Financial Fair Play

[fmk_RoI]

Re: Re:

]Ok, so now you accept it is part of the current financial model but want to say that that doesn't matter...I'm sorry, but it either is something that can and is being done, or it isn't.

If you don't understand what a mixed financial model actually means, I'm not the guy who's going to explain it to you.

The problem is that too many don't want a mixed model, they want a single solution, all the money coming in from one source (ASO's TV revenue, usually).

How much do these glorified beer gardens bring in as a percentage of total revenue? Facts please! Cite your sources and submit your papers for review! <As a certain know it all likes to say>

John Swanson

I think all the race organisers treat that as market sensitive information: we know it's part of their financial model - and looking at the way it's being done in Flanders they appear to like it, and the fact that ASO have twice used stadia this year suggests they like it too - but we don't know its actual contribution.

But this is progress: at a cost of a lot of unnecessary personal abuse I have at least moved you from your initial, inaccurate statement.

Unfortunately, there are a lot of other financial myths to be busted yet...

<hand waving> You've moved me from nothing. How much are broadcast rights worth for Flanders? What's your spitball estimate for finish line beer garden revenue? No numbers means you've got no idea. This is the exact same thing you beat on others for. You, sir, are full of carp.

John Swanson

John - a simple, calm reminder: you said none of this was an option. You said, and I quote: "The organizers also can't charge admission from the fans or sell t-shirts and beer." That is simply not true. The extent of it we can debate. But we cannot debate that it is not happening.

If we want to talk about the financing of races, let's also bring in the sportif element, as that is becoming an increasingly important revenue stream for organisers (look to the size of ASO's sportif arm, look to all the races that currently have them attached). We could also look at the recent American race and associated music festival.

This is what a mixed financial model entails, for race organisers.

 

[ScienceIsCool]

Re:

The "beer garden" used by Flanders Classics.

Keep waving those hands Feargal. It's not very convincing. What was the media revenue for Flanders? Numbers and sources, please. Or maybe just walk it back a bit, yeah?

John Swanson

 

[StyrbjornSterki]

Professional sport is a business, a commercial enterprise. Successful businesses operate on a financial positive feedback loop. Build a better mousetrap, and the world will beat a path to your door. (--Emerson) Denying successful teams the ability to invest past profits to promote their future successes effectively reinforces failure.

 

[Brullnux]

Re: Re:

Back up the bus, buddy. I have not said Sky's wealth is responsible for driving up wages for all other teams too.

Well, I did. I don't know for sure if it's true, but I think it's plausible.

Some evidence for it would be useful. Do you have any? Or is it just a gut feeling?

It's definitely possible.

Was there big money in the sport before Sky? If you read carefully you'll see reference to this issue commencing in the 1980s and going on since. Was there wage inflation before Sky? Yes, there was. Clearly, then, Sky cannot be accused of having caused wage inflation, can they? Has wage inflation accelerated since Sky arrived? Produce the evidence. Are Sky the only Daddy Moneybags playing this game? How many times do I have to ask if you've read what was said about sugar daddies? If wage inflation has increased since Sky arrived, could there be other explanations? Indubitably: in the same way some have a gut reaction Sky is a problem, others said Oleg Tinkov's Peter Sagan / Alberto Contador man crushes were the real problem.

Too much of the debate about cycling's finances is built on guesses, hunches, gut feeling, utter bollix. The fly-by-night sponsors. the bogeyman du jour (Sky, Tinkov, Tapie), TV revenue that - if shared - would pay for what, a couple of spare wheels for the team bus? A little bit of evidence in support of these claims, is that really too much to ask for?

Did you read the whole of my post or did you give up halfway through? I said that Sky's money will have probably caused wage inflation as they entered the field with a larger budget than most had ever seen - how many teams in the past have had €35m budgets? Using my knowledge of how a market like this works, and empirical data from other sports, I think it is likely sky contributed to wage inflation. I did not say they were the sole factor or had caused it, which is something which you have decided I said so you could deviate off into sugar daddies, but likely a factor.

