Garmin-Cervélo was to become Garmin-Big Mat but the French building supplies firm pulled out, leaving the squad hunting for a new sponsor and with a hole in their budget. I wonder what happened to make the company back out, especially since there are reports of a “binding” letter. But that’s for another day.
Fortunately there is Doug Ellis (pictured left). The Chairman of Slipstream Sports and a very wealthy entrepreneur, he helped Jonathan Vaughters found the squad several years ago. But it means the team now joins the Sugardaddy club of squads dependent, partially or wholly, on wealthy backers.
Let’s look the 15 squads aiming for the top flight in 2012:
| Astana Pro Team | Kazakhstan government |
| BMC Racing Team | Andy Rihs |
| Garmin – Cervélo | Doug Ellis |
| GreenEdge | Gerry Ryan |
| Katusha | Igor Makarov |
| Lampre – ISD | * |
| Liquigas – Cannondale | – |
| Lotto Cycling Project | * |
| Movistar Team | – |
| Omega Pharma – Quick-Step | * |
| Rabobank | – |
| RadioShack – Nissan | * |
| Saxo Bank Sungard | – |
| Sky Procycling | – |
| Vacansoleil – DCM | – |
In summary six teams depend on rich men or political patronage. The asterisks are cases where the sponsorship is mixed. Lampre is a viable business but run by a cycling fan. Lotto is the creation of Belgian politicians and the state-owned lottery. Omega Pharma sees businessman Marc Coucke promote his company via his favourite sport, joining up with the Quick Step team that is part funded by Czech millionaires. And Radioshack-Nissan is built on the pricey foundations laid by Luxembourg’s billionaire Flavio Becca. In total that’s nine out of the fifteen squads that are dependent on patronage in some form although note the majority of total sponsorship income comes from companies, not wealthy men.
Now it’s great that people want to come into the sport and spend the money. Maybe if you won the lottery you’d spend a proportion of the money on a pro team, after all the Belgian and French state lotteries have their own teams in Lotto and FDJ. If anyone riding a bike is good. then by extension anyone paying for a squad of 40 or even 120 staff is great. Sport can be a mixture of business and pleasure. Look at other sports and you’ll find many combining their wealth and passion to buy a team or bankroll athletes.
But all the same the absence of pure corporate sponsors does signal something is not right. It’s said that sponsoring a team brings in huge amounts of publicity, a giant return on the amount invested. But it’s a bit like buying a bond from a Greek bank right now, you might get a big return but there’s a big chance you lose too. The sport is still suffering from doping scandals from years past and sponsors fear if they get involved it could blow up in their face. Reputations take time to turn around. Simply put companies are saying it’s not viable to back a pro team and they’d prefer to take their money elsewhere. The likes of Nestlé and Skoda are sponsoring the Tour de France instead of the riders.
Summary
It’s great that some put their money into the sport and cycling isn’t alone when it comes to sugardaddies and political patronage. The sport goes on, nobody is saying races will end.
But look at the Leopard squad, Flavio Becca came in with talk of building a team but the absence of a sponsor meant the adventure was over and just a year after it was born the Leopard team was a carcass being picked apart by vultures. When this is replicated across other teams, from Highroad to Geox, the uncertainty is magnified. Teams take time to build but if a sponsor can leave after a year or three and no replacement appears, you lose the whole team. Despite the relative value of sponsorship compared to publicity, many sponsors won’t sign up.
I’ve always wondered how effective sponsorship in general is? And similarly, how detrimental a doping scandal is to the sponsors’ sales. I mean, I can’t imagine buying a certain brand because it sponsors a certain team…though maybe I’m just naïve (in that, perhaps I do so without realising it).
On the other hand, I can say with complete certainty that I wouldn’t refrain from buying a certain brand because it sponsored a cycling team that was linked to doping. Surely the benefits of sponsoring a team are getting your name out there and recognised? As they say, any publicity is good.
That said, perhaps the forces behind marketing and sponsorship are more subliminal than I realise…don’t know (clearly).
Although the CPM of cycling is excellent, the risk of brand damage from a doping scandal is categorically deterring.
I am personally responsible for a marketing budget and although I adore the sport of cycling I would not even bother trying to pitch it to my directors. Whatever the bigwigs of the UCI may believe, the perceived tarnish is still very much on in the real world.
