Want to run a pro team? You need millions of Euros a year. Here’s a closer look at the team budget of Ag2r La Mondiale, the French team in the World Tour sponsored by one of France’s largest mutual insurance companies.
There’s the team budget in black and white for 2016, grabbed from a filed copy of the team’s annual accounts: €15,583,516 which is up 8.7% on the previous year’s budget of €14.3 million. Again it’s 2016 and not this year, these are from the team’s accounts for the year ending December 2016 which are then compiled, audited and filed and in time published in France… and a kind reader duly emails a copy over.
As this team publishes the accounts annually we can trace the budget over recent years and the chart above shows a compound growth rate of 10.8%. This tells us something about the team’s ambitions over the years and the sport in general. The World Tour background is one of wage inflation for riders, pay has gone up substantially. But the market is lumpy and variable. A year where points suddenly matter for teams hoping to stay in the World Tour can see salaries soar, ditto if a new team wants a World Tour licence. But the accounts for most teams and the World Tour as a whole are not public – the UCI does audit them but won’t share the data – so we can’t get the overall picture.
Ag2r La Mondiale are not just passive observers responding to the market trends. It was not long ago they were recruiting Iranians for their UCI points but these days they’ve got a solid feeder team and have some of the world’s best riders like Romain Bardet and Oliver Naesen and sit tenth in the UCI rankings. They’ve spending to make something rather than just buying in riders. They’ve expanded the coaching staff and now have head coach Jean-Baptiste Quiclet managing three others including an altitude training specialist. It was only a few of years ago that Romain Bardet was driving down to the Sierra Nevada’s Centro de Alto Rendimiento with his father and a stack of scientific literature about altitude. They’ve also restructured the management so it’s more than team founder Vincent Lavenu driving the team car and juggling the budget.
Where does the team’s revenue come from? Actually the accounts don’t spell this out, they’re published but only in summary form. Presumably insurance firm Ag2r La Mondiale provides most of the funding but other sponsors typically contribute cash too on top of material and teams also get millions from race organisers for participating in their events.
How are these millions spent? Here’s the screengrab from the accounts:
There’s €470,632 on materials and supplies. Teams have sponsors for many things so this could be fuel and accommodation but it’s not clear. The main item is wages: the underlined €8.2 million spend. Team Sky’s accounts are due out shortly but last year their wage bill was €24.1 million in comparison which explains plenty. Sky’s dominance leads to talk of salary caps and budget controls but teams operate in many different jurisdictions and in France, as the accounts show, there are a further €2.8 million on top in charges sociales, better known as payroll taxes which equate to 33% of the wage bill to be met on top. This means Ag2r need to spend 33% more just to pay the same salary to a rider on a team that doesn’t face these taxes, a significant fiscal headwind. It shows that simply imposing a budget cap in isolation could close the gap but it won’t level team finances.
Teams have few assets, there’s no stadium and they don’t carry much cash either. Riders and accumulated knowledge and experience may be assets in the figurative sense but they don’t show in the accounts. Instead the biggest assets in the accounts are the team vehicles only of course these just depreciate with age and use.
As ever there’s the UCI bank guarantee of €2 million on the books to. All pro teams have to have one of these as a condition of their UCI licence and it’s effectively a pot of money held in escrow in case the team vanishes, leaving riders and staff with unpaid wages. It’s a good idea but it ties up a lot of capital. If you wanted to start your own version of Ag2r La Mondiale today you’d need the €15 million annual budget and then have to stick €2 million on top for the UCI guarantee as well as spending more on the team bus and more.
“Just €5 million more”
Cofidis’s accounts are online too. The budget for 2016 was €9,918,775. Their publicity and success seems far removed from their French rivals. The Cofidis logo is often easier to spot at a race on the roadside publicity hoardings or finish line – pictured – than on the team kit because they’re struggling to win and haven’t won a stage in the Tour de France since 2008. Just €5 million more would get them to where Ag2r are and perhaps, but no guarantees, stage win and podiums in the Tour de France. Now just a few million is also an increase in the team budget of 50%, a huge increase but parent company Cofidis turns over €167 million a year. We’ll see what 2018 brings for the team, signing the Herrada brothers is a surprisingly good move and Nacer Bouhanni can and has beaten the best in World Tour sprints, he just needs an injury and hassle free path to the Tour de France.
Conclusion
Three podiums in the last four editions of the Tour de France is plenty and every year Ag2r La Mondiale put out a press release to show how they’ve got many times their spend in publicity. They’re so happy they’ve committed to funding the team until at least 2020 and this has allowed the team to sign the likes of Romain Bardet, Pierre Latour and Oliver Naesen on uncommonly long term contracts that run until the end of 2019. This is welcome stability but the finances show ever increasing demands on the budget which has risen by 10% a year on average this decade.
- Exchange rates at 31 December 2016: €1 = US$ 1.05 = AU$1.46 = £0.85 GBP
Not only would budget caps perhaps lead to teams being at more equal levels, but it should also help bring more stability to teams – instead of them having to deal with ever increasing costs. Capitalist dogma tells us that growth is always good, but the examples that show this not to be the case are too numerous to mention.
It’s good that Ag2r publish their budgets and it would be good if the UCI would do the same for all teams – but we all know how the UCI hates transparency.
I can’t see how Cofidis are getting value for money and their signings policy has long baffled. Maybe the Herradas will bring them a TdF stage win, but I don’t see Bouhanni doing that – he rarely beats the best and hasn’t won a GT stage in the last three seasons. Either way, it’s a lot of money to spend for having only the possibility of some stage wins and, if they’re lucky, maybe a top ten on GC.
