There’s an air of the obituary across newspapers, cycling news websites and fellow blogs. Everyone’s lamenting the announcement that the Highroad team could not find a replacement sponsor for HTC to keep the team going into 2012 and beyond. And many are asking aloud why such a good team could not find a replacement sponsor.
But one answer is that they never had sponsorship in place since the day the team started.
Background
The team was originally known as T-Mobile and had a strong German identity, not surprising since the sponsor was German and the squad was built around Jan Ullrich. But the Germany telecoms company quit the sport after numerous doping scandals turned a large section of German public opinion from pro-cycling to arch-skeptics.
Initially the sponsor tried to clean up, hiring Bob Stapleton – a telecoms entrepreneur and avid cyclist – to run the team and to put new staff and riders in the squad for 2007. But during the course of the year more revelations about the team’s past appeared, with tales of widespread systematic doping and to cap it all, a rider tested positive during the Tour de France. By the end of the season the sponsor fled. It had a contract to fund the team in place… so it simply paid up and exited “with immediate effect”, leaving a lump sum of money to fund a team with no name. More of which in a minute.
The rump of riders remaining formed the basis of the team known as “Highroad”, named after the management company of Stapleton, just as “Leopard” today is the name of the legal entity behind the eponymous pro team. At the start of 2008 this was a team with no sponsor and they started off in white colours with the aim of attracting a sponsor. They landed US sportswear company Columbia in time for the Tour de France but for 2009 the team was still called Columbia-Highroad, a big “your name here” sign. In time HTC joined as a co-sponsor and when Columbia pulled out, HTC was the main name for HTC-Highroad.
The lump sum
The settlement payment from T-Mobile is unknown, apparently subject to a confidentiality clause. Estimates go from €20 million to €40 million. A good source tells me it was €28 million, an even better placed one says €23 million. Let’s work with the arithmetic. On the basis of €20 million, that’s €5 million per year, on €40 million that’s €10 million per year and €5.75-7 million if we run with the €23-28 million figure. As such this payment wasn’t enough to run a whole team… but might well have gone a long way.
In addition there was also talk of “a couple of well-intentioned investors” putting money into the team.
Now add in money from smaller sponsors like the bike suppliers, components and the others who have supplied the team and you’ve got enough to keep a team on the road for four years, especially if the model is based on recruiting younger riders and nailing down wages, indeed riders were asked to take a pay-cut once T-Mobile quit. One reason Mark Cavendish grew frustrated with the team was that he’s the number one sprinter but on a pay deal seeing him earn less than Damiano Cunego or Carlos Sastre.
In short, the lump sum, potential funds from “investors” and smaller sponsorship could have been enough to keep the team afloat alone. Plus the team inherited the infrastructure from the old team, like cars and the team bus. The was none of the outlay of a new team.
Columbia and HTC
Now the team landed additional money from Columbia and HTC but I believe in both cases the sponsors joined at what you might call “bargain” rates and perhaps not at the normal level expected of a team, with the idea that once a big name sponsor was on-board then the team would look good for other sponsors. But if the jersey is blank, you might as well get some income. In short, the sponsorship received from Columbia and HTC could have been modest but it was additional funding to keep the team going. That said, it seems HTC increased its commitment to the team over time, to reach a significant contribution.
Summary
This was a team that started without a sponsor. Instead it had a pile of cash and over the years this was topped up by extra revenues. Yes, the team did find sponsorship from the likes of HTC and Columbia but I wonder just how significant these deals were, they say Columbia in particular was particularly modest. Could it be that the team struggled from the beginning to land a sponsor and relied on the T-Mobile settlement to stay on the road?
Bob Stapleton is also insanely rich, so he probably poured some of his money in this endeavour.
This simple underlines the fact that pro cycling simple can not have any more high profile doping scanddles! It is driving sponsors away and keeping them away. Without them cycling doesn’t exist.
Interesting point you make here. Something else that I would love to find out more about is, just how long does it take to bring on board a new sponsor. I honestly feel it is someting that could take a good few months, even to as long as as year to nail down. For the money the teams are asking/require no company will just jump in with both feet without checking and double checking everything. So time is a big factor.