I don't have any evidence - why? Because as far as I'm aware there are no detailed balance sheets coming out of every team, there is no list of every single cyclist's pay since the turn of the millenium. Even current team's budgets are estimates - cycling doesn't strike me as the most transparent of sports. If I looked hard enough, dug deep in every document of every team; every article of every transfer, then yes I could almost certainly provide evidence. But I'm not paid to be a journalist, to investigate such matters. I have other things to do. I am interested in the topic, yes, but the things I will post are derived from my own hunches and background knowledge on markets and such like; but I while present them as such: not facts or statements, but beliefs.

 

[jfazendeiro]

I feel this has become a only between friends discussion. I only recently have created an account and I haven't made much posts but would still like to be part of it.

 

[MarkvW]

If someone closed down one hundred miles of road, I would pay a very decent fee to ride down that road for a day, or for a series of days. I couldn't care less about racing. That's the kind of model I'd like to see. Let the racers race away to their heart's content, and I could just meander down the road.

The only kind of a cycling event that can make it is a participatory one, I think.

Cycling isn't much of a spectator sport. It's certainly not one worth paying to watch (unless you're in a chase car, or something cool like that). Who cares about doped up Type A anorexics and their obsession?

 

[Alex Simmons/RST]

To me, all FFP needs be is for financial commitments/contracts made to be honour-able and honoured, with sanctions applying to those who make such commitments without the means in place to honour them. e.g. say sign a high profile rider on a 3 year deal without actually having the forward budget (i.e. sponsor contracts) in place to pay for them.

I see no point in much more than that. Else it just layers on an additional farce of dealing with financial doping. And there are way more people expert in financial shenanigans than there are doping experts.

Worldwide at all levels the sport of road cycling loses money and is heavily subsidised by public money. About the only events that make money are TdF and the Giro (just).

 

[fmk_RoI]

If someone closed down one hundred miles of road, I would pay a very decent fee to ride down that road for a day, or for a series of days. I couldn't care less about racing. That's the kind of model I'd like to see. Let the racers race away to their heart's content, and I could just meander down the road.

The only kind of a cycling event that can make it is a participatory one, I think.

Mass participation is where a lot of organisers are going: ASO have a whole host of events, most attached to races, some not. RCS have their Fondos (Fondi?). Does Flanders Classics have any, can you ride the RvV? More importantly, I think, you have the 'upstart' organisers, like the British race with its mass participation event the day before, or the Cyclassics thing in Germany. That's also attached to the Velothon thing, which does stand-alone mass participation events, bringing to cycling the marathon model you see elsewhere. More race organisers seem to be turning to a more mixed revenue model, mixing hospitality and sportives with sponsorship and whatever they can get from TV (if they can get anything from TV - which only a few can). What the typical spend per head on these things is I'd love to know: I suppose once you've got someone in on the basic entry fee you're up-selling all sorts of tat and extra goodies to them?

But I'm not sure: are these the type of thing you're talking about, joining a peloton of sweating Freds wobbling all over the road in front of you, or are you looking for something a bit more, well, private?

 

[fmk_RoI]

Re:

To me, all FFP needs be is for financial commitments/contracts made to be honour-able and honoured, with sanctions applying to those who make such commitments without the means in place to honour them. e.g. say sign a high profile rider on a 3 year deal without actually having the forward budget (i.e. sponsor contracts) in place to pay for them.

Cycling's current take on financial fair play involves the UCI setting minimum limits for some things, like wages, prize money, participation fees. You also have the areas in which costs are shared (eg the way teams, riders and race organisers all fund the CADF). Some of these are policed and easy to police but things like minimum wage, as we've seen with the pay-to-play scandal, seem to be beyond the wit of the UCI/local feds. Even getting teams to pay their wages - particularly at the lower levels of the sport - seems to be a challenge the UCI/local feds don't want to rise to.

Worldwide at all levels the sport of road cycling loses money and is heavily subsidised by public money.

This is a point a lot of people seem to miss, how effective public subsidies have carried the sport for so long. However, many of those subsidies are being replaced by costs: policing in particular is getting more and more expensive, across all sports (and only likely to get more expensive, given the current security climate). That means the money is either coming out of the race organiser's profits, or is being borne by the host town, which only makes it more expensive to host big bike races and harder for race organisers to raise such funds.