I agree, some sort of budget cap (probably a soft cap that takes into consideration regional taxation/admin expenses) and stability mechanism is a good thing on papers. However, as we all know, cycling is a very weird sporting endeavour and business model. It would very likely be a non-starter.
For example, here’s one fly in the ointment. You’d be asking the team with the largest advantage in large part because they have the biggest budget to give up that advantage. The Murdoch’s pay the most in cycling on purpose so they get the exposure every year of crushing the competition at the Tour. Don’t forget, most teams effectively operate at the mercy of their sponsors, so this rule wouldn’t be with the UCI, it would have to be between all World Tour team sponsors. If one team doesn’t agree, then it doesn’t work.
Honestly, this is an example of the UCI being a very powerless organisation. They have very little actual control. The ASO completely ignored their rule changes under the Brian Cookson regime, and the next UCI President could come in saying he/she will institute a salary cap, but if Team Sky and Quickstep don’t agree to it, what’s the point?
Cycling is a sport run by the ASO and a few top teams make the rules, the sooner the UCI and fans accept that, the quicker people will be able to move forward with practical solutions to it’s problems.
i still don’t really see budget caps as much of a solution right now. sure, it would help to limit the advantages of the larger teams, but wouldn’t it create a knock-on affect with prospective sponsors? would someone like Murdoch or Movistar still want to sponsor a team if their investment is stymied by rules limiting how they can spend their money? it’s not like cycling has a high intrinsic value or revenue model that guarantees results like NBA Basketball.
the last paragraph from CA above correctly identifies the starting point here. the low hanging fruit like rider safety or rules for the press motorcade are definitely more realistic and attainable.
I’d happily lose sponsors who objected to a cap.
As said above, if the UCI put forward this rule, it would probably result in some form of ‘breakaway league’ and the UCI no longer being in charge of at least men’s road cycling.
However, ASO and the other race organisers working together could institute this and then the teams would have to do it (and the UCI would be powerless to object too).
If the UCI and the race organisers came together on this, the teams would have to go along with it. Some sponsors would be lost, but so be it.
It will, of course, never happen.
“I’d happily lose sponsors who objected to a cap.”
No, you wouldn’t. Not if you were actually in charge of the UCI instead of just being a keyboard warrior spouting nonsense knowing full well that “it will, of course, never happen.”
The power to post complete shite without the responsibility of doing anything whatsoever about it is the prerogative of the twitterati in the 21st century.
I agree Sam. The sport needs to be on much better footing before you go for a salary cap. Slipstream’s example is never going to attract bigger sponsors, while Sky’s example may.
Exactly, need to be pragmatic.
@J Evans: “I’d happily lose sponsors who objected to a cap” is a ridiculous comment. The entire purpose of a budget cap and similar measures is to create stability, happily saying goodbye to sponsors (in this case the single largest sponsor from the pro peloton) would prove the budget cap to be a complete failure. The rest of your comment is similarly nuts – when has the UCI and organisers ever come together on something? Never, plus why would organisers want a budget cap? It would hurt their interests because teams would then ask for larger race start fees. This is a non-starter for cycling.
You’d lose some sponsors – perhaps (and it is only a perhaps). But gain others, for whom it had become more affordable and for whom more equal racing meant more chance of sharing the spoils of victory – plus the sport becoming more interesting as a whole.
(And I did say that the UCI and race organisers agreeing on this will never happen.)
Sky are not a sponsor, they own the team. But a salary cap would never work, there are so many ways round it. The result would probably be even more terrible Bora adverts.
I quite enjoy the Bora ad’s in a “how bad are they” kind of way and Sagan looks like he knows it too. But i do love this Bora cooking revolution…….
2 years ago nobody knew who Bora is and what they are producing. Now everyone does, if the ads are good or bad, it doesn’t matter. You hear Bora, you think ‘cooking revolution’. I love it when a plan comes together.
To be fair, budget caps are an area where sports leagues generally are shown to be weak. Because they’re inherently anti-competitive, spending caps are vulnerable to challenge by any disgruntled participants, whether teams or individual competitors. So competition organisers are generally unable to enforce them unless:
(a) there is sport-wide consensus on their value, as shown by a sport-wide collective bargaining agreement, or
(b) the sport benefits from an immunity from competition law as some major US sports have.
That’s before you get to the multi-jurisdictional nightmare that would be involved in a WT cap.
I know how I would react if I deserved a pay rise and the boss said “No – I’ve reached my salary cap”. What would you say J Evans?
prick
From Wikipedia
A luxury tax in professional sports is a surcharge put on the aggregate payroll of a team to the extent to which it exceeds a predetermined guideline level set by the league. The ostensible purpose of this “tax” is to prevent teams in with budgets from signing almost all of the more talented players and hence destroying the competitive balance necessary for a sport to maintain fan interest.
If you are a team Sky fan or an anti-tax person you may be against this. The varying taxes/social charges can be managed by including them in the aggregate payroll or take home equivalent (thereby discouraging tax evasion).
No, it’s impossible. All the experts here say so. Only other sports can do this.
If the various parties won’t do it that’s the same as it being not possible to do.
Challenge nothing.
That’s exactly the logic. I guess such measures would move sponsoring from teams (where there is inflation) to races (where there is scarcity).
So there we are readers of the Inrng blog. J Evans would happily LOSE SPONSORS from a sport we routinely claim is dying because they don’t happen to fit in with his notions about how the world and the sport of cycling should be run.
Cycling as a sport exists because of sponsors. It has always existed as a means to advertise things. All ideas like “budget cap” would do is cause the best and richest teams to form their own cycling league, probably do a deal with the ASO and RCS and Flanders Classics to secure the best races for themselves (because money talks in case all the morally principled folk here weren’t aware) and then the UCI would be in charge of nothing or, worse, would have to beg to get back in and back down. The chance of teams agreeing to a budget cap is zero. The chance of any stakeholders agreeing to give their power away is zero. We already have Velon organising their own races as it is. And it wasn’t that bad either.
