The Problem with Revenue Sharing

Wednesday, 22 January 2014

The Tour de France is cycling’s ultimate prize, the biggest, best and wealthiest race in the world. The sport revolves around July and the publicity available is usually a prime factor behind team sponsorship. But for all the Tour’s success and wealth, teams struggle for stability, many come and go while the Tour has celebrated one hundred editions. Some team owners are becoming increasingly envious of the Tour and other succesful events and want to tap into the revenue streams generated by these races, notably the TV rights money.

But what if there’s no money to share?

Show me the money
The Tour de France has three prime sources of income:

  • the sale of broadcasting rights to TV channels around the world
  • sponsorship income from jerseys, hoardings and the publicity caravan
  • charging towns to host the race, whether the often large grand départ fee to the smaller price of a stage finish

The hard part is knowing the sums involved. Amaury Sport Organisation (ASO) owns the Tour de France but the race is just one asset alongside other sporting events. ASO publishes annual accounts but these are minimal and only report the headline figures so working out the income for the Tour or other races is guesswork.


That’s an excerpt of ASO’s income statement from 2012 and you can see a total revenue of €166.4 million which covers all sports from cycling to golf, marathons and the Paris-Dakar rally. For the sake of argument let’s assume all of this money came from cycling races and ASO decided to share 50% of this revenue with teams. These assumptions are wild but bear with me.

Sharing 50% of the total income across 22 teams equates to €3.8 million per team. The average World Tour team budget is estimated to be €12 million per year so this sum is considerable… but not enormous. But before any team owner gets excited, let’s return to reality. ASO has costs to meet like staff, marketing, fuel and police charges and more. Trawl the accounts and in 2012 these amounted to €128.3 million meaning a net income of €38.1 million. Now assume again 50% of this is shared with the teams 22 teams and we get €860,000 per team. Useful but it doesn’t change the game and we’re still assuming all of ASO’s revenue comes from cycling and Amaury family decided to hand over half of their profits to teams owned funded by large corporations, governments and billionaire tycoons. More realistic estimates say 80% of ASO’s income is derived from cycling and if the Amaury’s decided to share 20% of the cycling profit then we’re talking €275,000 per team. A large sum of money but less than 2.5% of most team budgets.

But the Tour is only one race. What if we added up income to share from other races? Well in fact we have because the ASO number includes all their races, whether outright ownership of Paris-Roubaix, the Dauphiné and other races displayed above but also revenue from advisory, logistical and media work with the Tour Down Under, the Tour of Oman, the Tour of Beijng and more. But onto other races outside of the ASO cosmos.

The Italian Job
The Giro is the second biggest event on the calendar. The accounts of RCS Media show its subsidiary RCS Sport declared €32.8 million in 2012 from non-publishing activities, meaning the Giro d’Italia and other races but a gran fondo, marathons, fun runs and a variety of sports consultancy work, notably in basketball and soccer.

Still for the sake of argument again let’s assume all of this money came from cycling and RCS has a similar operating margin to ASO meaning 23% of revenues flow into profits which means €7.5 million is available to share. Dreaming 50% of this is divided by 22 teams it’s just under €170,000 per team or if 20% is shared it’s €70,000 per team.

So with optimistic assumptions and generously allocating 50% of ASO and RCS’s profits to the teams, we’re up to about million euros per team. Between them ASO and RCS accounted for about 45% of the World Tour calendar in 2012 with the Tour, Giro, Dauphiné, Paris-Nice, Tirreno-Adriatico and several one day races, a share that will rise now ASO owns the Vuelta in full. Many of these are the most valuable races on the calendar but once again for the sake of argument, let’s be generous once more and imagine if ASO and RCS give the teams a million euros then the other 55% of the calendar pay up proportionally and we’ve got about two million Euros per team per year.

In short using assumptions that are generous, back-of-the-envelope and… wild it seems revenue sharing won’t generate more than two million Euros per team. It’s good money but not not transformational and in reality the sums would be beaucoup less.

Why so little money?
Auctioning the TV rights for a sports even can be lucrative but if outdoor broadcasting is expensive, covering a bike race takes things to new levels with mobile cameras and aviation. Plus the audience demographics are not too hot either, cycling is popular but not wildly so and a large segment of the audience is made of up low income viewers. Many TV ads are directed at senior citizens. High production costs, a moderate audience and a poor audience mean cycling’s TV rights aren’t as valuable as other sports like soccer, golf or tennis.

Revenue share, cost share?
If there’s money to be shared then what about becoming liable for the costs? Both ASO and RCS use money from the Tour and Giro respectively to help fund the other races they own. For example neither Paris-Nice or Tirreno-Adriatico are tremendously profitable, in fact they could be loss making. This way revenue generated from a lucrative grand tour is reinvested elsewhere on the calendar to provide a platform for teams to race. And these are the big events, many other races are struggling to break even and we never hear of team owners offering financial support.