On top of this, the company would also need to make sure that besides the money paid to the team, they have the money to support their own marketing initiatives to help drive their sponsorship. So a €20 million invest could actually land up costing the company €30/€40 million. At these prices, there are only a handful of companies that could step up to the plate. This is something the Stapleton refers to. There has to be synergey between the two companies. A lot of companies, I suspect, will be looking at the team to show them how they need to market and support their involvement. So not only does the team need ace riders to deliver the results, it needs an awesome marketing & PR team to support the needs of the sponsor.
Great point here – and not sure why nobody else (to my knowledge) has publicly called this potential bluff about Highroad’s sponsorship. Although, I’m not sure that this makes the big picture conclusion any better about the state of pro cycling and sponsorship…and it probably makes it worse (after all, not only could they not find a supporting sponsor now, they couldn’t find one for the past three years!).
On the other hand, as the world economy continues its plunge into a global depression, it’s kind of hard to see how *any* major corporate sponsor is going to want to pump millions into professional cycling (or any sport, for that matter).
As someone who can watch a CAT 3 criterium and be entertained, maybe it is time cycling went through a little deflationary culling. Sad that rider salaries will decline, but if it means a more stable sport, and a sport where guys such as Stapleton can actually compete against Oligarchs and McQuaid, I say let the blood-letting begin.
To me what is more troubling, is the fact that Leopard-Trek cannot yet find a sponsor. And how long will the likes of Saxo-Bank (the troubled bank) last? What amazes me, is Radio Shack. I am still shocked they stuck on through 2013. I guess it helps that RS’s CEO is on the Board of Livestrong.
And by the way – @ Inner Ring:
this analysis above, and this commentary is something you will not find in the likes of Velonews (or whatever they call it nowadays), Cyclingnews etc….
@ColoradoGoat: sure but you won’t find race results, interviews, reviews, photo albums etc here either.
I agree – just saying it is nice to have an outlet where analysis goes deeper than your normal trade publication.
You made a very interesting point and one which is quite plausible. As a post on PodiumCafe mentioned that the big teams either have a sugar-daddy with lot of dough or are a political soft front. The big teams are paying exorbitant salaries to the stars which is not sustainable and a salary cap seems a logical step. But the sport in which the governing body is busy minting money (i.e. Global Cycling Promotions etal), all cries of restructuring will fall on deaf ears.
Closure of Team Highroad is a big event in the cycling history, one which will have far-reaching repercussions. I hope the sport comes out stronger from this turbulent and corrupt period.
This only reaffirms IMO the need to have a stable “league” with stable teams, revenu sharing, etc., etc.
I would be extremely interested to see someone follow the dollars to the final pocket on this one…
@Inner Ring:
While it seems conventional wisdom that TRS has a commitment from Radio Shack, there is some rumors swirling around that potentially this is also not a done deal. If this were the case, I would not expect the likes of Ben King to be blogging that he is happy for the commitment through 2013.
Is there any truth at all to the idea that RS may be able to back out at the last minute, leaving riders high and dry on this team?
Teenage skateboaders win $150,000 for a single event and pro cycling struggles,
while far more peeps participate in cycling. Something is quite wrong
My inside connections stated that the team was being primarily funded by T-Mobile money for several years. When that started drying up, notable (and expensive) riders left, and bidding wars were kept to a minimum (Hincapie, Barry, etc.)
As other riders started coming of age (Greipel, EBH) they were readily replaced by other young sprinters (Goss, etc) which helped keep costs down, and the victory count high.
Some may criticize their lack of GC contenders, but the bottom line is that going after GC is a high risk proposition which puts many eggs in very few baskets. While top 10 finishes are admirable, they really don’t mean much; a win is a win; 2nd, 3rd, or 7th are not. But focusing on one day events and stage races gives you many opportunities for success, spread out over many riders. If you are winning a lot of races, the riders have more prize money to split, which can help keep wages in check.
Maybe I’m being naive, and I don’t know what things are like outside of France, but I was surprised at how few of the team sponsors actually took out cycling-oriented spots during the commercial breaks on France 2 and 3.