NB: the Contador and Armstrong cases have together pretty much reset the clock on that.
This debate sparks a lot of questions in my head. None of which I have an answer to. Maybe others have?
What are the different available business models for the teams? What other sports are comparable to pro cycling in that regard (Formula 1?).
Are there anything to be learned from other sports?
I know they can’t sell tickets, but what are the other areas where pro cycling differs from for example a football club’s revenue stream?
Post note: The media landscape is getting more and more diverse, you have better options than ever to target your advertising on several platforms. Sponsoring big events or teams gets your name out big time, but it might be more effective to spend less, but more targeted.
Brand damage from doping scandals? I don’t think there’s any evidence for that. On the contrary, the story goes: Festina sold the most watches in the year after its EPOnymous affair.
I think Festina is a counter-example. Many other sponsors have fled the sport on the back of doping scandals. See Saunier-Duval, Liberty, Telekom. There is publicity in scandal but there are probably cheaper ways to link your brand to cheating and deceit.
Kasper, I think the businessmodel of a UCI World-Tour cyclingteam breaks down into two types.
On one side there’s the big company like Sky and Rabobank that effectively own the team and probably have a say in what happens on the sportive side. (Rasmussen-Tour incident with Rabobank)
On the other side there’s companies that offer exposure in UCI World-Tour cycling like Bruyneel Sports Management, Slipstream Sports etc.
@Laurence I might be a silly example but I generally go with Europcar lately, went to Chipotle grill in central london when i saw it (i wasn’t even hungry!) and when i first arrived in Europe (from Australia) used to seek out Credit Agricole banks to make my withdrawals from. My brother chose Garmin over Tomtom specifically because of their sponsorship. I do it in a silly knowing way – as if it proves my credentials as a cycling fan or something frivolous but, hey, it works. My next mobile will probably be an HTC (they did have a couple of good years!) and my brother always gets his kids the little Estate’ iced tea when he visits Italy and then point it out to them when watching the post stage interviews of the giro. “Look at what Di Luca is drinking….that’s what you had with your lunch!”. I think they actually hate it……probably the Di Luca association though.
Well, the “tarnished” image of the sport can have itself great advertising value, for some sponsors. On one hand, I think pharmaceutical companies and health service providers will come round to sponsor riders sooner or later, so that they guarantee the cyclist’s health and proper, controlled, knowledgeable use of chemicals. On the other hand, those who sell mindless pleasure and hedonism (erotic industries, extreme tourism, foie-gras and big burgers, wine and beer, viagra, you name it) can greatly benefit of cycling’s low CPM, regardless of doping (at least in Europe).
I got thinking…
Radioshack continued sponsoring of the “Radiopard” team maybe it’s just for show.
I mean like Leopard this year, the best part of the budget will come from Becca. Radioshack is staying to silence the joking on the blank jersey.
Becca wanted Bruyneel for the Schlecks, and this merger was the way they figured out.
If memory serves me, Kas (the Spanish drinks company) was owned by a cycling fan, who promised Sean Kelly that he will spend all his career in a Kas jersey, that was until the owner of the company died and the remaining directors then pulled the company out of cycling!
There should have been a lesson learnt there.
On another note I wonder if the lack of sponsors is a combination of the following two issues:
The so called “super tanker effect” (it takes a long time for it to slow down), where due to the drug scandals and the subsequent badly managed PR around the scandals sponsors who were legally contracted to a cycling team stayed in the sport until they were able to get out of the contract without paying a ton of cash (ala Telecom), and we are now seeing the results of this.
&
The lack of vision among the teams (management) and UCI to get out there and promote pro cycling as viable cheap marketing tool.
i follow @jkeltgv comments
After standing on the col de la Madeline in 2010 for 3 hours in the summer heat, the sudden appearence of a Vittel bottle being thrown past my head by a guy in a van was a life saver (well almost). As a thank you, I now always look for Vittel in the fridge cabinet when buying water and at my business we now only stock Vittel.