Cash for all
There’s also the argument that if teams want a share of the money because they animate the race then why not reward others? Surely those big crowds in the mountains add to the spectacle, perhaps ASO could hand out wads of cash from the caravane publicitaire? And why stop there, maybe ASO should be sharing money with the various tiers of French local government who build the roads that the race uses? Ok this sounds absurd but actually ASO does pay a nominal fee, believed to be €250,000 a year, into the coffers of French government as a payment for the use of the roads.

Prune Juice
Loyal readers will be familiar with the “prune juice” concept where any extra money poured into a team’s topline flows out immediately in the form of athlete wages. With revenue sharing this could be even more pronounced. Imagine an envelope containing €200, how much would you pay to buy this off someone? Normally the answer is €200 and this illustrates the problem with any payments. If revenue sharing meant teams got €2 million a year then many a team owner would pay close to €2 million for this privilege.

Power base
In fact this flows suggests the riders are more important than the teams. Oleg Tinkov has raised about boycotting the Tour de France but this sounds as fanciful as some of the assumptions I tried above. Anyway the loss to the Tour is not the missing team, it is the absent riders and a team owner threatening to sit out a big race would risk mutiny from riders denied the chance to prove themselves.

Reverse model
In fact rather than seeing teams being paid to ride the big races, arguably they’re already paying to ride the Tour de France. There’s no entry fee but instead squads compete to stay in the World Tour and thus ensure automatic qualification. Viewed like this the big races like the Tour have created a valuable arena for teams to bask in publicity and can therefore charge sponsors a premium.

Now for the good news
Starting with the revenue cake, deducting costs and sharing it means even on the best terms the slice is small. Just suggesting this feels mean, like trashing an idea worth exploring. If the slice is small the solution is to bake a bigger cake. There’s a growth story with audiences are growing worldwide. New ways to make the sport more valuable so TV companies bid more are being explored. If the sport can put its reputation for scandal behind it then credibility will translate into premium payments. This will also bring more sponsors into the sport. Coupled with other managerial issues like a salary cap and even the exploration of franchises – both topics for another day – then maybe revenue sharing could solve the chronic instability of sports teams.

Summary
Revenue sharing sounds great but the money might not make a big difference. The above demonstrations are back-of-the-envelope stuff but all the same, even using wild assumptions the sums involved appear complimentary to the average team’s budget rather than anything more. Worse, done in isolation the risk is that payouts just make team owners bid more for a World Tour licence as they buy riders with ranking points to qualify for the promised revenue and we’re back where we started with the money flowing direct from the race to riders with the necessary points.

Team owners obviously want extra revenue but for now the fundamental problem is a lack of sponsorship and this is something they can address rather than waiting for someone else to give them money. Billboard jerseys, naming rights and all the publicity yet many teams still struggle to attract corporate support. To view revenue sharing as the golden solution seems wrong, it might have a place within a comprehensive reform of the sport but only if the races can be convinced donating their profits to teams will deliver benefits.

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{ 54 comments }

PuffPant January 22, 2014 at 2:27 pm

Nice analysis – this kind of high-level financial analysis is really insightful, follow the money!
I wondered how you got the €1M per team from TdF/Giro, but you’ve done a bit of a shuffle with your percentage estimates, so those numbers @50% share have to be derived. Just keeping myself on my toes ;-)

The Inner Ring January 22, 2014 at 2:40 pm

Just rounding the numbers, it would be a touch above €2m if scaled in totally proportional terms but given the numbers going into to the calculations are guess-timates I didn’t want to stray too far to the right of the decimal place.

PuffPant January 22, 2014 at 2:55 pm

Quite right too, spurious accuracy is pointless – I just hadn’t done the 50% slicing to actual value, and you only provided other %ages! It’s often amusingly easy to demolish people’s claims for such and such on the basis of these simple exercises. I wonder how much time Brian and the team are spending thinking like this? Or is it all distressingly obvious to them?

Alasdair January 22, 2014 at 2:43 pm

I think it’s worth pointing out as well that to some extent, teams ALREADY make money off of being in the tour de france – after all, sponsorship is much bigger for teams who are guaranteed to be in the Tour…

The Inner Ring January 22, 2014 at 2:50 pm

I tried to hint at this in the “reverse model” paragraph but as we see, team finances aren’t any better because they just have to outbid each other for riders/points in order to qualify.

BC January 22, 2014 at 3:10 pm

In a free market I don’t see why any of the successful event organizers would be in support of handing out any of their potential profit. The model of pro bike racing has subtly changed in the last forty years, with larger salaries for riders doing away with many smaller events, where in the past riders made the majority of their money.
Maybe the real problem is the extremely large salaries paid too a small number of top riders.
Are top riders really worth their estimated 3 – 4 million euros a year ? Cycling is in danger of following the financial model of soccer – a model which is not sustainable in the longer term.

