Revenue Sharing: Chump Change or Structural Change?

Wednesday, 2 May 2012

A bicycle race is a simple affair with some riders, a start and a finish.  But the organisation and management of professional cycling is complicated by rules, law, money and business.

The news that pro cycling teams could get a share of the TV rights money paid by broadcasters would mark a significant change to the way business is done today. Here is a look at some of the issues surrounding revenue sharing. For now we don’t have much detail so it remains to be seen whether this is just some extra cash for the teams or a structural change to the way the sport is organised.

Many races can trace their origin to a commercial imperative. In many cases a newspaper started a race to boost its sales. The Tour de France was born this way, the Giro d’Italia too. Today several of today’s press in Europe owe their existence to the circulation and profits generated by races a century ago. Racing, the media and money are the trinity of pro cycling.

The news that the Giro could share revenue with the teams could be one of those “win-win” scenarios. The Giro is a great race but it remains an Italo-Italian race and many of the best riders avoid it which can diminish the race’s status. By paying teams to come with their star riders the race can grow in stature as the win is more widely contested and interest in the race will spread further beyond Italy.

But sharing money to bring riders to the Giro is not new. When Lance Armstrong rode the Giro in 2009 there was apparently an appearance fee. Here we saw the organisers giving up some of their money to buy in a foreign star. Certainly the race was more widely covered because of this.

We don’t have details on the split for now. This matters because all sorts of things could happen:

  • What % of the total TV rights money would teams get?
  • If the race becomes more attractive to more broadcasters will teams get a proportional increase?
  • Do all teams get an equal lump-sum payment?
  • If the teams get the money, what do they do with the money?

In other words is this about the payment or is there a change in the model behind pro cycling here? Because right now the sport is in a funny position where teams would probably pay ASO to ride the Tour de France, to bid for a share of the airtime in July but many other races on the year are a cost to a squad, even winning a minor race can involve more expenditure than the value of the publicity generated.

One concern is that any increase in money just flows straight into wage inflation. Now rising wages are good but it’s never so simple. Sport is a winner takes all environment where superstars earn giant wages whilst the helpers don’t. More money for more big names in the Giro might just end up rewarding the top riders. As such we have a round of wage inflation where a few riders gain but there’s no change to the structure of the sport, instead it has just got more expensive to operate a team.

In a similar way, what is there to stop team owners taking the money they get from the Giro? Maybe there’s nothing wrong with this and a team owner that takes the money for themselves is probably going to find their squad becomes less competitive compared to one that re-invests the money.

Another thing is that the teams become tied to the one race, or at least to the highest bidder. Big races with big revenues can draw in the top teams but this means smaller races on modest budgets can’t compete. Note the Tour of California is already up against the Giro d’Italia on the calendar. Plus even smaller events can pay broadcasters to screen their races, they could get trampled on quickly here.

If today’s races are the product of newspapers, will the sport become the product of TV tomorrow? Gone are the days of 400km stages of the Tour de France but what if the action could be condensed into 150km or less? And what about other changes, for example timing the finish of a race to suit prime time audiences, for example the Tour de France could finish in time for 8.00pm. Or perhaps even seeing the timing of one race altered to suit the viewing habits of a larger audience on another continent? Arguably we’ve seen this in Formula 1 motorsport already.

Conclusion
Paying teams is a novel idea but note we’ve seen appearance money used in the past. Indeed the payments seem to be about attracting star riders since teams are committed to ride the Giro already. What is different is giving the money to the teams to use. We don’t know the details for now but it’s one thing to give up a proportion of the team money, another thing for it to change the sport.

There’s no doubt a deal like this could change the sport. Just as newspapers created many of today’s races, TV looks set to shape the sport tomorrow.

Feargal C May 2, 2012 at 1:20 pm

About time.
Without teams there is no race. Ensuring that you have the top riders coming to your race (by paying teams) means more kudos for your race.
More kudos means more viewers, more viewers means race organisers can charge more from advertisers for roadside banners (which can be shown TV via the hellicam or bike cams for a set period of time) as well as start/finish banners, more sponsor money means the race survives, which means more coverage to watch for us fans!
Oh and by having on site multilingual commentary provided by the race organisers (ala the Giro) is great for two reasons, the TV as a whole package can be sold into markets where TV broadcasters don’t have to look for specialist commentators and the online coverage can be viewed from the source and not via a pirate feed, ensuring that the race organiser can sell advertising their too.