You might routinely claim the sport is dying, but it evidently is not. And it has survived for a century and more. It would continue to survive if one or two sponsors pulled out because they didn’t like a level playing field.
I reiterate: I never said that any of the parties concerned would do this.
Feel free to continue to believe that money is the most important thing.
Why you think the fact that nobody in the real world would act on your ridiculous ideas somehow justifies your position is baffling.
Anonymous, nowhere was that said.
All the sponsors could disappear tomorrow, and cycling would continue. Because people love doing it, being involved in it, and watching it.
Would it continue as a big huge circus, with a few top riders getting 6/7 figure salaries, carted around in luxury buses, and with huge trains of CO₂ and NOx belching vehicles – outnumbering the bicycles – around the largest races? It might not.
However, hundreds of thousands would continue to race bicycles. Many millions would continue to enjoy that racing. Just go out to some local amateur race, and you will see the proof of this. With nary a big sponsor in sight.
Exactly Paul. We would lose some sponsors, and some “fans” like RonDe. We exist before them, we’ll exist after them. That’s hat they can’t accept with their neoliberal agenda.
I cant see how any sort of cap will work. Even if you cap salary’s you will still have the ‘richer’ teams spending more on training camps, scientists, equipment, research and other areas of support. This will still make them more competitive and continue the current environment with little to know changes.
You only need to look at American and Australian ball sports to see that salary caps are a worthless tool if you objective is to develop an equality between teams.
Interesting. The social charges would include employer pension and health insurance and, while more modest in some countries, would not disappear completely. If one assumes 28 non-trainee riders and 22 support staff this would give a mean salary of around 160k€ though it is probably the case that many part time (soigneurs, mechanics, drivers) or full time support staff are non-direct employees being either “auto-entrepreneur” (self-employed contractor) or “interimaire” (temporary agency employee) some of which would be included in “charges externes”. The mean rider salary must be more like 250k€ with a wide disparity between Bardet and the rest. J Evans makes the point about value for money with Cofidis but the market and centre of interest, as with AG2R, is France with the French teams always featuring in French events which are frequently televised. In any case my partner complains that her health insurance contributions pay for cyclists !
One could also ask Orica to justify value for money. Not many watching the TdF are in the market for mining chemicals and explosives, though while things were good an Australian company supporting Australian athletes might seem worthwhile. Now the mining business is harder and the team more international they are stopping. Who will replace?
Orica probably sponsor for goodwill as much as anything. They’ve come under a lot of fire in recent years for how they’ve managed things like explosions at storage warehouses and the cleanup and managerial response to that. A lot easier to function in the world (not just their actual operation of what they sell and buy but how it helps other things like HR and other marketing efforts)
Exactly, they’re not trying to tell speciality chemicals to the roadside fans but to be seen giving something back and supporting Australian sport. They’ll also wine and dine VIPs and presumably have staff rides etc.
Orica used the sponsorship initially mostly to get a better reputation after a few scandals and accidents – so was clearly aimed to sway the public opinion – and they probably were successful. One might call it manipulation.
We were doing similar sums based on riders and support staff – turns out Sky have 68 staff listed on their website excluding riders!
Presumably UAE Team Emirates and Bahrain-Merida are smart enough to employ all of their employees via UAE and Bahrain employment companies and therefore they pay no tax or social charges. As inrng says this provides them with effectively a 33% gain in social charges plus the ability to pay their employees higher salaries at lower cost than others.
The cost of paying a rider EUR 150 000 Net in UAE is EUR 150 000, to pay the same amount to a rider in France costs well over EUR 300 000.
But is not income tax (plus some other charges) paid where one is fiscally resident rather than where the employer is registered? Many of the top French riders will be fiscally resident in Monaco or Switzerland rather than in France though the employer is French.
French riders could move but off the top of my head none of the current generation have. For starters French citizens can’t live in Monaco to duck taxes but none of the big French names live outside France. For example Pinot says he’s had plenty of financial advice telling him to leave France for nearby Switzerland for tax reasons but he enjoys his home region too much.
Mark H – That’s not how that calculation works. As DJW suggests tax residency is based on where the employee resides. It is very doubtful that any of the UAE or Bahrain team staff or riders qualify for residency in UAE or Bahrain, therefore they’d each individually have to pay tax in whatever home jurisdiction they live in.
Secondly, the “social” taxes don’t depend on what jurisdiction the sponsor is from, it depends on the residency of the team management company. My quick research points to them having Middle Eastern team management companies and structures, but I’m not sure of all the facts regarding their management.
But, back to the calculation. Saying the equivalent salary of 150,000 net Euro in UAE is 300,000 in France is inaccurate. The equivalent is more likely 180-200k vs 150k. Still it is advantageous to have UAE management, but not as advantageous as initially suspected. Plus, there are many other factors, including much (significantly) higher travel costs, as one factor.
They have significant operations in Italy (indeed, both those teams have nothing of substance in UAE / Bahrain, operationally, do they?). You don’t escape the tax man that easily in large, diversified, European nations.
“Exchange rates at 31 December 2016: €1 = £0.85 GBP”
Ha!. The stuff of dreams now in the UK.
Assuming that the Sky budget is defined in sterling and that much of the expenditure including salaries is in € then it would have needed to increase by around 25% with respect to 2015 to maintain buying power. If that has not occured then budget differences to € based teams are steadily reducing.
Sky can take their money from the parent company in Euros or Pounds, it may actually benefit them.
