Professional Cycling Sponsorship Discussion Thread

[Race Radio]

And TDF would be nothing without the best teams/riders. Are you gonna watch it if the best teams wont show up? I dont think so.

I would.

Perhaps it is just how I deal with loving the sport and hating some of the various elements. I really don't care if they climb Alpd'Huez in 38 or 45 minutes. I mostly tune in to see the pretty pictures and the various tactical elements of the race.

Dump the World Tour teams and think about about much attacking the racing will have. Ever seen a French Cup race? Amazing stuff.

 

[Libertine Seguros]

I doubt Rabo will ever come back to cycling

Rabo never left cycling. This photo is from last week.

 

[Granville57]

Upon Race Radio's suggestion in another thread, I'm bumping a relevant post from a few of years ago.

Jonathan Vaughters provided some interesting info on the sponsor/financial return aspect of cycling teams. It's still hard for me grasp the effectiveness of it all though.

JV: I am a little harder to schedule these days, huh? One of the things I’m doing is we just did our media evaluation with IEG – how much value your team has. And we’re pushing like $90 million in value. We may be the highest total publicity to investment dollar ratio in cycling ever.

Q: How do they track that?

JV: Say for example a 30-second ad on one TV program costs $100,000. So 30 seconds of direct advertising to consumer costs $100K at this slot on TV. Or this amount of print costs this amount of money. Anything – print, tv, radio, whatever. So in the TV example, let’s say the program’s an hour long. 40 minutes of that is actual coverage. Of those 40 minutes, they find that Team Garmin received two minutes of direct commentary and in-focus logo exposure. If it’s out of focus, a helicopter shot where you can’t make out the jersey or whatever, then it doesn’t count. But if the commentators are talking about the team, the logo’s on screen and in focus, let’s say you get two minutes. If 30 seconds cost 100K, you’ve got a $400,000 value.

They do the same thing for print –what’s it cost for a full page ad? Now, what’s the word content for that amount of space, did you get a photo, did it not have a photo, and so on. And they have a calculus that if a full page in the NY Times costs X amount and you got a quarter page article and there was a photo, we’ll call that X dollars. Add it up worldwide and here you go.

Q: And you guys are the highest-producing team ever? Even over, say, Postal or Discovery?

JV: I’m sure there are a couple of Lance years, like 2005, where they outstripped the total value but, put it this way, for a non-Lance associated team, it’s unprecedented. And they don’t count value in markets that don’t matter to Garmin. Meaning like, they don’t sell Garmins in Uganda, say, so if you get 20 hours of live coverage, it doesn’t count.

Q: Is there any kind of qualitative aspect- the direction and trends of the coverage, so on?

JV: Yeah, negative stories count as neutral or very limited. Positive stories are counted 1:1 with ad space. I was pretty pleased with the results. It’s $60 million just in TV. Once it gets to all the other stuff…
http://bicycling.com/blogs/boulderre...ot-revolution/

Just to clarify one thing for the record:
The interviewer seems to somewhat misrepresent JV's claims when quoting the "highest producing team ever" bit.

JV clearly states, "We may be the highest total publicity-to-investment-dollar ratio."

That's a bit different.

 

[mihhint]

Just a quick question - might be slightly off-topic:
Are there any sorts of financial restrictions in cycling what-so-ever? Any sorts of caps to salaries or sponsorships or any relations/ratios limitations between whatever or anything of the kind? I assume 'not really', but just wanna ask over.

 

[Race Radio]

Just a quick question - might be slightly off-topic:
Are there any sorts of financial restrictions in cycling what-so-ever? Any sorts of caps to salaries or sponsorships or any relations/ratios limitations between whatever or anything of the kind? I assume 'not really', but just wanna ask over.

No caps, but there are minimum salaries on some level......but those rules are often easy to get around

 

[Race Radio]

Upon Race Radio's suggestion in another thread, I'm bumping a relevant post from a few of years ago.