Conrado Calvet May 2, 2012 at 1:53 pm

I think in the end that’s just bring cycling to the regular way to do business. Sharing revenues it’s good to everyone I think. Football, Motorsports, Basketball and other sports share their revenes between all parts, organizer, teams and even players. The football teams has been seling special TV features for their fans in the Internet and mobile for ages, why cycling teams can’t do the same? Offering special tv shots from their riders in specefic races or something like that? In the end this can help to make the teams more profitable and able to bank thenselves and to stop this crazy chair dance, where a teams is created and destroyed from year to year. We see this happen to small teams and great teams as Highroad.

Regards,

ave May 3, 2012 at 3:20 pm

>”The football teams has been seling special TV features for their fans in the Internet and mobile for ages, why cycling teams can’t do the same?”
Like Beyond the Peloton? Check the viewing figures on youtube. And it’s free.
or OPQSCyclingTeam’s youtube channel? Check the viewing figures. It’s free too.

Adi Gaskell May 2, 2012 at 1:57 pm

Ironic that the Giro organisers paid Armstrong as it was arguably him that created the current trend of lead riders skipping the event. Because he focused solely on the Tour he was inevitably fresher than those that had done the Giro beforehand, thus hampering their own chances of winning the Tour.

As long as that remains the case it seems hard to see how money will help things, although it might see some of those who might traditionally finish 5-10th in the Tour doing the Giro instead.

Roadie61 May 3, 2012 at 8:24 pm

@Adi Gaskell: Lance Armstrong affected our sport in so many ways, many of them less than ideal. As he piled up Tour wins and behaved like a Hollywood celebrity, along with that came this personality and power trip that mowed down anyone who got in the way of what he was trying to accomplish. His entourage was not really visible like many “stars,” but his network of people globally and his connectedness to people in really high places changed the ethics of our sport.

He was a specialist who changed some of the beloved traditions in pro cycling. To have a race calendar as diverse as the WT calendar, it’s hard to imagine wanting to focus one’s entire career, essentially, on one race. But that’s who Lance is/was, to be the best at the most difficult race in the world and repeat that feat more times than anyone else. He hated to lose and would go to great lengths to make sure his opponent would lose. In his younger days he even admitted that he was a ‘Texan from Plano with a chip on his shoulder.’ Well, that chip’s still there.

Lance was arrogant in his goal to win the Tour more times than anyone else. I believe he beat the doping tests from ’99 – ’05 with Johan and some dirty docs’ help. “Win #7″ was just putting the final nail in the coffin, to ensure (for his own ego) that no one else would come along and surpass his record. The sworn testimonies in the Grand Jury were damning first-hand evidence, esp with credible voices like Hincapie and many others. His $100,000 donation to the UCI, what was that?
He literally bought his way out of any positive tests that popped up…made them just vanish…that’s what having endless money, fame and power can do.

Lance was “good” for cycling in that he increased cycling’s popularity worldwide, he increased viewership and he brought spectators out to races just to see this “super-human” man ride a bike.
He brought revenue, tons of revenue to the sport, and the UCI liked that, why wouldn’t they?
But he did it behind a mask of deceit — he deceived his fans and he deceived those with cancer who saw him as this saint who could do no wrong. When you cheat and lie about it, and get away with it, we can only hope that karma will get him in the end.

In 2009, Lance was paid appearance fees beyond the Giro.

It was odd to know that the ’09 Giro (100th Anniversary) was his first and only attempt at this GT, and he rode it because he was PAID to appear. The organizers hoped that his ‘rock star status’ would increase interest and viewership in the Giro and this centennial anniversary edition. He finished 12th @ + 15:59. Team Astana, BTW, did not win a single stage at that Giro.

2009 began with an appearance fee paid to Lance to ride The Tour Down Under (where he finished 29th). He raced Milan-San Remo and finished 125th. He raced the Tour of Ireland but DNF. He begrudgingly finished 3rd in the TDF (no #8 to be had) to Contador, the very rider he despised most at this point (just look at the photos of the final podium — Lance’s face says it all).

With Johan running the ship, Astana’s Final GC was:

1st. Contador (Johan pitted Armstrong against Contador and the two battled for “protected” rider)
3rd. Armstrong
6th. A. Kloden

Astana also won the team competition by 22′ 35″ over Garmin-Slipstream.

*Note: After Stage 11, Astana had on GC:

– Contador (2nd) @ + 0:06
– Armstrong (3rd) @ + 0:08
– Leipheimer (4th) @ + 0:39
– Kloden (6th) @ + 0:54

I found it remarkable that almost HALF of Bruyneel’s team was placed 2, 3, 4, and 6th on GC after the first half of the TDF. Leipheimer crashed/abandoned during Stage 12. Those same four riders on Team Astana would have likely finished in the Top 6 or better had Levi not crashed. How often does that happen for a team in the TDF? Hmmm…

And why was it that Astana didn’t perform particularly well in the Giro and Vuelta? With Bruyneel as Lance’s team manager, his focus remained narrow, win the TDF. Together they built a “winning” combination for many years, regardless of the team name.