The compound growth rate of 10,8% for AG2R La Mondiale is completely in line what I have demonstrated for the 2 Belgian teams over even a much longer period: Lotto (+10% a year between 1984 and 2014) and the different teams by Lefevere (+ 9,5% a year between 1992 and 2014). So it’s not a problem of today, nor a problem of Sky, it is a problem deeply rooted in cycling.
That is very interesting, if true.
Is there any point at which a financial Malthusian check will occur or, particularly with the introduction of the Middle Eastern teams, is this a state that will continue or even accelerate?
The better question is how does this rank vs other sports? On the surface, this could seem bad to have +10% CAGR wage inflation, but if, say football (both of them!) exceeded this rate, then cycling could well be in a fine place
That’s the cost inflation but I wonder about the other side of the equation, have audiences grown in size or value to match the increase in spend?
Readers should note Daam is the editor/author of The Economics of Professional Road Cycling, http://inrng.com/2015/11/book-review-the-economics-of-professional-road-cycling/
And was the sport being chroncially undersold for many years? Is it still?
That would have to be the obvious conclusion.
As much as I dislike the ‘free market’, in this instance, the market for sponsors has re-aligned and continues to do so.
There are companies out there that are prepared to bankroll the teams, whilst others come and go.
The same as it ever was, I guess?
At least you can now say that the cyclists themselves, amongst the most elite of elite athletes I’d argue, are compensated to a degree befitting their talent and dedication.
Interesting, but this growth rate far exceeds the cost of inflation. Inflation for stabilised economies floats between 1-3% per year.
This growth rate however is common among sports. Professional sports in North America have annual budget increases of 5-10% or even more. Further, companies such as Sky could have annual increases of 10% as a normal increase.
Keep in mind that annual inflation over an entire economy averages to 1-3%, which is an overall picture of all industries underneath it.
the interesting thing is that I’ve seen that Froome shot quite often, but not noticed the enormous Cofidis logo on the ground until you pointed it out despite it’s size – with blanket advertising like that it just part of the background noise….
could that be down to most of the road side sponsors with the exception of Skoda are very french/mainland europe orientated and as such dismissed by the brain as, as you put it background noise
I get the sense that the sponsorship deals many teams do are actually quite localized. I didn’t really know what AG2R La Mondiale did and with many of the others its a similar story. Clearly there a few lottery companies, but I don’t know what Soudal do, I’ve never seen a Quick Step floor and I have no idea what Cofidis do. Thanks to Peter Sagan I know that Bora make pointless extractor fans for your kitchen and thanks to Kittel I learned in previous years that Alpecin make shampoo. But presumably there are people in other places for whom these names means a lot. And since these sponsorships seem to continue I assume these sponsors must be getting custom for their sponsorship dollars in the countries where these names mean something.
But there are other kinds of sponsors too. Astana is promoting Kazakhstan, UAE and Bahrain are PR attempts to boost the profiles of Arab regimes. We have a couple of big communications companies that operate in numerous territories in Movistar and Sky. (Sky’s recent win seems to have fortuitously coincided with a major PR campaign in Spain over their new TV service there.) Throw in a few bike manufactures like BMC and Trek and away we go. The World Tour peloton. Now obviously not all these teams enter at the same financial level or with the same constraints. I imagine the nationalistic teams which are there to promote a country have budgets more likely to achieve wins in the big races. They are basically in it for glory. Bahrain have two grand tour podiums this year and UAE will hope for some next year with Dan Martin and, apparently, Fabio Aru as well. My point is teams find their level and, sometimes, punch above their weight. Quick Step aren’t the richest team. But they often win the most races and the biggest ones. It is possible to find a niche. The equation that money equals success is a long way from being proven in cycling.
You must either be a new reader or have a habit of not reading at all during (your) off-season. As long as I can remember (or for at least a good number or years) in or around January or February the Inner Ring has done a blog entry about “Pro Team Sponsors” and “What They Do” every year in January or February: http://inrng.com/2017/01/pro-team-sponsors-2017-world-tour/
Indeed, I now use that as a purchasing guide!
I recently got a Quick Step floor in the kitchen and have been using various Soudal sealants with recent DIY projects.
Also at the last sportive I rode, the taps in the hotel I stayed were Hansgrohe and I saw that as as positive omen for the day.
I went to visit the Hansgrohe factory/museum this summer in Black Forest in Germany (father-in-law is from there and very proud). It was surprisingly interesting, and their products seem very good, more importantly they had one of Peter Sagan’s old bikes on display and they sold the team kit pretty cheap (I broke the rules and bought the World Champion jersey).
Provided you don’t wear it outside the house, you’ve broken no rule 😉
Haha, to be fair I haven’t worn it all yet but I will get it on for the next turbo session.
On that note, we in the northern hemisphere are headed into winter, wear it at the gym in a stationary cycling class.
why would you wear a jersey on the turbo? seems like unnecessarily modest and just added heat. i’d wear that jersey and dream of pinching butts while muttering “paris-roubaix” in my sleep
Regarding Cofidis (the company), if their turnover is 167m Euros, that extra 5m for the team is not an insignificant addition. Assuming Cofidis would fund most of any budget increase, that would be approaching 8-10% of their turnover for just the team. I think thats well above and beyond what most companies can afford to put into a cycling team. If Sky were to put in 10% of their turnover, they could buy every team twice over….
Cofidis is an umbrella organisation with a large number of component companies in France and more widely in the UE. The turnover you quote will be for one division and reporting entity.
According to their 2013 accounts it was 400M, so I’m sure it is a lot more now.
Sure, and I am quoting Mr. Rng’s numbers. But even at 500m+, it’s not a tiny fraction of their spend to add in an extra 5m.
Turnover is for Vanity…Profit is for Sanity…..Cofidis may turnover 167m but what profit do they make, because that is where the extra 5m has to come from…..
yes and no….