 

[fmk_RoI]

JV on Froome's communist comment and the need for budget caps:

Vaughters disagrees, both as a manager and someone who wrote a paper on budget caps within sport for a business MBA. “With all due respect, the evidence totally debunks that,” he said. “Communist? That’s ridiculous. In a budget-cap scenario the fanbase increases because of increased competitiveness. Do you want to watch a chess match where one player has one queen and the other has four, which is what [Sir Dave] Brailsford has?”

Also, franchises for life, again...

 

[fmk_RoI]

An expanded take on JV's current position on franchises for life, budget caps and revenue sharing.

Back in 2011, when all of this started, one of the promises was how financial reform - and in particular franchises for life - would see more money being spent on anti-doping ("Guaranteed participation could help teams generate more sponsorship. In return teams would be obliged to donate 20% of new money to combat doping." JV calculated that 20% would mean €50m over five years.). Curiously, that seems to have disappeared in more recent calls for permanent licences:

"First, and most important, you need permanent franchises for the teams so that they can not only sell sponsors on the fact that there’s stability but also sell it to investors that there’s value in the fact that we own a franchise. When sponsorship money is a bit tight, you sell a little equity to investors to get you back on your feet, until sponsorship money isn’t tight. This is how businesses work, and it’s how we stabilize the sport in a sponsorship-revenue-driven business proposition."

It is worth noting here that in the last couple of years Slipstream has twice turned to investors, selling slices of the cake to Cannondale and then Drapac. What happened to that money no one is saying. Funnily, when it was most needed, the option to sell another slice of the cake was not put on the table, not even to fans despite all the comparisons being made to the Green Bay Packers.

"Second, there has to be financial fairness legislated into the sport, whether that’s an agreement amongst the teams or something the UCI tries to implement. Every sport that has moved its audience level up and up and up — the NFL is the best example — uses a financial-fairness model. The easy word to say on this is 'salary caps,' but everyone gets panicked when you say salary caps, because it’s not really salary caps but budget caps. It’s simply saying that in every team we’re playing chess out on the field or on the road.

"Every team starts with the same number of chess pieces. How you decide to implement and use your pawns versus your bishops versus your queens, that’s up to you, but everyone starts with the same number of pieces. And that’s what financial fairness is about. It fundamentally drives competitiveness. It’s not the same team winning all the races in any given year. It flip-flops around year to year. It increases audience levels as the sport becomes more competitive and more unpredictable, and smaller-market teams are able to be at the top as well. NFL is a perfect example. Without any financial fairness, any TV rights get burned up immediately in bidding wars for just the top few athletes, and that does nothing for the stability of the sport."

(An interesting way to think of this: why are American sports socialist and European ones not?)

"This third thing — and only after the first two things have occurred — is you look at whether or not we partition up media rights to financially stabilize the sport. But if you don’t have the first two things in place, the third is useless."

One question I'd like answered by JV is whether revenue sharing would be limited to media rights: if race organisers are making more money out of sportifs attached to races, do the teams and the riders feel they deserve a slice of that cake too, it being they who the Freds want to emulate when they falter through the Arenberg or weave their way up Alpe d'Huez?

 

[fmk_RoI]

Re:

Back in 2011, when all of this started, one of the promises was how financial reform - and in particular franchises for life - would see more money being spent on anti-doping ("Guaranteed participation could help teams generate more sponsorship. In return teams would be obliged to donate 20% of new money to combat doping." JV calculated that 20% would mean €50m over five years.). Curiously, that seems to have disappeared in more recent calls for permanent licences

Back in 2011, the CADF's total budget was CHF 6.7 million, with the WT squads chipping in about 40% of that, CHF 2.7 million. In 2016, the total budget was CHF 6.7 million, with the WT squads chipping in CHF 2.5 million.

All of that paid for about 15,000 tests in 2016 and 13,000 tests in 2011.

In the five years to 2016 the WT teams have paid about CHF 12.5 million for testing.

(€1 is equal to about CHF 1.15 currently.)

 

[fmk_RoI]

Even the Accountant - Bert - favours financial fair play, specifically a salary cap (which is v funny when you think about him and Oleg Tinkov):

“I'll tell you my point of view, but I want you to understand it isn't aimed at any particular team – Sky or anyone else – but rather with the future of cycling in mind," Contador began.

“I think there should be a salary cap. You have to decide what the amount should be, for example 15 million Euros on rider salaries. Because if budgets start to go through the roof, we’re going to find it difficult to attract sponsors at all.