The Inner Ring January 22, 2014 at 4:27 pm

I tend to agree but the idea is a stable system of teams could mean a more stable sport where teams can invest for the long term in rider development and invest in things like cultivating a fanbase and more which in terms make the sport more valuable and so the TV rights go up, a virtuous circle.

But many a race owner doesn’t want to play Santa Claus and many cannot.

noel January 22, 2014 at 6:55 pm

maybe a system where teams were limited to spend only say 60% of their budget on riders, and a max of 5% on any one rider might help dilute the prune juice effect (however, without visibility, and the myriad different ways of paying riders I appreciate this would be difficult to police…)

channel_zero January 22, 2014 at 8:40 pm

1. There is no such thing as a “free market.”
2. The soccer model is perpetually characterized by some as unsustainable yet somehow is quite so. The regular corruption scandals at FIFA suggest there is plenty of money on the sports administration side.
3. Suggesting an athlete is paid too much doesn’t work either. The athlete asks for a price and either gets it, or finds some lower price.

As pointed out in the article, extra revenues to teams would most likely be spent on athletes. If the sport would seriously address the corruption and fraud problems, it would attract more viewers and that would eventually lead to more sponsors.

BC January 22, 2014 at 11:02 pm

channel-zero: You are of course correct – ‘market’ would be the correct term. Your second point however is a grand fail. The classic example being banks surviving for many years before the failure of their modus operandi eventually overwhelmed them – and many others. Your third point is valid, the question however is, what is the return on the 3 – 4 million Euros to a commercial sponsor ?

I agree a healthy sport, free of questionable administration and doping would ensure more of everything – increased fan base, wider media coverage and a return in interest from sponsors at all levels.

Dave H January 23, 2014 at 1:36 pm

The question of the sustainability of the football/soccer model is an interesting one. Certainly at the level of many individual clubs it isn’t sustainable. Taking the Premier League in England for example. Broadly speaking there are three types of clubs:

Type 1 – Manchester City, Chelsea etc – These clubs have very rich backers who are happy to lose vast amounts of money in order to have a successful football team as a plaything. If Roman Abramovich lost interest tomorrow Chelsea would have to change their whole operating model.

Type 2 – Portsmouth, Cardiff etc – Much smaller clubs with relatively little income (except TV money) who are spending beyond their means and incurring debts in a bid to stay in the top flight and keep getting the TV money that services their debts. They can stay afloat as long as they stay up but relegation means bankruptcy as often as not.

Type 3 – Arsenal, Tottenham – clubs that match their spending roughly to their income. Generally bigger, older clubs with good income. As long as the overall income to football remains stable these clubs are generally secure.

I would say the first two types are unsustainable in the long term for different reasons but the third type (probably about 25% of clubs are sustainabe. The bigger question is whether the football economy as a whole is sustainable and that doesn’t really depend on individual clubs but on the income from TV rights and, to a much lesser extent, attendances. There is no sign, right now, of declining interest in the sport and so I think Sky et al will keep paying good money.

So, I would say that the football economic model (at the sport wide level) is sustainable as long as TV interest holds up which seems pretty likely to me. At a club level it is a different question.

Sorry, nothing to do with cycling but the comments above piqued my interest

channel_zero January 23, 2014 at 7:49 pm

what is the return on the 3 – 4 million Euros to a commercial sponsor ?

Like football, cycling has a large number of hobbyists funding it. The “value” model isn’t clear. They get some kind of enjoyment spending the money. Keep in mind that many of the commercial name sponsors are hobbyists too. Someone, somewhere at Saxobank likes cycling.

Let’s assume the Belkin boss is more level-headed and is looking for a return in the form of increased sales in the EU. It is the very rare case measuring the cycling team expenditures against EU sales works. Inevitably, the sponsor learns how corrupt professional cycling is and leaves.

Touriste-Routier January 22, 2014 at 3:11 pm

Thank you for illustrating this fallacy about TV rights and profit sharing.

Often team budget figures are thrown around, but we never really get a sense of what comprises them. It is safe to assume that these include cash from sponsors/benefactors, but do they include a) the value of team equipment & in-kind donations and b) travel stipends/appearance fees received from race organizers?

Under today’s system, it is laughable to that any team would consider striking/turning down a Grand Tour invite (as Tinkov postured). Not only would this be a violation of a World Team license, but there are dozens of Pro-Conti teams itching to fill their spot. Sure the racers animate the racing, but there are plenty more where they come from; as long as the teams are of comparable ability, races will be hard fought, compelling stories told, and heroes made.

ArgyllFlyer January 22, 2014 at 7:19 pm

Dozens is a stretch as there are less Pro Conti teams this year than World Tour teams.

