Connecting the Spots

Team Leopard-Trek had its grand unveiling this week, the denouement of a story that has been percolating, seemingly, since the beginning of recorded history. Much has been made over the last few days of the spartan team kit and surprising lack of title sponsor. Leopard is simply the name of the holding company operated by Flavio Becca, the project’s main financial backer. Trek provides bikes, and some lower order financing.

Calling the squad Leopard-Trek is akin to Bjarne Riis renaming his squad Riis-Specialized, and connotes a failure to secure corporate sponsorship to offset operating costs. One must assume that Becca will pick up the majority of the not-inconsiderable tab for a team already ranked number one in the world.

And that brings us to a much more serious issue.

In May of 2010 we ran a piece about the significance of Bjarne Riis’s difficulties in securing sponsorship for his then SaxoBank team. At the time, THEY were the top team in the world, with super-duper-star Fabian Cancellara, Tour contenders Andy and Fränk Schleck and a long list of other race winners and top class work horses. We posited then that Riis’ struggles, since surmounted when Sungard stepped into the mix, were indicative of a greater challenge faced by the sport, the challenge of bringing in new investment.

Since May, new investors have in fact joined the fray, Movistar and Geox among them. But for the world’s top team to go without title-level corporate sponsorship remains troubling. Riis’s dilemma from last spring has simply defected along with all his top riders.

Leopard-Trek will not struggle financially. Becca is reportedly extremely wealthy and extremely committed to the project. No, the struggle is likely to be felt rather at the lower ends of the Pro circuit. We have already seen Pegasus Racing denied a pro continental license and subject to dissolution by circumstance. Geox’ patience as financier of the team featuring former Grand Tour winners Carlos Sastre and Denis Menchov has been stretched by their failure to secure a ProTeam license.

One might argue that the UCI’s inability to get the various levels of pro-cycling organized in a coherent and transparent way have exacerbated the problems of securing sponsorship. Jonathan Vaughters made that point quite well in a recent piece for Cycling News. The doping controversies swirling around Alberto Contador, Lance Armstrong, et. al. have also undoubtedly lowered the cache of the sport.

What the Leopard-Trek unveiling tells us is that there is something rotten in more than just the state of Denmark. It is fair to ask whether Sungard and SaxoBank still feel good about the checks they’ve written to Bjarne Riis, given the very real possibility that their prize asset, Contador, won’t be able to ride in 2011. But those same questions extend to Spain (Geox), Luxembourg (Leopard-Trek) and France, where teams like Cofidis and FDJ fight to stay relevant, to Germany where Team Milram is gone, leaving Germany with no ProTeam, and even to the US, where RadioShack’s funding of Lance Armstrong’s ultimate venture is running out.

Until the UCI gets the structure of its leagues right and forms real partnerships with the owners of the sport’s most influential races, we are likely to see more unveilings like the Leopard-Trek event, two dozen skinny men in blank jerseys and a team manager deflecting questions about money.

13 comments

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  2. sophrosune

    I think this is indeed a troubling development for the sport. It seems that corporate sponsors don’t want to run the risk of having their images besmirched by doping scandals. While rich benefactors who love the sport and have some national motivation for picking up the multi-million-dollar tab for running a Pro team might fill the void in a few instances, one can’t really see this as a sustainable business model for the sport.

    Sponsorship pricing structures are always based on the quantity and quality of the eyes that your product can attract. European pro cycling has been on a downward spiral it would seem since the 80s in popularity while other sports like football (soccer) have been on the rise.

    I don’t think the sport has fully come to terms with this, or if it has they haven’t worked out solutions. I’m afraid I don’t know what they might be either except for us to expect a diminshed sport.

  3. Tim

    Does anyone know what exactly Mr.Becca is thinking? He wanted a team and he got one. They could sign a title sponsor at any point in the near future or never sign one for the next four years. He is a very successful businessman and knew what he was getting into. No one questions Team BMC which is funded by a Swiss billionaire with no real title sponsor or Garmin which until this year was largely funded by yet another billionaire Doug Ellis. Shares in the Quickkstep team were just purchased by a Czech businessman. Cycling is a great and inexpensive way (Compared to other sports in Europe) to reach a local or global audience. Maybe Mr.Becca is thinking of it as a long term investment? It is not worrying that the teams have a rich benefactor but teams like the Pegasus or in 2010 the Bahati Foundation that are made of thin air that we should be trying to bring attention towards and hold the parties that run these teams accountable.