If we go back far enough, most of the teams were sponsored by bike companies. We’ve seen a bit of a return to that in the last few years, but the costs are higher than they used to be, and Cervelo has shown that companies in the bike industry don’t really have the resources to be title sponsors of teams with today’s budgets. Certain companies have a good case for marketing by sponsorship. Garmin is becoming a niche company that sells sport-oriented GPS gadgets, since their more mainstream devices are being undermined by smartphones. The problem is, the collective marketing dollars of the top businesses in the bike industry are not enough to bankroll the professional peloton, so it will always be reliant on other sources, and it may be inevitable that some of those sources are rich guys with money to spend. That’s OK with me as long as they can come up with some rules to create a little more stability than what we have now.
“jkeltgv:- I am the same, however I think that we cycling fans are atypical. (Which as I understand it, means “Very Special”) 😉
As for the rest of the public, I am not so sure. I dont know if my wife even knows that Geox sponsored a team let alone that they are pulling out. (Memo to self: ban wife from buying any more Geox shoes….. actually, ban her from buying any more shoes fullstop… she has enough… and it cuts into my cycling equipment budget.)
@Q:
RE: Rules to create stability.
I am with you here. I know the UCI are hardly in the position to refuse the chance for wealthy people to get involved in cycling, but surely a stable sponsorship platform with several sponsors at different levels, with different contract durations would be preferable to one Sugar Daddy with a promise. The financial criteria should not just be based on proving that a certain amount of money is available by October each year. Although he is not World Tour, this is why Gianni Savio’s teams go on for ever; if one sponsor pulls out, the other twenty just get a fraction more jersey space until he finds a replacement. How much advertising value they all get is however questionable. Maybe he keeps them happy with other benefits like direct marketing access to our niche, corporate hospitality etc.
Having said that, the UCI contract lengths, and the late notification for world tour status would make any sponsor contract negotiations challenging.
Note: As if I have the power to ban my wife buying shoes…ha.. I must be dreaming.
(and sorry for the long post)
I’m waiting for the first “Sugar-Mama”
Is it not also arguable that although sponsored by BSkyB that this arrangement largely came about because James Murdoch is a cycling fan. I would have concerns as to what the future might hold if the News of the World scandal sees James Murdoch take more of a back-seat at BSkyB.
Though on the flip side I would also imagine that Sky get a good return on investment in terms of increased brand recognition on the continent. I read an article (I think in the economist) that said that Berlusconi effectively changed the regulatory environment in Italy to favour his own stations and prejudice Sky. Maybe he could pitch up at the UCI when he gets bored of politics…
“binding letter”? its another day now, somewhere.
You list tells the story: 9 of the top 15 teams are either owned outright by rich fans or sponsored by companies controlled by executives/fans. How is that different from most football teams? I see it as a natural evolution of cycling into the business model of other big-time sports. Teams always will be happy to accept a sponsor’s money, but time has shown advertising alone is not enough to finance the sport.
for a stable platform they need budget caps, salary caps, max team size of 24, multi year race appearance guarantees
The only thing everyone is missing in this discussion is that there is a global economic crisis going on. Cycling isn’t the only sport that is having trouble with sponsors/money. The NBA is sitting out a season because half their teams aren’t making a profit. The biggest teams in auto racing aren’t finding sponsors.
To the person that thinks Radio Shack is sponsoring a team “for show”, ummm, no. They are a publicly traded corporation that is not into throwing money away. They have a deal, brokered by Austin’s favorite son (RS is an Austin, TX company) Lance, through 2012 and when the opportunity to get back on the podium in the remaining years of their contract cam about, why wouldn’t they go for that?
Why are bike teams always named after their sponsors? Why not adapt traditional sports sponsorship naming? Eg: “Vaughters Vikings – sponsored by Garmin”. This way if a sponsor decides to bail, the team is still the Vikings. It will also make it easier for fans to keep supporting a team, rather than supporting a company.
I think Q and Harvey have got it right. I keep pointing this out but some don’t seem to understand or believe it – the multi-national, big bucks situation in cycling started only with LeMond and continued to a greater extent with BigTex. It was never the normal state of affairs and those days are OVER folks! Add the global economic situation and there should be zero surprise about sponsors being tough to find — then add in the doping scandals and a CEO either has to be bike mad or insane to link his brand with the corrupt sport of pro cycling. Do I like this situation? Hell no! But pretending it doesn’t exist and yearning for those good old days when there were piles of money being thrown at cycling doesn’t fix anything. Only fixing the corruption at UCI and ridding the sport of dope cheats will have any chance of improving things. But even with that, I wouldn’t be a dime on the heady days of 1990-2008 being repeated any time soon. I’d be content with 12 protour level teams, 4 wildcard entries allowed by promoter choice and pelotons of 150 rather than the 200 of recent times. There are not enough good sponsors, team directors or riders to support it.