From memory, it was mostly AG2R and Skoda (though the latter aren’t team sponsors as such). Last year, Garmin had an ad featuring Tyler Farrer, but that was not followed through this year. Apart from that, every commercial break ended with an irritating little item for saucisson makers Cochonou, who designate themselves as official suppliers to the Tour, no less.
Sky did and are currently still doing ads on BSkyB, pushing their contribution to getting people back on their bikes.
Am I wrong in thinking that most of the sponsors don’t have much of a strategy for linking their sponsorship with a TV advertising campaign?
Great article! The T-Mobile payout was big news when they walked away…but now overlooked by pretty much everyone. So many stories about Stapleton being the guy who built the team from nothing. Nothing but a big pile of cash and the infrastructure of the biggest bike team in the world!
Still, sad they couldn’t pull in a legit sponsor when they needed one. Stapleton is good for cycling and it will be a bummer if he’s gone.
Where did the myth of the billionaire Stapleton come from? From Forbes his net worth is estimated as $80 Million. Super rich, but not “insanely” and definitely not enough to run a team on his own for any length of time.
@Max – this is the problem with the sport.
A) Cycling cannot for the most part charge to see their events (there was discussion of this precise action in Spain this year, but it seemed to go nowhere).
B) While lots of people cycle, many a hipster/local commuter could not tell you much more about the sport than Lance, the TdF and the tiresome “they are all cheats”. I live in Denver/Boulder area, a hotbed of cycling, and even then, most of the guys I ride with do not pay attention to the Tour, much less the Spring classics.
C) Cycling has the same unfortunate disease soccer in America has….everyone does it, but no one wants to watch it.
Who cares where the money came from they were a very succesful entertaining team, its a great pity they have gone under.
@Grumpyoldman Anecdotally I know HTC took out ads in SBS’s (Australian broadcaster) coverage – information gleaned from watching the #sbstdf twitter feed and the complaints about seeing the same HTC ad repeated over and over again.
InRing: I’m surprised that you haven’t mentioned the recent court case between HTC and Apple over patent rights. HTC lost, and according to the BBC their shares fell 7% on 18 July. That was about 1.6 billion US dollars. The cost of sponsoring a cycling team with an international profile that suits HTC is peanuts by comparison, but at times like this, directors need to be seen to be making tough decisions . . .
Did they ever even really NEED a sponsor?
For those who want to look even deeper….anonymous sport sponsorship; Leopard, GreenEdge, BMC (yes, BMC, you really think a bicycle manufacture can support that whole program?)…. “bread and circuses, in modern usage, the phrase has become an adjective to describe a populace that no longer values civic virtues and the public life. To many across the political spectrum, left and right, it connotes the triviality and frivolity that characterized the Roman Empire prior to its decline”…… I’m thinking there will be continued sponsorship to keep us all preoccupied with entertainment and out of politics while the world’s elite continue to erode the middle class. Anyway, just a thought. Another thought is that cycling seems to air it’s dirty laundry way more than other sports, talk about shooting yourself in the foot. Hope you enjoy the mixed metaphors.
Interesting. Bob’s been keen to play at “mid-budget” so perhaps he was eeking out that T-Mobile money (I was told 30million to 32 million by someone who knew the accounts guy) and then matching it with relatively small sponsors. Don’t forget though they were running a women’s team as well which is a much smaller cost but an added cost nonetheless.
One angle to look at this, is this:
Bob Stapleton appears to have thrown in the hat once he could not get the sponsorship dollars to support the team at the “highest” levels (i.e. – Leopard-Trek, BMC, Katusha, Liquigas etc…). Now, a lot of people were put out of work who were not just riders (mechanics, trainers etc..). One could ask why Bob could not have maybe set his sights lower, in an attempt to retain a team at the current budget (maybe even smaller, if truth be told, their budget was the 6th largest).
Sure – maybe his team would be more akin to a Cofidis, or Lampre, or FdJ, but he still could have maintained a team that, given time, could have been a punchy crew of younger riders. One does have to ask if his ego refused to accept a smaller team, because he just had to be in the limelight.