Larry T. January 22, 2014 at 3:14 pm

Thank you. Mille grazie. Merci. FINALLY a level-headed editorial on revenue sharing. Rumor has it the Giro loses money each year, so ASO is the cash-cow and as you point out the sums are not as big as some would like to think. I can’t help but think if ASO’s profits were carved up and handed out to the teams, how much MORE influence would this 1000 pound gorilla in the room wield? While they do a fine job I certainly don’t want their influence on the sport to increase, they are probably too powerful at present. If ALL the whiners about sharing the mythical pot of TV gold would put their efforts into cleaning up the sport, they might see enough big-money sponsors return to make the issue moot. But instead we have megalomaniacs ranting about boycotts. I truly feel sorry for anyone stuck with a contract working for this character – the guy who got his start by breaking laws (smuggling denim jeans) and now making a ton of loot with what has been reported as legal loan-sharking.
PS- back-in-the-day there was an entry fee for LeTour. I remember Jim Ochowicz explaining that “For $30,000 we get entry in the race, two cars, hotels, meals…and a couple of towels.” :-)

Sam January 22, 2014 at 3:16 pm

INRNG, you’ve made a point of stressing the wildness – and generosity – of your guesses. When it comes away from RCS and ASO to the other 55% of races…that’s definitely wild….so many races still struggling to survive….reducing the numbes of days just to keep a stage race going till next year in the hope it’ll all be better next year…

But as you say, reality would fall well short of your sum of 2m euros per team

The Inner Ring January 22, 2014 at 4:28 pm

Exactly, I can’t stress enough how these numbers are illustrative rather than precise but that’s the point, even the biggest numbers possible just aren’t big enough for now, the whole system has to change or nothing much will be gained.

maximflyer January 22, 2014 at 3:17 pm

Inrng, I totally agree with you on revenue share/cost share. In the last couple of years many races shrank or disappeared in Europe. Even San Sebastian and the Tour of the Basque Country was on the verge of collapsing. I guess apart from the most prestigious events organizers doesn’t make too much.

Tinkov is probably trying to get some publicity, I can’t see him convincing Contador on boycotting any GT. Last year this time Purito was trying to get out of his contract with Katusha b/c it seemed he could miss the Tour. I don’t think any athlete would support this idea.

Gregg January 22, 2014 at 3:24 pm

Anyone out there have the breakdown of where revenue for other major sports (Golf, American Football, Soccer, Basketball, etc) come from and the % of each. Given the fact that Payton Manning’s salary for one year is the same as the average World Tour Team, we are doing something wrong in cycling. One thing I feel is the biggest limiting factor of licensing fees and revenue. For most major sports the revenue generated by the sale of Fan jerseys more is big business, combined with ticket sales to stadiums, two revenue sources lost to cycling.

jaas January 22, 2014 at 5:36 pm

In regards to the NFL it makes staggering amounts of money from television network deals (apparently >20 billion annually…..billion!!!!!) and advertising deals. Football games are almost always amongst the highest rated broadcast programs. To put in perspective how much Americans love the NFL, the 2012 ProBowl got 12.5 million viewers. Anyone that knows anything about football knows that the ProBowl is nothing but a glorified scrimmage…a joke of a game. And yet 12.5 million viewers is more than any baseball game that year and more than every NBA game except for a few of the playoff game 7′s. In the US the 2013 TDF averaged 280,000 per night by contrast.

Even paying Peyton all that money the owner’s of the Broncos are making staggering money. And keep in mind there is a salary cap in football so the amount payed to the entire team is the same if one guy gets 25% and the rest 75% or whatever however else its divided.

Finally F the seahawks and richard sherman.

Larry T. January 22, 2014 at 6:45 pm

And don’t forget the NFL is a NON-PROFIT organization. Tax-payers foot the bill for stadiums as well while these plutocrats get ever-richer. One of the appeals of pro cycling to me is that it’s NOT like the stick-and-ball sports.

jaas January 22, 2014 at 7:50 pm

the stadium issue is not the same across the board in all sports. building a hockey arena or nba arena in a small market is dumb. in the case of the new stadium the 49ers are building in Santa Clara the economic win fall for the area is going to be staggering because of the popularity of the team and the sport. and the County/city of santa clara in the long run is going to have financial win fall. everyone in the area will benefit…except those inconvenienced by traffic. The ‘tax payers’ in the end will come out on top. people will argue this but its true. another good example is Pac-bell park in SF where the Giants play. That stadium transformed an entire section of the city for the better and is a huge winfall for the city. The new 49ers stadium wont transform the area like Pac-bell, but financially it will be similar. The biggest loser in this situation is the city of san francisico who let the team move out of their city lines and county.

also F starbucks and macklemore

channel_zero January 22, 2014 at 8:49 pm

the economic win fall for the area is going to be staggering because of the popularity of the team and the sport.

No. not really. We know attendance is shrinking at the stadiums. What stadiums are built are progressively smaller and have trouble being filled by pro sports soon after completion as ticket prices skyrocket. What jobs come as a result are temporary and very low pay. Multi-use stadiums are somewhat better, but not much. The area around the new stadium sees some benefit, but is not transformative.