There are other sporting leagues where there are a team owners, often wealthy, and team sponsors, the “gate” reciepts, and significant television revenues that are shared amoung teams. In road cycling, a team or a promoter can’t build a stadium and charge admission. Currently television revenues go to the promoters and do not help the teams balance their books. I wonder that television revenue sharing wouldn’t help stabilize cycling team finances, the prospect of world tour participation, and sponsor willingness to pitch in for extended periods.
Well, there’s three critical points that have to be rethought:
1. The lack of disclosure and governance by the UCI.
Think about a foreign investor willing to invest in a market, but unable to trust in the government that rules that market. Gains have to be higher to compensate the risk. Same in sports.
2. A well established business model by the teams to ensure that sponsorship will be worthwhile on the long term.
3. Lack of imagination.
European cycling business model has not evolved in 100yrs. And there are other ways, besides sponsorship, of a team making money. Or there has to be. In a sport followed by people around the world, on the 21st century, and the best thing you can do is offer a 30cm space in your shirt? Just like 50 years ago?
Have a look at Barcelona (the soccer team). They don’t even have a sponsor. Actually, they pay to sponsor Unicef, and still makes BIG money.
I know I’m comparing two different things, but for the sake of an argument. What cycling teams are offering is the best they can do? Honestly I don’t think so.
I admit it, I am new to following pro cycling. I am learning a bunch from this blogand enjoy the comments as much as the articles.
That said, I agree with “huphtur”. The teams are to “transient” in nature with regard to naming. I can only assume that the name of the team is the most beneficial aspect of sponsorship. The rights to the “jersey” are secondary. I could stand corrected but his naming model is not seen in other pro sports. The “All Blacks” could never be called Adidas-Steinlager right?
I know there are a lot of trades and player movement (and teams on occasion, go Winnipeg!) in most pro sports, but keeping track of the pro peleton is a full time occupation. It is little wonder that the “fair weathered” fan (or TdF only watcher) is easily distracted by scandal.
All of what I read here makes sense. More stability of licence and guaranteed races would lead to stability of sponsorship, leading to stability of teams and rosters, leading to increased long term fan support and brand awareness, leading to more sponsorship. Scandals aside of course.
This scenario is repeated on this Blog and elsewhere often. Call me new and naive but if folks on here can see it and mostly agree, who has the blinders on.
David
Without the revenue stream of paid attendance, I think teams would be better off with a share of TV revenue as is done in most other sports.
Since this would take money from UCI, ASO and others; I don’t see this happening.
I do think it would be best for the sport as an ongoing concern, however.
Some teams are transient but others less so, they have been in the sport for a decade or perhaps 20 years. FDJ, Lotto, Europcar, Cofidis, Movistar… all can trace lineage back in time.
I’m sympathetic to the revenue sharing idea but flip it around and note that many teams are only too keen to pay for a World Tour licence, committing to big squads and budgets, funding the licence and biopassport scheme. All so they can get guaranteed entry to the Tour de France. Reduce this down and maybe ASO, as Tour organisers, could – in theory I stress – charge teams admission to ride. In other words this race is so valuable, instead of sharing money, ASO could raise money. Just an extra thought on sponsorship.
@Rich
I agree 100% with salary cap and longer licences (+ a better point system) .. but not clear on the benefits of a smaller team size. Can you elaborate some more ?
@ Felipe
Slight problem with the Barcelona example, they didn’t have a shirt sponsor recently until this year. They are now sponsored by the ominpotent Qatar, and they are in an enormous amount of debt (hundreds of millions). I wouldn’t promote football as a model to follow generally. Huge global TV money has made nonsense seem acceptable, but it’s not sustainable.