The Marketing Exec may have a budget of £20m – they may choose to spend 5m on the team and another 3 on advertising hoardings and have to justify that it’s meeting their goals in terms of exposure and driving new business.
Whilst you might argue that all above the line marketing spend is taken straight from the profit line others (and presumable the Cofidis board) have a strategy that they’re pursuing which in this case involves raising the profile of the Cofidis brand.
is it a cost, yes, but it’s not clear that if it didn’t exist the marketing team wouldn’t spend it on something else…
So, still impossible to have a discussion on this site without histrionics and/or insults from the usual suspects then.
You do seem to attract them with your attitude.
I noticed it as well. You made a good point though, and I agree.
It’s not you.
If you were genuinely interested in having a discussion rather than telling everybody what is and what shall never be then you might suddenly find fewer histrionics. Try it. You never know.
Actually far less forceful and didactic than most on here.
You can make the case that Sky, Ag2r, BMC et al that are spending big are doing so to ensure a sufficient return from a risky proposition. A wage cap would only make sense if the proposition was de-risked. Revenue sharing with ASO in exchange for a wage cap is the only path to such an outcome. Not sure ASO feels the need to do that – its product is pretty successful as it is. Even in a revenue share/wage cap world, sponsors looking for “outsized return” might no longer be interested as a result of diluted exposure due to fewer wins/less dominance.
It seems that there are a number of models. The big budget teams are spending money to increase thier probability of success and would no doubt be disappointed to not succeed in big races. The smaller teams would hope to have a big win but would probably accept some wins in secondary or local market races. It seems a reasonable choice and better than standardised budgets which would be hard to enforce and may lead to under-the-counter wage supplements as in football.
x2 to this. Footballers at the top level in the UK especially are paid “Image rights” to limited companies they set up to avoid paying the same levels of tax as they would as PAYE. It’s a big mix of dividends and corporation tax and so on. I wonder how many Pro cyclists do similar? (disregarding the Monaguesque tax exiles).
exactly ….. if there was an wage cap, I’m sure we could imagine a scenario where sky (the team or the corporation) may start to “buy” Pinarello bikes for a few million and Pinarello started to pay sponsorship or image rights of 1m to Froome…. and a few hundred to Thomas, Kwato etc etc
Doesn’t have to be the bike company, could be a data/analytical company for “services supplied”
Re Salary Caps. Be careful what you wish for. Introducing regulation also means introducing means to ensure compliance and enforcement. There are orders of magnitude more people in the world skilled at financial shenanigans than there are skilled at beating anti-doping.
I just don’t see it as practical, simply because cycling does not have a closed system where income can be negotiated and managed/guaranteed with some reasonable level of certainty (e.g. stadia revenue, TV rights, merchandising) and as noted, operates across a diversity of regimes. The peak “admin” body, the UCI, has no stake in nor control of events other than it’s own races, namely the world championships.
Then there is the fundamental issue: aside from the odd exception, it’s simply not profitable to run road cycling events. But even the ones that nominally make money do so largely due to funding by the public purse (e.g. host city fees or subsidies, subsidised support such as Police and most run with a dominantly volunteer workforce). Sure, sponsors contribute and we thank them enormously for it but cycling is not a profitable sport by any measure and requires taxpayer (and political) support to survive.
Just curious–do team general managers/owners, such as Lavenu, Vaughters, Lefevre and Brailsford, get paid out of the same kitty for riders and staff members’ salaries, or is their “compensation” separately financed, as perhaps equity pay outs? Wondering what the ramifications of a salary cap would be for them, especially in determining which side of the argument they are on.
I recall Oleg Tinkov (remember him!?) used to whine about how no one in cycling was interested in changing the structure of ownership and race organization so that everyone involved could make some money. He was right!
As a professional spectator sport, cycling is not a money-making venture for its investors and sponsors. In fact, for most of the corporate sponsors, they are probably writing off their sponsorship amounts as “Losses” of “Business Expenses” for purposes of accounting and tax filings. Aside from those few race organizers–who can earn money from broadcasting rights and commercial advertisement space–that can make a profit, the whole CYCLING SHOW seems to be about facilitating a forum for riders to race and spectators to watch. At the Olympics, the only event with no ticket sales is road cycling. In the words of the late journalist, Linda Ellerbee, ” . . . , and so it goes.”
I seem to remember a charge for Box Hill (London 2012)
It’s a tough one, The open nature can encourage new fans, but I think paying a fiver (say) to get into the team bus area at the start would be feasible. Motor racing fans often pay a little extra for Paddock Passes, after all. But it may have a downside too.
Team managers are paid out of the team budgets. You can see why some are rather interested in capping the salaries of their employees and creating structures that give them long term monopoly positions.
I saw a report in a US publication (not a cycling publication) from a few years ago that Vaughters gets a salary of $400,000 USD from Slipstream. I don’t know how accurate this figure is, but the context was that this is a small amount for being the CEO of an organization with revenue over $10 million/year.
I’d say quite the opposite: very few companies would spend 4% of their income just on paying the CEO.
I am going to call BS on John reading about Vaughters salary. Provide a link, spreading false rumors is not responsible.
(There is a James Vaughters that had a $450K NFL football contract).
(Public records show that the former CEO of US Cycling had total compensation and benefits of $380K, which is nothing in comparison to the CEO of US Swimming at 850K or US track and field at $1,090K all for 2014)
Correction: “In the words of the late journalist, . . . ” —–> “. . . the great journalist, . . .” Sorry, Linda.
No worries, Joe. If you can limit yourself to making just small mistakes like this, we’ll all be fairly happy.