Just to highlight how hyper-connected Lance and Bruyneel were, below is a comical quote I found about LA’s appearance in the ’09 SRAM Tour of the Gila race (New Mexico); [Lance is part-owner of SRAM] and they jumped in at the last moment to sponsor this race that was about to die a quick death. Fantastic race, but Lance’s team, Astana (and any UCI ProTour team), could not enter races without UCI sanction.

“They can field up to three riders each, racing for composite teams, which in years past meant the somewhat comical scene of Johan Bruyneel directing Lance Armstrong from a Mellow Johnny’s team car, and Dave Zabriskie riding in a DZ Nutz jersey.” – Bicycling.com, 2 May, 2011

Because of Armstrong’s influence within teams, in the peloton and in the business and politics of pro cycling, he modeled a new paradigm for GC riders; maybe it’s okay to skip the Giro and focus on the Tour (?), skip most Classics and focus on the Tour, skip whatever you can to focus on the Tour.

Astana’s entire 2009 Tour de France roster, minus Contador, had moved to Armstrong’s new team (RadioShack) along with Bruyneel in 2010 (after political unrest surrounding Vino, Bruyneel and LA). Must’ve been good stuff in those white bags for 9 riders to follow 2 men.

Anonymous May 4, 2012 at 2:15 pm

Sounds like you love him a little bit.

Simma May 2, 2012 at 2:01 pm

I’m glad things are heading this way, but the giro is best of the big 3 for route, i would of expected the vuelta to jump this first =/

Ben May 2, 2012 at 2:43 pm

The Vuelta is 49% owned by ASO, who seem to be against sharing TV revenue.

Sidamo May 3, 2012 at 1:19 am

Why pay a team to show up to your race when they’re all desperate to be there anyway?

The TdF could probably get away with charging teams to enter.

jimmyk May 3, 2012 at 7:40 am

Sidamo, Ultimately if there was a good structure in place where additional payments to teams did not just lead to wage inflation at the top end but instead lead to greater stabilty of teams then races like the tour maybe able to avoid the negative publicity.
Stable teams should be able to greatly reduce doping and thus scandal. Also ask them if there was a super team that could bring better racing and more exiting viewer ship would the TDF pay for that team to come?
I would assume so….

ave May 3, 2012 at 2:16 pm

Exactly, teams would pay to race the Tour if they had to.

Shawn May 2, 2012 at 2:54 pm

What seems smart here is that the amount of revenue shared with teams will depend upon advertising revenue which, in turn, will increase with bigger stars competing. It provides teams with an incentive to send bigger names and all sides profit.

In terms of how teams use these funds, I would hope that if TV revenue sharing becomes the norm teams could have greater stability and not fall prey to the fickle decisions of sponsors. It would probably also mean the continued trend of small races being bought by larger promoters to sell as part of a larger TV package.

Cat4Fodder May 2, 2012 at 4:02 pm

Shawn,
the problem with the current model is that it is dependent on ad dollars. Media and advertising is becoming more and more diffuse, which also leads to less and less willingness of potential sponsors to deal with the risk of investing in cycling.

Cat4Fodder May 2, 2012 at 4:00 pm

@Innrng:
I think you have raised all of the various points as to why this deal is nothing more than shuffling chairs on the deck of the Titanic, and I think your concerns about made for TV racing dictating Parcours is a sad development indeed if it were to happen.

At the end of the day – it seems pretty clear to me that this sport, in a coincidental set of circumstances, has quite a lot related to the Newspaper industry. Newspapers are struggling with a business model where content is free, and ad dollars are the lifeblood of the business model…except the ad dollars are getting more difficult to come by. In my opinion, this sport needs to develop some form of pay-to-watch model, at the very least on the key sections of the race where the action may occur. I know this seems anathema to the sport’s history and culture, but I think you will end up more and more with a model being developed in Belgium, with special paid VIP zones, where these organizers can monetize the race.

And – if you think about it, teams, if they get a cut for example, may be more (not less as you indicate) willing to take on harder routes on more challenging terrain, if this means more opportunity to charge more people, more money to watch the race on these challenging routes (I could see a Monte Zoncolon in every edition – or always including the ITT up the Plan de Corones).

Or maybe many, many more of the flat stages will end in a circuit, where closed sections of city centers can be closed, and allowed the organizers to charge for access to the final sections of the race.