Meanwhile, voters love funding their pro sports. So, the stadiums happen anyway.

Robin January 23, 2014 at 7:22 am

The bit about pro sports being an economic windfall for cities is certainly not true. If you take into account the tax breaks and abatements that teams get and add into that the fact that the vast majority of jobs created by pro sports in a city are low wage service jobs, the windfall goes away.

Larry T. January 23, 2014 at 3:04 pm

It’s a windfall for sure. But sadly it all goes to the plutocrats who own the teams. They use all the claims you’ve repeated here to get the voters to approve the payments for their stadiums, but once they’re built and the benefits to the 99% fail to materialize, it’s too late. Once the voters/fans realize they’ve been had yet again, the rationalizations begin. Sorry to go on about this as this IS a cycling forum, but I think it’s important to counter the arguments for modeling pro cycling on the North American stick-and-ball industry.

rikard January 22, 2014 at 9:47 pm

The TV money in the NFL is huge but not 20 billions annual. According to this Forbes article: http://www.forbes.com/sites/kurtbadenhausen/2011/12/14/the-nfl-signs-tv-deals-worth-26-billion/
the annual deal is 7 billions. And from those money roughly 4 billions are player salaries (I used a salary cap of 125 millions, I think it’s a little bit higher than that). But still a long way from the money discussed in this well written post.

Dai Bank January 22, 2014 at 4:40 pm

I know that you have ignored any prize money allocated to each race but if anything that exclusion illustrates how miniscule the value of any prize money is, in this sport. I guess that would be included in costs already and adding it back, on the assumption that Teams would not get prizes and an allocation, wouldn’t nake a vast difference to the point you are highlighting.

The Inner Ring January 22, 2014 at 5:04 pm

Prizes go straight out to the riders. Teams do get a payment from the races like the Tour to cover some participation costs but it’s tiny so I left it out to keep it simple above.

Sam January 22, 2014 at 5:19 pm

Well, riders and the support staff including mechanics and even the bus drivers…

Greg January 22, 2014 at 4:43 pm

Thought provoking, the Wall Street Journal on two wheels.

You’ve got a link to the RCS accounts but not to the Tour, can you add this?

The Inner Ring January 22, 2014 at 4:55 pm

No link available, sorry. The accounts were kindly emailed in from a reader and look like a scanned copy. The excerpt above seems as useful as it gets, there’s not much more to read as they’re summary accounts to comply with French law rather than a self-regarding glossy report.

Graham Goodman January 22, 2014 at 4:46 pm

Bike teams need bike races to exist. Therefore, they need to make organising races more appealing to individuals and organisations. Demanding shares of TV revenues in a sport where most events do not make money will do the opposite and will only serve to reduce the size of the calendar and shrink the sport.

I also think that revenue sharing will reduce the size of the events. If we are to argue that Sky or Movistar are worthy of €1M of revenue share, what about Lampre? Do ASO really have to give them the same amount of money when their event would be in no way diminished had Lampre not turned up? Would ASO not more likely decide that they only want to pay 15 teams and tell Lampre to stay at home? So, if teams are to be better rewarded for entering races, then surely it has to be in the prize money so that it is performance related?

Finally, with economies of scale, there is no way that any other race organiser are returning the same operation margins as ASO.

Ankush January 22, 2014 at 4:54 pm

Slapped back to reality. Great stuff Inrng, simple yet effective analysis.

Jason C January 22, 2014 at 6:04 pm

To me, the missing element which you hint at in all of this is transparency. Without at least the teams and UCI knowing the audited finances of race organizers, there’s no way to even begin a constructive discussion on revenue sharing.

The most difficult negotiation in the recent Collective Bargaining Agreement (CBA) for the NHL was around the term “Hockey Related Revenue.” The teams and players had agreed to a share, but not what income elements comprised that number. It’s more difficult than you might think, since some teams own their buildings (or are at least part of the same holding company as the building owners – NY Rangers/Toronto Maple Leafs) whereas others need to lease their arena (Phoenix Coyotes). Of course TV money is included, but what about ticket revenue, concessions, parking, etc.? This number is critical, since the revenue share is built on it. The players’ share is doled out in salary, prize money for team and individual accomplishments, and retirement funds. Perhaps not the best analogy, since the teams own the league. This would be akin to the UCI, ASO, and Team Owners all on the same side of the table against the riders.