Willy Wonka Golden Ticket.
Until the bubble gum burst & no one had a clue how to repeat the receipe.
ColoradoGoat, I agree Radioshack could now be regarded as a potential sponsor rather than a definite one, same for Nissan. The team was clearly formed with Lance & Levi in mind and although the two main sponsors have signed on for another two years you’d expect some ‘escape’ clauses in the contract. You might also expect those clauses to be invoked at some point before mid 2013. Strong results are essential and everyone – riders and management – need to stay out of the courts.
Johan Bruyneel’s strategy for the 2011 Tour of California said it all. A team packed full of strong US riders and nobody who’d recently been raided by the police. Topping GC was the objective and they made it look easy – great legs and some good tactical decisions. Except Bruyneel wasn’t making the decisions, he seems to have stopped visiting the US recently.
Meanwhile Popovych headed a weak team at the Giro which was ostensibly about the TTT (they came second), sprinting (Cardoso was anonymous, McEwen hasn’t won in a big stage race since 2008, Hunter hasn’t since 2007) and bringing on new talent, which when you look at the ages of the riders, really only includes Selander & Rovny. Bruyneel didn’t make it to the end of the race, leaving about the same time that the police arrived. I’m not sure he will visit Italy or the USA for some time which would surely make his job more difficult.
He did make it to France but the team’s performance was perhaps the worst he has seen as a manager. Crashes destroyed any hope of a strong GC result: Brajkovic & Kloeden, who had both been rested for the Tour, didn’t finish; neither did Horner or Leipheimer.
The team needs strong results in big races and my feeling is that Horner’s ToC win will only keep the wolves outside for so long. In addition, the Novitzky investigation could cause the team to implode at very short notice.
That would leave Garmin as the only non-European lead sponsor of a ProTeam. Funding structures need to change and I agree with many of the comments above about revenue sharing and budget caps. Both realistic solutions – if Forumla 1 can reach agreements on these issues (eventually) then so can cycling.
Sad that, in a world of concern about greenhouse gas emission and obesity epidemics, the sport that is the pinnacle of human-powered transportation has such a difficult time landing corporate sponsors. Thanks, Aigle!
I’ll throw in a bit of historical perspective here. The “big-money” era of cycling (the one that so many here seem to think has been going on since pro racing began) started when? Greg LeMond really got peanuts compared to big-time U.S. stick-and-ball players, though his salary was a huge increase over what the older generation of cyclists made. Once LeMond showed cycling (at least the TdF and perhaps Paris-Roubaix) could be popular on North American TV, multi-national concerns started to come in with lots of money. When BigTex started winning TdF, the whole deal exploded with a ton of outside money being thrown into the sport. None of this was sustainable in the long term. Now LeMond and BigTex are gone, Tex will probably will be indicted soon, dope scandals seem to be ever more in the news and the “justice” takes longer and longer to be handed down. Meanwhile the worldwide economic crisis comes along and makes every potential cycling sponsor look extra hard and extra long at what publicity they might get from their investment. The big-money era’s over, at least for the foreseeable future. Some might say the TdF is raking in profits…but for how much longer? Get used to fewer teams, lower salaries, etc. A lot of these old guys pushing 40 need to retire and make way for some new blood, kids who’ll ride for far less. Team budgets need to shrink down to what’s reasonable for the bike industry to fund as they are pretty much (just like the old days before Fiorenzo Magni brought in Nivea) the only ones willing to pony up sponsorship money beyond the few cycling-mad rich guys who’ll bankroll their favorite team or riders ala Slipstream or Leopard. Everything goes in cycles, none of this should be any sort of surprise — it’s been coming for awhile now. Ask NASCAR about it…some of their biggest, most successful teams with famous drivers are scrounging around for sponsors and their races are less and less on network TV these days. Anyone who thought pro cycling (or NASCAR) would enjoy almost unlimited budgets and TV popularity virtually forever wasn’t paying much attention to why or how the big bucks came in when they did.
@OJT – You are spot on in your analysis, but I have to quibble with one of your facts: Leipheimer did in fact finish this year’s TdF, albeit in an anonymous 32nd place.