The conjuncture of cycling is fascinating. You mention the Iranian rider, and indeed I looked at the 2011 UCI World Tour rankings. Second to last? Quickstep – the Quickstep we now consider the second best team in the world. That’s six years ago. Two years later Lotto Soudal, who were first in 2011, were second to last. Cycling is such a cyclical sport – whoever has the in form rider can exceed their budget expectations and soar to the top – budget is not always, and can not always be, an indicator of succes. As the 2014 season shows for Team Sky. It’s all so interesting – but it’s dangerous. Looking back at seasons of cycling that don’t really stand out in recollections (2009-2012), and looking at the teams now, the amount of different names and backers is shocking. Economics is based on the principle of the greater fool – there is always someone dumber willing to take a risk on that thing you’re selling. Well, cycling teams seem to be the same. Let’s hope they keep finding greater fools.
Most Corporates will account for sponsorship under the heading of “marketing”or “advertising” in their published accounts.
Was it here I read that Sky have an adverting spend in excess of £1 billion per annum? Sky Procycling spend of £25 million per annum is a pittance and might probably be accounted as “sundries” compared to TV , print and radio under the overall advertising breakdown.
That’s right, Team Sky is a drop in Sky’s annual marketing spend, for example in 2015 Sky UK spent £1,117 million on marketing, meaning the pro team is about 2% of the UK marketing budget.
I don’t think the local payroll taxes etc are the largest problem with a salary cap. It’s easy to go around such a cap by having the sponsors pay the stars separate from the team budget to appear in adverts etc. Although that in itself might encourage more attractive racing. Riders who race more aggressively are usually more popular and thus more valuable for advertising. See e.g. Jens Voigt for a good example.
Re: the discussion on whether a salary cap deterring big sponsors or not. It can go both ways. Companies like to see some return on their investment. On the one hand, a “smaller” sponsor/set of sponsors willing to invest, say, 12 million, might decide not to if that means they are sure that winning anything big is highly unlikely. On the other hand, a big sponsor like Sky might be turned off completely if they lose the sporting advantage that they were able to achieve by having a significantly larger budget than others. On the other hand, as soon as two or three other teams (Bahrein and UAE come to mind) start matching or bettering the salary offers of Sky that might happen just the same.
I think some of this discussion is rather missing the point. AG2R are a well managed mid sized team, arguably the best of the French teams. Their top rider has finished on the podium at the past two Tours, the biggest sports event (not just cycling) in the world. By any standards that is pretty successful. However their annual budget is around €16 million. On one level that sounds a lot of money but even if we ignore the lunacy of football that is a pretty small budget for a leading team in most sports. Naturally the riders will look at other sports which get similar levels of media attention and expect to get paid similar amounts of money to the professionals in those sports. The same will apply to the support staff, many of whom will have studied for professional qualifications in sport related subjects.
Where does the money come from to pay for all of this? AG2R are lucky, they have a stable long term sponsor. However that hardly compensates for the relative lack of income from the sport itself. I realise that this is probably an impossible problem to solve. Few races make money and those that do are extremely reluctant to give more of that profit to the teams.
Cycling is fairly unique in that those who watch live generally do so for free, so no tickets sales as in most sports, though perhaps we will see more races along the lines of the Velon series where I believe an fee was charged to spectators. I suspect (considerably?) more money could be raised from TV rights however that prospect is remote. It would need a much stronger central organisation. Far too many stakeholders have an interest in keeping the UCI (or any other similar body) weak. However even the most powerful of those stakeholders – ASO need the rest of cycling, the Tour cannot exist in a vacuum.
It is possible to see a situation where some sort of organisation representing the teams, maybe something along the lines of Velon, (which in fact is ultimately representing the riders) is created which then puts enough pressure on the race organisers to thrash out a sustainable way forward. In reality the chances of this happening are very low indeed (arguably less than zero…….). Even in some fantasy world where it did there is the risk of overt commercialisation damaging the sport eg English Premier League.
Salary caps and similar ideas have some merit but without more fundamental (and extremely unlikely) change to the way the sport is run they are simply fiddling at the edges and are in fact very unlikely to ever be implemented.
Ticket sales are an irrelevance. Big money sports – Football, Formula 1, American ball sports – are not swilling around in money because of the 50-60,000 people sat in the stands. It comes from TV rights money, and to a certain extent in Formula 1’s case the amount each country is willing to pay to host an event. So unless we want to be paying £30 a day to watch and want the Tour and Giro to be held entirely in natural resource rich despotic states we should be careful what we wish for.
These annual budgets really highlight how niche a sport pro cycling is. These annual budgets that pay for the whole team including the salaries of all the star riders are the cost of a single transfer fee of an average premier league player.
Question: How do the sponsors evaluate ROI?
It depends, for example a media agency will collate all the examples of the logo or mentions across TV, the press, internet etc and put a value on this coverage. Others will measure things like brand recognition or even sales.
Apologies if this point has already being raised and discussed:
People have identified that Team Sky have a bigger budget than almost all other teams and can recruit the best riders, effectively paying some riders who could be potential competitors to ride for them and even ‘sit on the bench’ as reserves rather than competitors.
Why is this not the case in other sports, say like football?
Is it just that big companies see football as offering a greater exposure/return due to much bigger viewing markets and therefore are happy to spend big amounts. In contrast only Sky have identified cycling as being worth the amount that they put in (in part because they are almost guaranteed success).
It has been mentioned before but is the problem no other companies want to spend as much because:
– they would not get the guaranteed return, just say 50% of it
– sponsors not wanting the risk of being associated with doping scandal
– cycling being seen as niche and not trendy by marketing execs – would a company rather be able to take clients to sit in a box at Wembley most weeks or sit in a car in a different part of Europe every following a race all day?