The F1 Concorde agreement is a bit more comparable, since the FIA = UCI, F1 Teams Assoc. = AIGCP, track owners = municipalities hosting races, and the commercial rights holder (CVC) is roughly equal to ASO, RCS, etc. Though the terms of the agreement are secret, it is based on all the negotiating parties knowing the audited finances of the commercial rights holder. Payments go out to teams both in lump sums for participation (though teams and drivers have to pay a fee to the FIA each year), to the FIA for “regulatory services”, and in prizes for the constructors and drivers championships. It is worth noting that track owners are not part of the agreement, and negotiate exclusively with the rights holder to host a race. It’s long been rumored that most tracks lose money on F1 races only to make it up by being able to charge higher fees for other races and events due to the prestige. The drivers all negotiate salary with the teams (with some drivers bringing their own sponsors and not drawing a salary at all), and negotiate safety rules with the rights holders/track owners separately.

It seems that the cycling powers are enamored of the F1 system (and it does fit better than the NA-style franchise system), and so top-level cycling will trend in that direction. But I think there won’t be a truly long-lasting system in place until someone can convince the race organizers to open their books and/or a single commercial rights holder for top-level cycling is in place.

Shawn January 22, 2014 at 6:20 pm

I agree that revenue sharing in isolation from other reforms doesn’t make sense. It only makes sense in sports when all parties are in business together. This is why a new series/league had appeal to some who wished to create a more stable financial environment for both teams and promoters. Then it is not a handout but different parties working together to create a product that is attractive to TV, sponsors, and other advertisers and, then, sharing the profits.

Two side questions:
1. I was surprised at the avg. team budget you set at €12 million per year. Has it recently jumped up? I remember reading not long ago it was around €8 million per year.
2. How do the 3 main cyclocross series operate? Do they share TV revenue or is it the same system writ small?

Gregg January 22, 2014 at 7:09 pm

How do the 3 main cyclocross series operate? Do they share TV revenue or is it the same system writ small?
– I am not 100% on how they do it, but I would bet Golazo control the TV rights and the organizers keep the gate, or a large percent of it. I do know one of the farmers who leased his land for the cross race in Ruddervoorde stopped farming and makes enough just from the land use fee to live each year.

Of all the forms of cycling I feel cross (in Belgian terms) is about the closest thing cycling is going to have to a League Sports such as the NFL. You have ticket revenue, food and concessions, die-hard fans who buy your team apparel. Great TV coverage (75% of Belgian households watching TV at that moment, which is more than the Superbowl gets). Worst part about all this is it’s the riders who benefit the less than most of the parties involved. Only a handful are making a decent wage and many give up due to the closed system involved. Still, it has the potential if it can grow outside Belgium to be a much bigger player. When Nys and company started demanding higher start fee’s, the start fee budget stayed the same, so the difference came from the lower end, with the mid-level guys taking big cuts and the lower-end going from a couple hundred euros a race to nothing.

For me the number 1 thing lacking is consistency. Manchester United is Man U every year, no matter the sponsor (and has geo-graphic centrality which breeds loyalty, sports teams are our new ‘armies’ of the democratic age). Euskatel-Eustadi was the closest cycling ever came to this format, but even Slipstream Sports is know as Garmin-Sharp, then next year is another name. It makes it hard to build brand value over time. Slipstream has done a good job with it’s blue and argyle theme, but it’s still not enough to make the real impact. Sponsorship naming rights gives cycling much of it’s Value, but in the end takes away more than it gives to our sport.

Also, we, the cycling community are very self-sustaining, which is why this year the Pro Tour features no less than 4(5) bike makers as the title sponsors of Pro Tour Teams (Cannondale, Giant, Trek, BMC, and Merida as a co-sponsor)

The Inner Ring January 23, 2014 at 12:35 am

Teams budgets have jumped up, yes. It’s more they’ve run ahead of inflation but crept up would be too light a phrase. The €12m is the average but bumped up by the spending of Sky and BMC, a typical team might spend €8-10m.

Craig January 22, 2014 at 9:21 pm

Big thing missing in all of these comparisons – ticket revenue. Cycling is the ONLY sport mentioned here that has no cost of entry for spectators. Cyclocross in Belgium – check. F1 – check. Ball and stick sports – check. Hell, BMX stunts – check. This “open venue” system drastically reduces much of the value and revenue streams that could otherwise be allocated.

Sometimes exclusivity breeds value …

Martin W January 22, 2014 at 11:46 pm

Is there hope in a renaissance of interest in track cycling, perhaps? Track = velodrome = ticket receipts and associated catering revenue etc. Seems possible in the UK where a few big names are well known in a way that they weren’t just six or seven years ago and several new velodromes are planned. How does the money work out for pro road teams such as Belkin whose riders do six-days, for example?

noel January 23, 2014 at 11:43 am

I just paid out a load of money to take my family to see the Revolution event at the London Velodrome for example…..

Darren January 22, 2014 at 10:55 pm

You made an important reference to the value of the sport/teams being closely connected to the popularity of the sport, and how that has been overshadowed by the doping scandals.

The sport does need to ‘pump up’ it’s image considerably before the financial figures can become more meaningful. Changing the business model is just a paper exercise if the sport does not become more accessible to the public, which is one reason why a bunch of well-meaning but misguided financiers recently suggested a new calender with significant changes in an attempt to make the sport more interesting to a wider public. We all know that is not the way to go, the heritage of the existing races is too valuable, part of the sport’s goodwill.