Just to clarify one thing for the record:
The interviewer seems to somewhat misrepresent JV's claims when quoting the "highest producing team ever" bit.

JV clearly states, "We may be the highest total publicity-to-investment-dollar ratio."

That's a bit different.

Slipstream was certainly innovative in the way they captured coverage. A few years ago they certainly had the best ratio, but it appears other teams have caught up.

Interestingly another team that did amazing things on a limited budget was Highroad

 

[Red Rick]

How come the Tour generates so little profit, aren't they getting millions and millions from grand depart, stage finishes, tv rights and all that stuff. Are their costs really that high?

 

[Fus087]

No caps, but there are minimum salaries on some level......but those rules are often easy to get around

Can you expand on how?
Personal sponsorships - i.e. a rider bringing a sponsor to the team that covers his salary?

 

[Jancouver]

How come the Tour generates so little profit, aren't they getting millions and millions from grand depart, stage finishes, tv rights and all that stuff. Are their costs really that high?

Its all accounting tricks and tax avoiding bookkeeping. ASO is a for-profit company and as every other major corporation, it is not that hard to hide profits by using accounting tricks, making investments and cooking the books. At the end, they will show very little profit to avoid paying taxes.

 

[karlboss]

Can you expand on how?
Personal sponsorships - i.e. a rider bringing a sponsor to the team that covers his salary?

For the top levels of the sport i.e. world tour the riders have a minimum salary. There is no maximum go crazy.

Hard salary caps I think form part of the answer, but as race radio says they can be gotten around. Though still having to get around them makes for a far more even competition that not having to bother at all.

 

[karlboss]

Its all accounting tricks and tax avoiding bookkeeping. ASO is a for-profit company and as every other major corporation, it is not that hard to hide profits by using accounting tricks, making investments and cooking the books. At the end, they will show very little profit to avoid paying taxes.

Revenue of 147 million from their own annual report for the whole company. That is revenue...it wouldn't go far. You can hide profit all you want, but that revenue isn't going to move too far.

 

[DirtyWorks]

Revenue of 147 million from their own annual report for the whole company. That is revenue...it wouldn't go far. You can hide profit all you want, but that revenue isn't going to move too far.

That's reported revenue. The idea that all race revenue passes through ASO is likely not true.

For example, we know the UCI has a licensing relationship with an undisclosed private company such that if you want to run a UCI race called "the tour of Russia" the UCI requires you pay the third party a license fee before they will sanction the event. UCI doesn't report the revenue.

Same idea. ASO managers can operate third-party entities in tax havens and accomplish the same thing. Not new and quite common once you get into an international business scale.

 

[Arnout]

This is not just about TDF. There is cycling on TV every week and somebody (ASO) is collecting all the TV right fees and as far as I know, the teams get nothing from that.

They are behind every other race including;

Vuelta a España
Paris-Roubaix,
Liège-Bastogne-Liège,
Flèche Wallonne
Paris-Tours,
Paris-Nice,
Critérium du Dauphiné
Qatar
Oman
Tour of Norway

and many others ...

Yeah guess how much those races make... Most of them are propped up by local governments for PR reasons.

Just a quick question - might be slightly off-topic:
Are there any sorts of financial restrictions in cycling what-so-ever? Any sorts of caps to salaries or sponsorships or any relations/ratios limitations between whatever or anything of the kind? I assume 'not really', but just wanna ask over.

Minimum salary in the WorldTour is about €50,000. Froome revealed in his book that he earned close to €100,000 in 2011, that was a contract negotiated before he transformed from an average to a GT winning rider in te Vuelta in that year. Cyclist salaries on the highest level are not the biggest problem of the sport, not by far.

How come the Tour generates so little profit, aren't they getting millions and millions from grand depart, stage finishes, tv rights and all that stuff. Are their costs really that high?

Well, expenses are equally big. Remember that races are obliged to pay for hotel expenses for all the teams during the race. Aside from the costs, this is a logistical challenge as there are many places where hotels are few and far between.