– cycling fans being the wrong demographic for most companies (not young and mainstream and harder to separate from their money) – except for bike manufacturers.
Things seem to be changing, cycling is the new golf, companies seem to be recognising this and there is now more mainstream sponsors moving in like Emirates. Just needs a bit more breadth rather than depth or Sky might keep moving the goal post just slightly ahead of the other teams.
“Why is this not the case in other sports, say like football?”
Did you follow football recently? Like German Bundesliga for instance, where Bayern Munich buy every prospect from other clubs and wins every championship fro years? Same thing happens in many countries. If you’re talking about that other sport, say American Football, please.
I don’t mean to insult people here, but it seems one or two still don’t understand the nature of how salary caps work in sports. That’s fair, because they are called salary caps, but almost all sports, to my knowledge, that have hard salary caps also have a second side to the system, which is some degree of income pooling. (Granted, this would be more difficult in cycling, without croecean broadcasting deals or matchday stadium receipts; however, it could be done based on sponsorship — or by manufacturing something, like, for instance, a collectively bargained kit provider and merchandise sales set up where, say, Rapha would provide the jerseys and bibs, etc, and market the sale of them for all the teams, and the UCI would divvy that money up between the teams.)
So, a salary cap would actually be better named something like ‘a cap and pool’ system.
My view is that it wouldn’t drive sponsors away, but attract more and eventually bring more sponsorship money into the sport. Indeed, that’s why I think it would even benefit a team like Sky. The point is that being one of the best in a popular sport is far better than being dominant in a marginal one. The idea would be to make the racing more unpredictable and competitive, mainly by spreading the talent around, simultaneously providing more quality team leaders (rather than Sky having five) and ending the domination tactics that strangle races. This would produce a better overall product. Over time, this better product would attract more fans, which would in turn draw more money into the sport. That increased pool (especially as corporates would probably look at the biggest bang for the buck, which would mean offering more than the smaller teams currently get) would make the product even better and even more competitive, and you would start generating a virtuous circle.
That’s the idea, anyway, and I think it has worked well with the NRL rugby league in Australia and the NFL American Football in the US.
How would it benefit Team Sky? It would eliminate their current competitive advantage?
Plus, of course as you mention, the cap and pool system is actually only for soft caps. Soft caps have a luxury tax component where teams that go over the cap pay a luxury tax that gets distributed over other teams. Hard caps can’t be surpassed, so there is no luxury tax component (think the NHL). MLB and NBA have soft caps, and the result has been very high team parity.
Once again, why would Team Sky have any interest in helping the lesser teams compete with Sky’s all-star cast of leaders and “domestiques”. I’m not best friends with the Murdochs, but my brief understanding of him pretty plainly points towards him flat out rejecting this.
This concept may have worked well in NRL rugby, but I’m not sure what your definition of “well” is. By most accounts, in the North American pro leagues, salary caps have led to increased team parity, which is not what Sky wants. They want to keep crushing the competition and have zero incentive to sign on for a cap.
Hadn’t realised the point of cycling was to please Murdoch.
CA, I explained why it would benefit Team Sky in my third paragraph: being one of the stronger teams in a popular sport is worth more than being a dominant team in a marginal sport.
Re-read for more detail.
Frank Carbo – I read that… and a reasonable person might agree with you. But, I think Murdoch wants to dominate the sport and the headlines for that sport.
If he wanted exposure via sponsorship of a super popular sport he would have sponsored a team in the Premier League. Clearly he decided on cycling as it currently stands and has zero interest in levelling the playing field.
And you seem to think it either absurd or impossible to stop Murdoch doing what he wants.
As far as I remember, Sky got involved in cycling because James Murdoch is a big fan.
Anyway, if it is about business, I would that the publicity of being one of the best teams in a popular sport would be worth more than dominating a marginal sport. Surely, if cycling generated more headlines and had more viewers, Sky’s name would get greater prominence than it does now through its domination.
Ultimately, though, for that to work, cycling would have to show a credible plan on how to move forward with it. I’m not sure I’d trust the UCI, or any of the self-serving associations, like ASO, to do so or even be able to work together to do what’s right for the sport as a whole.
Well – Sky does own the TV rights for Premiership, which cost them 5B.
In comparison, with the English-dominated countries thinking that Team Sky (via Chris Froome) dominates cycling, the return on the annual 30M expense seems to be pretty good in terms of exposure for the Sky brand.
I don’t really see how a budget cap will help. Sky certainly gives us a vision of what the sport could be for the riders if more money was available. Sky also is living through a moment where they appear to have a good ROI with CF as there leader. Take him away and they would certainly not have the same success with all their investment. In fact, we would all be writing about how regardless of how much money they spend they just don’t seem to win. Same with La Vie Claire. They had money and were loaded, same with Hinault’s Renault teams. If Froome moved on, many teams would find money to support him, since he’s proven to be a good bet. It will be interesting to see what type of investment Tom Doumolin will attract if he were to win the TdF. I”m sure sponsors will want to jump on the band wagon.
Instead of a salary cap, cycling should spend more time worrying about improving the business model that would attract more sponsors. I wish people would worry less about slowing Sky down, but how to build up the other teams to their level. A salary cap with current system is unworkable.
Joe – exactly, and you bring up a good point. What happens when Froome is on the downslope of his career, which should start very soon.
Tom Dumoulin was courted by Team Sky recently, which shows that Brailsford thinks he’s the next big thing at the TdF. Tom signed with Sunweb until 2022, which covers his peak years.
Who will Sky look at now to replace Froome when he stops winning TdF’s?
Yes, Sky never buy good young riders.
Difficult to tell if Anonymous is being a tad ironic but with Sky just having bought Sivakov and Bernal, two riders who have won or been placed a number of times in the last 12 months this argument doesn’t hold up.