@ Maddave
RE: “who has the blinders on ?”
http://cozybeehive.blogspot.com/2010_05_01_archive.html
@ Maddave
This is the correct link….
http://2.bp.blogspot.com/_urSQl6wUA5g/S_n9O0A3J4I/AAAAAAAAIBw/73ZxRVh1ifM/s1600/pat+mcquaid_hearnoevil.JPG
Great comments! Many “teams” in this sport suffer an existential crisis every year. Why? There are many causes, but they all have to do with the fundamental economics of this particular branch of the sports-entertainment industry. Vaughters has commented persuasively and at length about all of this on numerous sites, and here is a concise summary of the solution he suggests. I think it should be taken with a grain of salt, but he makes a strong argument for a more stable equity model that could build demand for well organized teams rather than relying solely on a hegemony (aka: UCI controlled licensing system) mired in secrecy. @Rich and @MadPat- I’m not sure the size of team salaries and budgets warrants constraint just yet, we’re nowhere near football or F1 financial demands. I don’t hear a lot of team owners complaining that the riders’ salaries are too high, but I could be wrong. @Irace1- I thought the NBA lock-out had to do with a dispute between players and owners regarding salaries and shared revenue, not a bunch of teams filing for bankruptcy. That sort of problem is a PRO’s wet dream, and I don’t know of any cyclists who get a slice of team equity…maybe the Schlecks?
@Ad
Agreed.
Maybe it was not a good example, but the argument still persists: naming rights its the best a team can do to raise money? Aren’t there any other ways? I mean, just to keep the team up and running in a short of sponsorship.
Pro cycling is a dead sport supported by a niche population of billionaires who turn their heads the other way to the ugly reality of the sport. Like fiat currency, the situation won’t be getting any better any time soon
@ rob
“pro cycling” will never die. It may be the living dead, but there are to many people who love “cycling” much more than “pro cycling” for it to completely bury itself.
I agree. Compared to football which is populated by a large amount of primadonna’s who think they are the big ‘I am’. I’ve found cycling to be a breath of fresh air. There’s an honesty about riders slogging their guts out over three weeks and because cycling is not mainstream it’s easy to get access to the teams and riders. Albeit you may have to travel considerable distance to do so. It is sad that the growth of the sport is being stunted due to a less than transparent system for testing and prosecuting drugs offences and a bungling governing body riven with conflicts of interest.
The UCI and other cycling/doping authorities (e.g. CAS, Spain, Russia etc) have a lot to answer for in deterring potential sponsors of cycling teams. The farcical situation of the Contador case must be having a catastrophic effect on the sport with regards to sponsorship. Imagine a marketing manager of a corporation looking at how the Contador case has been handled and you can see why they’ve been scared off putting their companies money into the sport. It’s unbelievable it hasn’t been resolved either way nearly 18 months after it happened.
Want more money in the sport? There is an easy answer, just unpalatable to some: Stop the war on drugs, accept that they are all doing it, and allow the pharmaceutical companies to sponsor teams – they have the money, and the general lack of conscience to use athletes as guinea pigs. In the west, we have sports that are rife with drug abuse – most people in the USA don’t care that there is cheating going on, as long as they put on a show. Drugs are rampant in all of sports, and cycling suffers because they try to clean it up – which is impossible – as the cheats will always be a step ahead of the testers.
@ Trounder
Excellent post.
One clarification, in my view, the primary benefit of a salary cap is the equitable distrubtion of talent. This will help smaller teams to be more competitive (as free-spending teams like BMC & Sky can’t monopolize all the talent) which should help them to attrack sponsors.
@MadPat 24 riders makes it easier to manage the finances and spreads the talent out more across the teams. If races go to max racers of 8 per team 24 allows them to field for 3 events in a short period of time.
According to the twitterfeed BigMat has agreed to sponsor FDJ for 2012. With the newsitems about BigMat coming from SlipstreamSports the deal between FDJ and BigMat now has a certain image over it. BigMat pulled out of a deal last-minute and are now joining FDJ.
Anyone experienced in sponsoring matters will recognize these things do not happen overnight. The budgets required are far to big to just juggle with them. On the other hand I can imagine that SlipstreamSports is very unhappy about this and BigMat could have given some better communication.
Dealing with an issue like this through public opinion is always an example or poor business and sports-ethics by Slipstream. Professional cycling has enough issues on its plate right now, publicly commenting on someone else’s sponsor deals does not help anyone.
