketing and Esports) to get their perspective on what went in to successfully creating and operating the Pro Invitational Series.
Question: Tracey, how did the idea come about? What were NASCAR’s goals for the Pro Invitational Series?
Answer: When the threat of COVID-19 heightened and forced most businesses to shut down or work from home, including NASCAR and the suspension of physical races, several NASCAR Cup Series drivers started discussing the opportunity to race together on iRacing during the hiatus. This idea quickly evolved into the eNASCAR iRacing Pro Invitational Series. We formally postponed real-life racing across our top series on a Friday and announced the eNASCAR iRacing Pro Invitational Series the following Tuesday.
Since the start of the pandemic, there is no question that there’s been a shortage of original content produced, and this impacted numerous businesses, including our media partners. NASCAR saw this as an opportunity to deliver something special for the greater racing community and industry stakeholders in the midst of so much uncertainty. Our partners at FOX Sports and iRacing spearheaded the project, but it truly became an industry-wide effort to offer fans a mental break from the crisis that consumed our country by providing some normalcy of sport to their lives.
Stakeholders could monetize and provide their respective partners value during these trying times, especially while NASCAR wasn’t running races. It took a tremendous amount of collaboration and willingness to do something positive for the greater racing community and the industry responded.
Q: Tracey, what were the biggest challenges, including from a legal standpoint?
A: We were in the midst of so much uncertainty and that unpredictable environment created challenges we had to overcome in a very short period of time. The biggest challenge was due to the rapid development of a completely new esports series. We had to navigate complications acquiring and securing the necessary rights and licenses associated with the creation of the new league in a really short timeframe. I have the good fortune of overseeing an incredibly talented and dedicated team of lawyers and legal professionals here at NASCAR, and the ability of the group to pivot and solve these challenges on the fly cannot be overstated. Credit goes to Jason Weaver, my Assistant General Counsel of Marketing and Esports, and the team members who were vital in getting this new league off the ground. He has always been complimentary of our working relationship with iRacing.
Q: Jason, can you provide us with your thoughts on this?
A: For more than a decade, iRacing and NASCAR have simulated stock car races featuring the top sim-racers in the world through the eNASCAR Coca-Cola iRacing Series. iRacing is so realistic and authentic to the racing experience that NASCAR drivers use the platform to practice. iRacing is a fantastic partner and worked alongside NASCAR throughout the whole process to help finalize all the logistical aspects of the series. NASCAR and everyone involved knew this project was important and that, if implemented correctly, it could be a resounding success.
Q: Tracey, have you had any dialogue with other sports entities — either inside or outside the world of motor sports — about the Pro Invitational series?
A: Between NASCAR’s Legal and Gaming teams, we received inquiries from leagues, agencies and executives across other sports as a result of the success of the eNASCAR iRacing Pro Invitational Series. The series became one of the most visible moments in esports history in terms of linear broadcast, with six of the seven events ranking as the highest-rated esports TV programs of all time and 6.8 million unique viewers across the series. Traditionally, esports has been confined to digital arenas and only more recently has it progressed to physical events. Delivering the eNASCAR iRacing Pro Invitational Series Sundays on FOX helped continue to legitimize esports as a real entertainment property, and other leagues noticed. Some states even offered it as a legal sports betting competition.
Q: Tracey, NASCAR also kicked off the second year of the eNASCAR Heat Pro League on April 22, which is a more traditional eSports league and has sanctioned one of the longest running eSports leagues in the eNASCAR Coca-Cola iRacing Series.
A: While the eNASCAR Coca-Cola iRacing Series dates back to the inception of NASCAR’s relationship with iRacing in 2008 and features the world’s most elite oval sim-racers, iRacing uniquely positions NASCAR, providing the ultimate crossover platform between esports and physical racing. In fact, many of the top drivers use iRacing to prepare for physical competition. It’s a testament to our innovative business and competition units that NASCAR identified iRacing as an opportunity to lower the barrier of entry to racing. In 2018, NASCAR and iRacing developed the eNASCAR Ignite Series specifically to attract and identify young and diverse talent.
Through NASCAR’s relationship with Motorsport Games – the developer and publisher of NASCAR Heat 5 – we created our first mass-market, console-based esports competition, the eNASCAR Heat Pro League. The league introduces NASCAR-style racing to the massive esports audience on consoles and offers an entry point for new, casual gamers while engaging avid fans on a deeper level. With the portfolio of competition that NASCAR has in the esports space, NASCAR is redefining fan engagement while connecting the sport with new audiences.
Q: Jason, from a legal standpoint, what have been the challenges with launching and operating these eSports leagues? How are these leagues structured?
A: Each league is structured slightly differently, and those nuances have created various challenges along the way. The NASCAR industry itself is historically complex, so we’ve tried to model these leagues somewhat off of real world racing, tackling the unique legal challenges they may pose in order to support the structures and make the product work as it’s supposed to.
Q: Tracey, care to elaborate?
A: All of the leagues are created by a license from NASCAR to the operator/developer of the league. Navigating the rights landscape and acquiring the necessary licenses (e.g., drivers, tracks, teams, sponsors, OEMs, etc.) to create each league and maintain viability has been tricky. However, our entire industry has been fully supportive of these initiatives, which helped establish a foundation for each league and open up new revenue streams.
For the eNASCAR Coca-Cola iRacing Series, participants must first become members/subscribers of iRacing. Once they are members, they must perform at a high enough level to achieve what is called a Class A license before qualifying through the NASCAR Pro Series, which runs November through January each year on iRacing. Once qualified for the series, competitors are drafted to teams, some of which are affiliated with top real-world NASCAR teams and drivers. The 2020 eNASCAR Coca-Cola iRacing Series features one of the richest payouts in esports racing competition, with a prize pool of more than $300,000.
For the eNASCAR Heat Pro League, Motorsport Games and the Race Team Alliance (an alliance of numerous NASCAR Cup Series sanctioned race teams) formed a joint venture together to create the eNASCAR Heat Pro League, under license by NASCAR. The league issues franchises to the participating teams. Each year Motorsport Games runs qualifying races for those interested in competing on both Xbox and PlayStation platforms. The league hosts a draft whereby franchises draft a driver on each console to compete in the eNASCAR Heat Pro League. Drivers are independent contractors of each franchise and are under contract for the season. The 2020 league featured 28 of the best players competing for a prize pool of more than $200,000.
Q: Tracey, how do teams deal with issues like sponsorships, contracts, etc.?
A: As I’ve pointed out, the sport of stock car racing is a complex and unique ecosystem, and our esports efforts often mirror or echo that ecosystem in terms of where there are opportunities for industry stakeholders to bring in revenue. So, we are continuing to see those stakeholders find their own unique paths.
Q: Jason, your thoughts?
A: Drivers and teams vary on their individual approaches to esports sponsorships and contracts, however, that approach is often similar to real world racing in NASCAR. Drivers, teams and tracks maintain their ability to secure sponsorships, just like NASCAR maintains its ability to sell sponsorships for the league itself.
Q: Tracey, what might be something we can expect in the future?
A: As esports opportunities continue to develop in our industry, I wouldn’t be surprised to see new and diverse stakeholders enter the fray as a gateway to the on-track racing itself.