@ColoradoGoat – if memory serves me, I believe both VeloNews and Cyclingnews reported that Stapleton would have been content to take a budget reduction if it meant keeping the team together. My guess is that after talking with Cavendish, Stapleton needed at least one huge sponsor to keep the Manx Missile, and that prince of an investor or sponsor never came through. Sure, if he had that big money, it would have made things very easy, but for someone who fielded one of the best women’s teams on a shoestring budget mid-2000s, a smaller budget at this level would have been fine, too. I think Stapleton bemoans the oligarch-sized backers of other teams simply b/c it’s a disturbing trend. A trend we saw (and continue to see) in Formula One and European football.
Overall, I think the key to stabilizing teams in the sport rests with the organizers of each race, and specifically the television rights they secure. Once those revenues are on the table in a profit-sharing system similar to most other professional sports, teams will not face the roller coaster ride of sponsorship dollars year after year. (To be certain, they will have to hunt for sponsors, but the life and death of each team will not be as dramatic if there are stable revenues in place before sponsorship courting starts.) My guess is that due to the enormous insurance costs associated with each event, the races are loathe to put those monies in play. We shall see.
Down here, upside down at the bottom of the world – Australia – we have Government money in play. The State and Federal governments run “Institutes of Sport” based on the old Communist East German swimming model. As a gifted 18 year old you can chose to go to the Institute for free or pay a shedload of money in student loans to do something really useless like become a doctor. Don’t get me wrong I am totally in favour of such socialism, just pissed off that it is not called for what it really is. The fact that some Institute graduates go on to become multi-millionaires (Leyton Hewitt) is amusing.
I am happy that my tax dollars are used to promote a good sport. Perhaps the gummint here could go all the way and pay for a Protour team. Team Bruce? Team Wattle-in-a-Bottle?
I will suggest to you that those who think that TV rights is the hen that lays the golden egg, that you are most likely mistaken. Outside of the TdF, the Giro, and the spring classics, these revenues are far smaller than you imagine. For ASO, profits from Le Tour help sustain many of their smaller events. Give any of these “rights/profits” away, and you’ll also see the loss of races.
For smaller events, many do not receive a dime for TV rights, in some cases, the organizer may even have to pay the productions costs or air time to have the race televised. Why do they do it? Because it is a prerequisite to secure a sponsor, and the TV stations realize that they won’t sell enough ads to cover the costs of production and airing.
I do not believe that salary and team budget caps are the answer; if anything, it will cause more problems. It isn’t the riders fault that teams can’t meet the budget. Like most things, salaries are about supply & demand; a rider is only worth what teams are willing to pay. I believe the problem lies in the way the sport is organized.
The ProTour system is completely broken, and forces teams to require more riders and staff to satisfy the requirement that they compete in every Pro Tour event, which has too many events over too long a period of time, and requires teams to enter races where they don’t necessarily want to be (Euskatel in Paris Ruubzix), and precludes them from competing in some races that they want to (lower level events on home soil). Not only do these drive up the costs for the top teams, but it reduces their opportunities to satisfy sponsors in key local areas, but also precludes aspiring Continental teams from taking to the start in higher profile events, where only a few “wild card” invites are available.
If the sport is redesigned so that you can reduce the size and scope of the top teams, and allow them to enter events where and when they want to, you can reduce their budgets, and thereby increase their potential sponsor pool. If you can offer more opportunities for the Tier 2 teams to compete at the top level, you raise their game, and enable them to potentially find better or more consistent sponsorship as well.
an excellent posting by Touriste-Routier.
Money’s has clearly gotten it’s dirty hands into cycling. Even cycling – a small, niche sport – can be shredded like any other economy. False and inflated budgets, legacy money drying up, investors running for the hills, and good workers find themselves without work. These themes are everywhere.
I believe some solution will rise from the ashes – much like what’s happening now. We’ll figure it out, but trying to establish an economic framework with bank accounts sizzling up like water on tarmac in July – it’s difficult to have a starting point.
I miss those days with Hansen, Barry, Kirchen, and Hincapie. Thanks for the memories and power files! Ha.