It's really hard to get to know exactly how much it costs to organize a one-day or a stage race. I'd estimate a one-day race costs about €100,000, a stage race will cost the same or a bit more per day. Check for example this story where some numbers about organizing the race are mentioned: http://www.cyclingnews.com/news/uci-considers-basque-country-intervention

It's clear that no TV station anywhere in the world will pay anywhere close to that amount of money to broadcast. Hence the reliance on public money (or breaks in for example security costs) for organizing races. It's a good thing for cycling that it's seen as trendy nowadays, which means there will always be local governers willing to spend tax money on our indulgence.

That's reported revenue. The idea that all race revenue passes through ASO is likely not true.

For example, we know the UCI has a licensing relationship with an undisclosed private company such that if you want to run a UCI race called "the tour of Russia" the UCI requires you pay the third party a license fee before they will sanction the event. UCI doesn't report the revenue.

Same idea. ASO managers can operate third-party entities in tax havens and accomplish the same thing. Not new and quite common once you get into an international business scale.

ASO is a for-profit company, which means rules for them will be a bit different than for the UCI. I have no doubt that they will have ways to decrease tax rates artificially, but they are bound by certain rules in their reports.

 

[karlboss]

That's reported revenue. The idea that all race revenue passes through ASO is likely not true.

For example, we know the UCI has a licensing relationship with an undisclosed private company such that if you want to run a UCI race called "the tour of Russia" the UCI requires you pay the third party a license fee before they will sanction the event. UCI doesn't report the revenue.

Same idea. ASO managers can operate third-party entities in tax havens and accomplish the same thing. Not new and quite common once you get into an international business scale.

No doubt, but honestly how much do you think they are hiding? A look at reported figures from the other side like that for the rights in france to all ASO events the ASO is paid 24 million euro. Assuming (and it is a huge assumption) that the rest of the world has the same willingness to pay for ASO events and that those watching ASO events can be extrapolated from french peak and average tour de france viewers to world wide peak and average viewers. You end up with the ASO being paid around 150 million in TV rights for all events in a year. Fairly bold assumptions I'll grant you and some serviette maths, but it all boils down to they can't be hiding too much. Lets call it triple...and use the 2012 number of 166 million, thats about 500 million, and still not too much to be shared around, especially when you have zero incentive to do so.

 

[Fus087]

For the top levels of the sport i.e. world tour the riders have a minimum salary. There is no maximum go crazy.

Hard salary caps I think form part of the answer, but as race radio says they can be gotten around. Though still having to get around them makes for a far more even competition that not having to bother at all.

I'm well aware that there's no salary cap in cycling.
I was asking how to get around the minimum salaries that are prescribed at certain levels (WT, ProConti, Conti in a few countries).

If you want to find out how to beat salary caps, look to US sports and their ridiculously long contracts.

 

[DirtyWorks]

It's really hard to get to know exactly how much it costs to organize a one-day or a stage race.

It's your lucky day! Here's a post on Tour of California:
http://forum.cyclingnews.com/showthread.php?t=22273

It's reasonable to assume things are different in France, but you can ballpark from that post because in most cases, the UCI assures these things are in place.

 

[Jancouver]

Some better news today as Samsung is new minor sponsor for Trek and NetApp secured 5 year sponsorship with a German company.

Any ideas who the German sponsor is?

 

[Akuryo]

Some better news today as Samsung is new minor sponsor for Trek and NetApp secured 5 year sponsorship with a German company.

Any ideas who the German sponsor is?

It is speculated that it could be Viessmann. But I don't really know for sure.

 

[karlboss]

I'm well aware that there's no salary cap in cycling.
I was asking how to get around the minimum salaries that are prescribed at certain levels (WT, ProConti, Conti in a few countries).

If you want to find out how to beat salary caps, look to US sports and their ridiculously long contracts.