There are plenty of other ways in which the sport can improve it’s image, both from the UCI level and from the teams and race organisers. TDU is a good example where the races all depart from a central point giving fans more opportunity to connect with the riders, plus there is the added thrill of circuit finishes, just as the Ronde Van Vlaanderen has recently introduced. These features seem to be appearing in more and more races. The global outreach of the sport of late is another tool if used correctly (consider the crowds at the 2 one-day races in Canada).

Ultimately, the sport needs to work on the pyramid of Brand Loyalty, strengthening the base, then building up. The money will follow accordingly. And if the business model fits, the money will flow in the right directions.

Phelan January 24, 2014 at 6:39 pm

Brand loyalty may yet be being taken seriously by the teams. we notice this year for perhaps the first time in ages, a dumbing down and only subtle changes to a majority of the rider team jerseys. is this coincidence or a real attempt to allow you and me to buy a replica jersey that can be worn for more than one season?
At the price point for replica kit i wonder if it is a serious attempt by teams to encourage more supporter purchases whilst having one eye on the current economies [specifically in cash strapped europe]

Patrick January 22, 2014 at 11:55 pm

i think the revenue sharing concept is really a means to an end. the end being more sustainable funding model for teams rather than being reliant on the whim of sponsors.

nice illustration though that, as is often the case, its not so simple as just changing one aspect. the theory i think is that the sponsors be tied more to the races than the teams so that if 1 sponsor pulls out, that impact is spread around evenly rather than being the instant death of 1 team. i’m sure a few team owners/managers would have appreciated this last year.

of course the bike manufacturers will prefer to stick with sponsoring a team direct so they ride the bikes. i can see a future where we have for instance the Cervelo-Slipstream team racing in the Garmin Classic. limited sponsors direct with the team (specifically around equipment sponsorship) and the general corporate sponsors behind events that then share the revenue with the participating teams.

noel January 23, 2014 at 11:58 am

nice sentiments, but I think Garmin Sharp are probably more attracted by JVs actions and attitudes than they would be to sponsoring a race where a number of ‘dodgy’ teams outside of their control could throw-up a positive test result, linking their name to some messy PR (having said that the Hesjedal thing didn’t read that well….)

Gareth January 23, 2014 at 2:44 am

I am the only road cycling fan in my family the rest are all football (soccer) fans. They find cycling a very perplexing sport, the hardest things for them to understand is whilst it is a team sport it is only individuals that win races, why person at the front of the race not the leader of the race and why teams do not have very big fan bases and why those idiots on mountains chase the riders in fancy dress.

I try to explain but am often reduced to “well it just is not football” and there it is cycling is just not like any other team sport and is the better if not the richer for it. To assume that income models from other sports are appropriate to cycling is to assume it is like other sports and it is not.

I concede that there needs to be more stability in the sport, more continuity of funding for teams better median wages for riders but have never been convinced that revenue sharing will do much to address these issues. The article has made me accept that it may have some contribution at some point.

More of the solution lies with all sections of pro cycling recognising that it must do more to foster and maintain it’s increasing popularity. At a basic level it needs to ensure that it keeps it’s hard fort for clean credentials. I am tremendously proud of my sport for the fight it made to clean up it’s doping history and wonder if other sports are as clean or would go so far to sort out their problems.

More importantly cycling needs to keep that vital edge; the idea that anything can and probably will happen all set in some of the most stunning scenery the world has to offer. This is manna from heaven for making high paying sponsorship deals if that is you can get it on TV, so investment in telecommunication technology is needed and varying formats that attract the cyclist core fan base and a new audience. So please do not get rid of the rider being chased by a man in a large nappy up Alpe d’Huez, it would as a cyclist hack me off but it does make for addictive TV.

Slip stream sports with its’ panda have cottoned onto the idea that the crazy can be helpful in creating an image and attracting a following and thus sponsorship.Long may cycling celebrate and exploit this its crazy side after all it is not like any other team sport and is the better for it

L'autre Dave January 23, 2014 at 3:26 am

In the business world a profit is still a profit. However meager that may be I suspect the ASO will always have a “let them eat cake” mentality.

John Liu January 23, 2014 at 6:49 am

I find the marketing aspect of cycling team sponsorship a little puzzling. Yes, Company X’s name on a jersey gets hundreds of hours of cumulative TV exposure in a season, but the great majority of that exposure is to viewers who have no conceivable chance of ever becoming customers.

Take for example Lampre. As a cycling fan and TV viewer in the US, I have no clue what Lampre does and even if I knew, they’ve no chance of getting a penny of my spending because whatever they do, they don’t do it in the country where I live. So the millions of hours of “eyeball time” the Lampre name gets in the US is all wasted as far as marketing value goes. Ditto many of the other team sponsors in many of the countries where they pay to show their logos. Tinkov and Saxo are banks in only certain countries, Argos has stations in only a limited region, etc. I fear the great majority of media exposure the typical cycling sponsor gets is commercially useless.