Ok, I was just curious who people think are the next Sky GT captain? Either, as Michael B suggests, Dumoulin breaking his contract or one of the new Sky riders. They clearly have a skill for developing very strong GT riders.
I still think Dumoulin will end up at Sky if he shows he can win the Tour. Wiggins broke his Garmin contract to join Sky, and I’m sure some form of transfer fee will have been paid. I think they’ll try to do the same with Dumoulin in a season or two, presuming another dominant rider doesn’t break through.
Yes, all the teams can have all the best riders – Sky is showing them all the way.
I’m no expert in finance stuff but I’d imagine a salary cap could also lead to financial corruption (payment in “Xmas gifts” rather than salary etc.). This will just be another layer of complexity and confusion to add to a distrusted sport.
And yes, if Dumoulin dominates after Froome, will Sunweb become the new punchbag? I suspect people will suddenly be more relaxed about Sky’s funding.
I wonder also if France found its Froome, would a French megacompany come in to match the Murdochs? Wealth brings better chances of success, but better chances of success also bring wealth.
BTW, for all the comparisons to the U.S. leagues with salary caps, they also have a player draft, and a mechanism to trade players. A draft is THE essential element that a salary cap needs to create parity.
Also, since this a post about AG2R, does anyone believe that if they had Sky’s budget, Bardet would or could win the TdF this past July? But if you look at it from AG2R’s ROI, I would think they are doing well in terms of cycling media coverage for their investment. Where is their incentive to increase the budget or bring in more money to compete with Sky? Once Froome is done, this discussion will go away. Froome landed in Sky’s lap without any realization of what they had. He was one race away from being on the open market. Sky is an exception to many rules.
“Also, since this a post about AG2R, does anyone believe that if they had Sky’s budget, Bardet would or could win the TdF this past July?”
Maybe not, but AG2R seem to be perfecting the art of riding as a team with a single goal, so if Bardet had better quality domestiques perhaps the gap would be a lot closer.
Sky my arse!!
People say that cycling needs to do more to attract more investment from bigger and better sponsors to bring stability to the sport. But, when you look at the longest running and most stable sponsor/team relationships they are those that are sponsored by a relatively small company with an interest in their home market, which happens to have an interest in cycling. Ag2R is one of these, along with FDJ and Cofidis in France; Quick-Step, Lotto and Sport-Vlaanderen in Belgium; Movistar in Spain and Androni in Italy. You could have included Rabobank in that. They didn’t leave because of poor return but because their own teams doping antics had dragged their name through it too often. They still sponsor the Dutch national team though. Until last year you had Lampre in Italy as well. Are these not also the teams that form strong links to local junior/feeder teams and bring on a lot of young riders? The economic downturn of a few years back hit this level of team in Southern Europe and Kelme, Euskadi, Liquigas et al went. But you’d struggle to blame that on the structure of cycling. It strikes me anyway that it is these sorts of teams that should be encouraged, and a salary cap might be a sustainable way of doing that. At the moment they can’t compete with the investment of super teams sponsored by conglomerates or oil rich countries and more of them might force them out entirely, which would be a massive shame.
I totally agree – you could even throw Trek into that group. Trek’s been through serious ups and downs and are still committed to at least co-sponsoring a top team, and the Segafredo combo seems a good fit.
Your argument that these may be the best sponsor relationships is pretty accurate, and has been the real stability at the top level of our game.
I agree, but cycling is losing those types of sponsors as well.
Europe is the heart of of professional cycling, despite the world tour designation. But clearly the type of organization/sponsorships that built the sport are in a bit of crisis. Italy has plenty of strong companies that could leverage the publicity from the sport, but their teams are essentially living out the Italian diaspora. And to your point, Sky, like many of the companies you mentioned benefit in their chosen market. Sky does not benefit for their exposure in the US for example.
Another issue that is not discussed enough, is that TdF exposure seems to driving sponsorship money, but their is just not enough GC talent to go around to make teams competitive for the GC. The Belgians have figured out how to get maximal exposure in the sprint stages, but for the rest its slim pickings. I don’t think this is a new issue, but the increasing influence of the TdF is exacerbating it.
Cycling may be the only team sport where the actual team does not make any money. In golf and tennis, sponsorship is the key, but its somewhat more clear because the sponsor of a tournament has no direct interest in which players win or lose.
But check that: sponsors are interested in publicity. They would rather have a well known player win their tournament than have an unknown player win. But they don’t control who wins so their analysis is simply down to the publicity they get and the value of it.
I am not sure Sky actually gets more in the way of publicity as measured by what they spend. Tinkoff got loads of publicity but apparently not enough.
I don’t think, from what I know having been involved in the business side of pro tennis, that the sponsors really would care about a salary cap. Sure, they don’t want their team to be a “losing team” but what they really want is publicity. And publicity is not directly related to winning.
Having more competititive teams, by the way, does not guarantee better publicity. U.S. cycling is more competitive now, but it was more public during the Armstrong era with one dominant rider.
“I am not sure Sky actually gets more in the way of publicity as measured by what they spend. Tinkoff got loads of publicity but apparently not enough.”
Measuring the tiny proportion of their marketing budget they spend on the team vs the sheer number of their vans plastered with Wiggins, Thomas, Froome etc I’d say they were getting a pretty good return. Tinkov, I suspect, wanted to drive down the Champs hanging out of the window like a dog with yellow hair. Personal glory was his thing rather than brand exposure.
One factor that doesn’t get mentioned is that sponsors can have competing objectives. Sky want to be dominant but Dimension Data, for example, are very good at playing the plucky underdog card. Giving them a £30m budget & big stage race wins might even be counter-productive.