I'm not sure what getting around a minimum salary would help, but if you wanted to do it. Rider X would give money to Sponsor Y who would give the money to team Z who would then pay Rider X. If the rider that changes hands is the same you now have a zero dollar rider. If there is no regulation at all, maybe sponsor Y doesn't need to exist.

If the long contract is your way around the salary cap that's an easy loop to close. Harder to close is the second set of books kept in a safe that no one ever sees, especially when they aren't looking. Harder to close are personal sponsors who say "Cav here is your money as long as you ride for OPQS", but to the world "Cav here is your money we don't care who you ride for"

 

[RobbieCanuck]

Belkin ending sponsorship of the team ... seems like cycling just cant get a break.

While ASO is raking in all the profits from cycling, the teams are struggling to stay afloat.

Something should change for real!

Discuss ...

I want to start with the observation that ASO pays the winner of the Tour de France 450,000 euros. Given that this money is "revenue shared" among the 9 riders on the winner's team (as opposed to the winning team) it amounts to 50,000 euros each. This is pathetic for the sporting event that considers itself the most prestigious and difficult in the world.

While the total prize money for the TDF is about 2 million euros, for all the various categories, I note that every weekly US PGA golf tournament which runs for about 10 months probably averages prize money of $5-10 million per tournament.

The ASO earned about 38 million euros of net income in 2013 from the TDF. It is not the ASO that makes the Tour what it is, it is the riders, and the sooner the ASO recognizes this the better. And the only way to do that is to fairly compensate the riders.

In my view the whole scheme of financing cycling has to start with the riders who train for the races, endure the elements, put their bodies on the line and provide the thrills. Until the riders create an independent union and negotiate a share in TV revenues and teams negotiate a revenue sharing scheme to help the lower income WT and CPT teams, cycling will always be a poor cousin to any other major sport.

There is not a pro sport where the athletes do not have a significant say in how the money is distributed, be it American football, NBA, MLB, NHL or the American PGA. All of those leagues have unions that have resulted in financing schemes that try to draw a balance between player incomes and the owners ability to make a profit. As a result players salaries have escalated substantially. Some would say out of proportion to their value.

Right now in cycling, riders are treated like indentured servants with only the top guys earning the money.

Domestiques and support riders are not given their due. That has to stop. Unfortunately the riders themselves do not seem to have the where with all to get their act together. If they only realized it they are the ones with the power.

 

[Hakkapelit]

Could Belkin be aiming for some stateowned dutch company for sponsorship with their TdF rooster?

 

[Fus087]

I'm not sure what getting around a minimum salary would help

When the Dutch fed introduced minimum salaries for Conti teams a few years back, we saw a dramatic drop in the number of Dutch Conti teams.
They simply couldn't afford it.

The money in cycling is small compared to many other sports, and ridiculous given the amount of exposure the Tour gets (and some other races regionally, but the Tour worldwide).
Small teams are often having a hard time just getting the wheels to turn around for the whole season.
They'll often look for whatever ways to minimize their costs, some times in ways you wouldn't believe - like taking homemade sandwiches across the whole country in order to save money on food at the race venue.
Sometimes, that will include asking a rider to find a sponsor for the team in exchange for a ride. Not necessarily evil-intended, but just out of necessity.

 

[Race Radio]

It is speculated that it could be Viessmann. But I don't really know for sure.

I have heard this speculation as well, how valid do you think it is? They have a long history of sponsoring various sports.

While I think it would be great I look forward to the day when large consumer brands return to the sport.

 

[Race Radio]

Some big bike related changes coming soon. Perhaps the biggest non-GC rider is going to be switching bikes and a large non-Euro team will be using an American brand next year.

Silly season starts soon

 

[Jancouver]

Some big bike related changes coming soon. Perhaps the biggest non-GC rider is going to be switching bikes and a large non-Euro team will be using an American brand next year.

Silly season starts soon

Cannondale merging with Garmin? Make sense