“Not all sponsors can meet sums that massive corporations can. When you go to a sponsor and ask for 12 million for a three-year project, that’s an investment of 36 million, and big outlays like that might not even see you fighting for the podium at the Tour de France.”

A salary cap, of course, would leave teams free to splurge the rest of their budget on other things, like expensive rejuvenating drinks, or extra zippy wheels. Or just plain circumvent the cap.

(€15 million on salaries - Sky pay (per their 2015 accounts) about €24.4 million on all wages, riders and staff.)

 

[Brullnux]

Re:

Or just plain circumvent the cap.

(€15 million on salaries - Sky pay (per their 2015 accounts) about €24.4 million on all wages, riders and staff.)

I think only two teams broke the salary cap in premiership rugby (or were alleged to), Bath and saracens. But you have to consider the inter-league competition in a sport like rugby as well - salary caps are set by the respective federation not a worldwide standard, so team will parhaps have more reason to break it? However the offshore circumvention will be much easier and common in cyclign withh all the cyclists who live in tax havens and dodgy owners who are tiher sheiks, barons or tax exaders themselves. If a salary cap could be properly implemented then it could work, but there would need to be tremendous punishments for any potential misdemeanour to deter people from just treating it as a minor obstacle ratehr than an actual measure.

 

[fmk_RoI]

Re: Re:

Or just plain circumvent the cap.

(€15 million on salaries - Sky pay (per their 2015 accounts) about €24.4 million on all wages, riders and staff.)

I think only two teams broke the salary cap in premiership rugby (or were alleged to), Bath and saracens. But you have to consider the inter-league competition in a sport like rugby as well - salary caps are set by the respective federation not a worldwide standard, so team will parhaps have more reason to break it? However the offshore circumvention will be much easier and common in cyclign withh all the cyclists who live in tax havens and dodgy owners who are tiher sheiks, barons or tax exaders themselves. If a salary cap could be properly implemented then it could work, but there would need to be tremendous punishments for any potential misdemeanour to deter people from just treating it as a minor obstacle ratehr than an actual measure.

In a sport that cannot police pay-to-play breaches of minimum salary rules, hands up who believes maximum salary rules would be policed properly?

 

[Brullnux]

Re: Re:

Or just plain circumvent the cap.

(€15 million on salaries - Sky pay (per their 2015 accounts) about €24.4 million on all wages, riders and staff.)

I think only two teams broke the salary cap in premiership rugby (or were alleged to), Bath and saracens. But you have to consider the inter-league competition in a sport like rugby as well - salary caps are set by the respective federation not a worldwide standard, so team will parhaps have more reason to break it? However the offshore circumvention will be much easier and common in cyclign withh all the cyclists who live in tax havens and dodgy owners who are tiher sheiks, barons or tax exaders themselves. If a salary cap could be properly implemented then it could work, but there would need to be tremendous punishments for any potential misdemeanour to deter people from just treating it as a minor obstacle ratehr than an actual measure.

In a sport that cannot police pay-to-play breaches of minimum salary rules, hands up who believes maximum salary rules would be policed properly?

Nobody, unfortunately.

 

[deValtos]

Haas raises a good point actually:

"If there were salary caps in cycling, it wouldn't be the best riders that suffer, they'd always get Payyyyd. It'd be their helpers loosing"

Cycling is not enough of a team sport to prevent that I reckon? In something like Rubgy your team would severely suffer if you shelled out a ton for a massive star since each player almost does an equal amount. But in cycling while the team is useful a huge huge portion of it is down to the individual. So stars will always get paid, doms maybe not if the cap is too low.

 

[Random Direction]

A salary cap with a wealth tax and a minimum salary for a rider would work if designed properly. Can be done no problem if the willpower if there. To bad it isn't.

 

[Alex Simmons/RST]

Salary caps exist in sports/leagues where the peak administration body actually earns substantial revenue and controls the sport. The UCI does not have any such revenue stream nor does it control the sport. It's a relatively poor organisation with annual budget of ~ $35M (more in Olympic years).