Regarding paying to be in LeTour; I remember in 1988 (my first time being there) listening to Jim Ochowicz saying 7/Eleven Team paid something like $20K to enter. For that they received, as he said, the use of two cars, hotel rooms and food –and a couple of towels”! I still have photos of Raul Alcala’s cycling laundry hanging out of the hotel window to dry. I believe part of the financial woes of pro cycling (as the Italian mag BICISPORT has pointed out recently) is the whole thing has become way too expensive. How many team buses do you need to compete in more than one big race at a time? How many supply/mechanic trucks, how many cars? How big a staff? How many bikes that cost $10K each? The budgets have gotten out of hand.
Irace1,
I think you misread what I wrote.
Radioshack will not be throwing away money, quite the opposite. What I wrote is that they will not spend that much as such high end team’s title sponsor would normally.
@ Ken, you can’t compare road cycling to stadium sports. There is no profit incentive to own a cycling team, as there are no revenue streams other than sponsorship, limited merchandising, prize money, and travel stipends/start money from race organizers available. Stadium sports, and leagues have gate fees, TV rights, but more importantly equity in an asset that they hope will appreciate. In cycling all of the revenues go to run the program. There is no equity; the only incentive to get involved is love of the sport, and possibly a salary by serving as management.
Almost everyone thinks that sharing TV rights is the key to stabilizing the teams. This is utter BS. Why? The revenues are only big for a few of the events; think Grand Tours and Spring Classics. Most smaller or mid size races have to pay to have their races televised (or provide a sponsor to the TV station/network to cover production costs & airtime); they do it because the race sponsors demand it. The races that do have large TV right revenues often use profits from their big races to support smaller races (ASO, RCS, etc.)
@huphtur Teams are named after their sponsors, because that is the largest revenue stream, and naming rights are sold. Having a team named “Vaughters Vikings- Garmin” has less commercial value to Garmin than “Team Garmin”. Since sponsors are relying on media exposure & PR for their return on investment, that means their name has to be visible on uniforms (visible on TV), prominent in print media, and on the tongue of announcers and broadcasters.
The sugar-daddy model will work, as long as interest is maintained, resources available, and scandal minimal. This model is no more unstable than a pure sponsorship model; with one exception. All marketing campaigns have an end; the difference is that if there is a solid commercial ROI for a sponsor,it is in theory easier to find a new sponsor than it is to find a new sugar daddy.
We need to face it, race organizers and team owners currently have significantly disparate interests, and face their own sponsorship and stability issues. At today’s expense level (and salary caps won’t work), it is just too expensive to fund a team that can compete from January – October, often on multiple fronts simultaneously. The larger teams have also set expensive standards (team buses, team kitchen trucks, staff’s of 40+ to run things) in the way they operate today. The pool of sugar daddies and sponsors are much larger at a 1 – 3M Euro investment than they are at a 5+ M Euro investment.
The UCI can keep changing the rules of the Pro Tour, but the structure itself is fatally flawed.
It was in the 1980s that Cyrille Guimard and Laurent Fignon created a company and then “leased” the naming rights and space on the clothing to Système-U, a French supermarket retailer. This was, I think, the first example of creating a company that managed the team and signed a contract. Prior to this riders on, say, the Peugeot team, were employed by Peugeot.
What’s interesting is that someone like Flavio Becca thought you could buy up some of the best riders and then sell the name rights and jersey to a company for a sum greater than the wage bill and operating expenses, in other words to make a profit. But this does not seem possible, wages and costs are equal to, or greater than, the publicity value achievable.
Touriste – you said it better than I did, good job! One note in general, I think Vaughter’s team did not recently join the sugardaddy club, it was founded as one. Slipstream is like Leopard, just a name for a rich guy’s passion for cycling, same as Highroad was. I’m glad these guys are supporting cycling, though I wish it cost them less. The sport became too expensive starting with the LeMond years, greatly accelerating in costs during the BigTex era. Pro cycling’s economic bubble (just like so many others) has burst and the new reality is painful for some to accept.
Katusha- don’t forget Gazprom, Rosnanotech, Transneft and that bank… You could say that Katusha gets most of its backing through the Russian Govt.
Why don’t the sugardaddies like Ellis spend their money in social causes instead of in sport teams? Really, it tells a lot about the lack of ethic values and intellect of these nouveaux riches who do not find anything better to do with their money. They are so incredibly tacky.
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