Some sports solve this problem by attracting global consumer brands as sponsors (e.g. F1) but cycling doesn’t attract many global banks, telecommunications giants, or energy drink brands as sponsors. Sky is an exception that doesn’t seem to be turning into the rule. As long as every cycling team is just one doping scandal away from being an embarrassment to its sponsor, this situation might be hard to change. But I think it is also a relic of road cycling’s history as a parochial sport centered in just a few countries of Old Europe. When 90% of races were in France, Italy and Belgium (that’s a number I’ve just made up) and there weren’t live video feeds beamed around the world, who cared if the sponsors were or were not global brands?

What is the solution?

Ultimately, if cycling can be seen as a clean sport and not a reputational risk to sponsors, maybe the global companies will return. They can really get the most commercial value from the thousands of hours of global TV coverage a cycling team gets, so they might pay accordingly. How many years or decades might that take?

Until then, perhaps teams could be permitted to advertise different sponsors in each country. In the Giro, the jerseys would carry one logo; in Beijing or California, they would carry another.

Or perhaps the jerseys would stay the same but the TV broadcasts could be digitally processed to replace, say, “Ag2R Mondiale” with “Commerzbank” or “Fidelity” in the appropriate country.

I suppose the teams would need an identity separate from their sponsors, if only so the announcers would know how to refer to them.

Anonymous January 23, 2014 at 10:17 am

What has always puzzled me is why do races in the middle of summer all finish at about 4-5pm CET when nobody is at home to watch?

Why not push the timings of the stage back to finish at 6pm or 7pm (while it’s still light of course) so that you run into the evening TV schedules? Look at competitions like the Champions League which gets big audiences on week-day evenings or even 20-20 cricket which moved to evenings to get bigger crowds and TV audiences.

I can’t see any reason why you couldn’t push the start times of a stage back a couple of hours and adjust the schedule accordingly, you could also do more of what the Giro is doing this year with evening TTs or TTTs on the opening day or flood-lit stages.

DrHeaton January 23, 2014 at 10:18 am

Ooops, that was me.

The Inner Ring January 23, 2014 at 10:28 am

Agreed. The Tour de Suisse does it with stage finishes timed at 6.30pm and we’ve had some later prologues in the Tour and the Vuelta.

But it’s not so easy, for example in France the Tour is popular but it can’t bump the prime time quiz shows and news bulletins off the schedules.

Marsman January 23, 2014 at 5:46 pm

I don’t think closing down roads during rush hour will make the sport more popular…

Dave H January 23, 2014 at 1:44 pm

The “prune juice” issue is giving me pause for thought. The issue I guess is that if revenue is shared fairly then no one team gets a competitive advantage so the increased wealth converts to more expensive rider contracts. Isn’t this a result of the way that cycling teams are financed though.

Given that most cycling teams get all, or nearly all, of their revenue from sponsorship it is difficult for them to justify making a profit to distribute to shareholders. If I was the marketing manager at Quick Step flooring or Omega Pharma, I would be pretty unhappy to see a portion of the money I spend to promote the brand going into the pocket of the owners of the team rather than being spent on ensuring success on the road and a higher profile for my brand.

In other sports, where the income is more diverse, it is reasonable (albeit rare) to make a profit on your activities. But when your only income is from sponsors it is harder to justify that passing some of it shareholders is the best way to promote their brand.

Eb in AZ January 25, 2014 at 9:51 pm

interesting, especially in light of the recently reported Project Avignon -
http://www.cyclingnews.com/news/exclusive-teams-create-project-avignon-to-revolutionise-professional-cycling
also I just read a piece about Gianni Savio and his Androni Giocattol team, his annual budget is only $2.5m. I’d venture to say that the numbers you are talking about would mean alot to him. Of course, the team wouldn’t be a Tour participant, Giro only. But knowing how JV scrambles to keep Slipstream funded I have to think those would be meaningful amounts. But of course you are right on the larger point, make the “pie” bigger, which is what the Avignon group seems to be working on.
Haven’t read any ideas in this regard. Race radios broadcast on the TV coverage? on bike cameras? Riders miked up?

The Inner Ring January 25, 2014 at 11:22 pm

I’ve done three pieces that are worth reviewing together:
- The Sugardaddy Paradox (subtext: it’s not about how much money the sport has, it’s how it’s managed)
- Who understands the UCI World Tour? (subtext: the world tour might be a great idea or not but the marketing and promotion is terrible)
- The Problem with Revenue Sharing (subtext: by all means share money but only if the teams can demonstrate they’ve cleaned up their and deserve a slice.

Put all three together and we begin to get an idea of where the sport is turning.

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