Indeed the UCI's revenue is dominated by government subsidies used to bid for the road world champs each year, and the quadrennial extra from the Olympics (which in turn are mostly drawn from host govt subsidies). In an Olympic year these two represent 80% of UCI income and in non Olympic year it's about 60%. Just about everything else operates at a big fat loss.

For context, the bigger pro teams have a larger budget than the UCI.

 

[fmk_RoI]

Re:

Haas raises a good point actually:

"If there were salary caps in cycling, it wouldn't be the best riders that suffer, they'd always get Payyyyd. It'd be their helpers loosing"

Cycling is not enough of a team sport to prevent that I reckon? In something like Rubgy your team would severely suffer if you shelled out a ton for a massive star since each player almost does an equal amount. But in cycling while the team is useful a huge huge portion of it is down to the individual. So stars will always get paid, doms maybe not if the cap is too low.

The impact on lower levels would also need to be considered.

 

[fmk_RoI]

Re:

A salary cap with a wealth tax and a minimum salary for a rider would work if designed properly. Can be done no problem if the willpower if there. To bad it isn't.

What would be the purpose of a wealth tax?

 

[fmk_RoI]

Re:

Salary caps exist in sports/leagues where the peak administration body actually earns substantial revenue and controls the sport. The UCI does not have any such revenue stream nor does it control the sport. It's a relatively poor organisation with annual budget of ~ $35M (more in Olympic years).

Indeed the UCI's revenue is dominated by government subsidies used to bid for the road world champs each year, and the quadrennial extra from the Olympics (which in turn are mostly drawn from host govt subsidies). In an Olympic year these two represent 80% of UCI income and in non Olympic year it's about 60%. Just about everything else operates at a big fat loss.

For context, the bigger pro teams have a larger budget than the UCI.

I think the long term goal is for a team-controlled organisation like Velon to take over, for WT-level cycling to 'split' from the UCI à la the English Premier League splitting from the FA. I think having Velon in charge of policing doping - pharmaceutical, technological - would be ... interesting.

 

[fmk_RoI]

Bob Stapleton (the High Road one), speaking to The Outer Limits, suggests the problem is a lack of imagination - and understanding of modern marketing - from team bosses in where they source sponsors from:

“The traditional value of visual and naming rights, measured by impressions, is being eclipsed by targeted digital and social media that have a quantifiable element and engagement that impressions can’t match,” said Stapleton. The days of measuring sponsorship value by the number of TV views are effectively over, and as a consequence, Stapleton believes that interest from companies who would have previously considered sponsoring cycling is waning. “The typical previous sponsorship candidates for pro cycling now have many other and potentially richer target marketing alternatives available to them,” he added.

In the same way that staffing in cycling teams is rotten with people who have worked during the worst excesses of Gen EPO, cycling's sponsors tend to be drawn from the same small gene pool, which includes many sponsors who have sat idly by while blatant doping was going on. Maybe what is happening now is economic Darwinism that will not only rid the sport of those sponsors, but will take from the sport also a large part of the management structure.

 

[proffate]

Why is there really a salary cap in some sports? The governing bodies pitch it as an even playing field but I'm pretty sure the owners are very happy to cap how much they have to shell out for their employees. If I were a professional basketball player I'd be pretty angry that I'm not getting paid the true market value for my services, but some artificially capped number so the megawealthy owners can continue to line their pockets without entering a bidding war with each other.

I don't think a salary cap will effectively redistribute the wealth in pro cycling; that's simply not how sponsorship works. QuickStep floors doesn't start using some of its excess sponsorship dollars on other teams. So all it would do is drive down rider salaries.

 

[Eyeballs Out]

Re:

Why is there really a salary cap in some sports? The governing bodies pitch it as an even playing field but I'm pretty sure the owners are very happy to cap how much they have to shell out for their employees. If I were a professional basketball player I'd be pretty angry that I'm not getting paid the true market value for my services, but some artificially capped number so the megawealthy owners can continue to line their pockets without entering a bidding war with each other.

I don't think a salary cap will effectively redistribute the wealth in pro cycling; that's simply not how sponsorship works. QuickStep floors doesn't start using some of its excess sponsorship dollars on other teams. So all it would do is drive down rider salaries.

One of the key aspects of the NFL salary cap is that there is a floor as well as a ceiling - the floor is almost 90% of the ceiling which means that each franchise is forced to spend