DeeJay May 2, 2012 at 5:24 pm

I’d rather see a part of the TV revenues to go to a fund to support smaller races. Such a grass roots programme is important for cycling. Smaller races are having a really hard time at the moment. Large espoirs and junior races are also facing tough times.

trounder May 2, 2012 at 6:46 pm

This is an interesting play by one of the two “lesser” grand tours to remain Grand. It’s somewhat counter intuitive , but perhaps we will see the star riders shine less brightly in the Giro to save themselves for the rest of the calendar. Guaranteed appearance is one thing; higher caliber racing is something else. The devil will be in the details for sure. Even if this goes nowhere, I like Acquarone’s creativity and willingness to experiment in the spirit of improving the race for its own sake (as opposed to changing a course to charge money at a beer tent).

Robert Merkel May 2, 2012 at 11:43 pm

The thing with “broadcast rights” is that “broadcasting” is a technology on its last legs.

Internet streaming is the future, and increasingly the present, of presenting sport.

Precisely what the revenue models that work best for this is not yet clear, but a) it means every sporting event with a camera pointed at it has a global potential reach, b) one layer of bureaucracy (the network) disappears, c) advertising can be micro-targeted to the individual consumer (just as Google does now with text ads).

Bundle May 3, 2012 at 3:07 pm

Spot on.

Ross May 3, 2012 at 12:32 am

I don’t know how it could be done, but perhaps the money should be used to encourage big name riders to contest a range of events throughout the year, and not just focus on a handful of races like they do now. It wasn’t that long ago that the top riders were winning Grand Tours and one day classics/monuments. Think of Hinault, Merckx, Moser, Kelly and Lemond. Imagine if GT riders such as Evans, Contador or Wiggins contested races such as Paris Roubaix, Milan San Remo or Flanders. It would generate a huge amount of interest. Some one has just got to work out how to structure the World Tour so this occurs. Any suggestions?

Pete May 3, 2012 at 1:26 am

In defence of today’s riders, the following GT contenders have won monuments:
Cunego (Amstel, Lombardia)
F.Schleck (Amstel,
A.Schleck (Liege)
Evans (La Fleche)

Cunego’s record in classics and GTs in the same year is decent:
2004: 1st in Giro, 1st in Lombardia
2006: 3rd in Liege, 4th in Giro, 11th in Tour (white jersey)
2007: 5th in Giro (possibly 4th if Di Luca was suspended), 1st in Lombardia
2008: 1st in Amstel & Lombardia, 3rd in Wallone, 2nd Worlds
2009: 2 stages in Vuelta, 3rd in Wallone, 5th in Amstel

Evans’ and the Schlecks’ records are nothing to sneeze at either, eg: Andy in 2009 was on the won Liege and was on the podium in the Tour and Wallonne

I think rose-tinted glasses may be affecting your post

jimmyk May 3, 2012 at 1:45 am

it is probably also a factor that the best have to be more specialized in what they do that it is hard to be a 1 day classics man, and have the recovery skills needed for a GT.
Plus then we have the whole issue of having lots of mini peaks or one big one, in terms of conditioning for a race.

Similar to how the best runners used to do a wide variety of events. Now it is, at most, 2 similar distances…..

jimmyk May 3, 2012 at 1:13 am

@inring,
Why would they pay them to show up when what they want is good racing! Should they not look at paying teams for what they contribute to the race? Ie make the price money an actual amount of money worth fighting for. Highroad could have done rather well if they picked up $250,000 for each tour stage win they had…………that could reduce a teams reliance on sponsor ship no?

Ankush May 3, 2012 at 7:15 am

JimmyK has raised a very valid point here. But then again it will not directly reward the gregarios in the peloton and will just lead to wage inflation skewed towards the leaders.

Ideally I would like the UCI to increase the minimum wage limit at WorldTour, Pro Conti levels as the teams may be able to afford higher salaries in future. This will in some way help the low paid riders on the team. With little to no job prospects post-retirement, I would rather help the riders than the sponsors.

Gillis May 3, 2012 at 9:57 am

Top pros are paid appearance fees to show up on the starting line all the time. Paying teams is just an extension of that.
Perhaps there could be something along the lines of a ‘constructors championship’ like in Formula 1. Seeing as ProTour teams have to line up at given races anyway, those races could be used to determine the winner and percentages paid out at the end of the season.
I think this way could work out well because there would be more competition at the smaller events, AND it would be taking into consideration the entire team, giving riders more incentive to finish races. (Although that could equal into more team pressure and we know how that has backfired)

Bundle May 3, 2012 at 3:04 pm

Teams getting money for just participating instead of earning it as a prize is not right. It can work occasionally, but not as a principle.

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