  4. sophrosune

    Rich benefactors are always welcome, but they don’t replace a solid value proposition for corporate sponsors. Corporate sponsorship is and has been a sustainable business model for the sport. It’s not clear that it will be in the future. And while billionaire benefactors who enjoy the sport are welcome, it’s clearly not a business model that is as sustainable as is corporate sponsorship.

  5. blaireau

    The UCI is the reason title sponsors are becoming shy. The government body cannot take a decision swiftly. It has also zero transparency and seems to change rules at anytime without warning. In such a system, only a gambling multi billionaire can play. Cycling should be self governed by a team association with a board that can vote decisions quickly and restore trust that everyone has a voice in the matter, sponsors included.

    1. Padraig

      Sophrosune: I have to agree with you. I think sponsoring a cycling team as a branding investment can be a great value, provided you have no doping scandals, but the funny flip side is that it would seem that a rich benefactor doesn’t really have to worry about a loss of brand equity should one of his riders end up testing positive.

      Blaireau: I think the CMO who entertains a cycling team sponsorship proposal is completely unaware of the UCI and their machinations. Their much greater concern is doping and having a scandal involving their company’s name that would involve a meeting with the board of directors. Imagine trying to defend your decision to sponsor a cycling team after your star rider tests positive for EPO. What are the chances that guy keeps his job?

      While I have no proof, I’d bet dollars, pounds or euro to donuts that Team Leopard is Team Leopard rather than Team Somecorporation because of doping and the incredible risk cycling seems to be as an investment. And if you want to put an even finer point on it, I think Leopard is sponsorless because of Contador’s situation. Even if he is declared completely and utterly clean, to outsiders cycling will still be seen as a sport filled with doping.

  6. Touriste-Routier

    In terms of funding, perhaps it doesn’t matter whether a team is receiving money from a sponsor, or from a benefactor, as long as the funding continues.

    Since teams at this level require >10 million euros per year to function, it seems like quite the folly for a charitable effort/passion, particularly without a huge ego stroke.

    Thus this model probably isn’t sustainable, but then again, sponsors with commercial interests come and go as well. Corporate sponsorship often comes with a lot of baggage and expectations that an individual benefactor may not have.

    Particularly in today’s economic climate, if the check is written, cash it! However team executive managers need to court all suitors.

  7. randomactsofcycling

    Can a cycling team really be called a business model? And if it is, it certainly cannot be compared with other sports. There are no stadiums filled every weekend and no clubhouse. Other than sponsorship, there is precious little revenue being generated.

    It is quite amazing any team can garner a Title Sponsor. I would observe that the rate at which sponsors drop out of cycling (which seems, with the exception of perhaps Rabobank and a few other stayers like FdJ) about every 3 or 4 years, it seems the Sponsor does in fact realise he is tipping money down the drain. Doping scandals or not, how long does it take to do the math and figure out that regardless of how popular mainstream cycling is, Professional Cycling is a tiny sport with a dedicated few followers. Hardly enough to justify such a large chunk of a marketing budget. Hence, lack of ongoing sponsorship.

    If ‘the Benefactor’ is the way ahead, lookout! Football in Europe is on the cusp of losing a bunch of wealthy sugar-daddies to the ongoing GFC. And as Cycling Teams essentially have very few assets, they are in no position to go into debt, even short term, to continue their operations. Big brands like Manchester United or Barcelona are hundreds of millions of pounds in debt, but have the assets to cover it. How much for a second had TT rig?

    1. Padraig

      Randomacts: A team cannot be called a business model. However, how that teams structures its sources of incoming revenue can be called a business model. Through much of the history of cycling trade teams were owned by the sponsor. The riders were employees of the company that sponsored the team. When the company decided to end the sponsorship, the riders were simply laid off. That was one business model.

      The structure we’ve become familiar with, where a management company owns the team and then sells sponsorship spots to other companies (such as Riis Cycling), is much more recent. The earliest examples of this I’m familiar with emerged in the 1990s. That’s the predominant business model.

      Jonathan Vaughters and Bob Stapleton essentially led the way with the newest business model where a wealthy benefactor acts as an angel to get the operation up and running. Angel investment is common in other businesses, but it traditionally leads to other equity investors, not finite-period sponsors. This is a very new business model and peculiar to cycling.

      Who knows, at some point someone might try a fan-base-supported business model, where everyone who invests $250 gets a jersey and an invitation to the team presentation and some VIP events at select races; give $1000 and get a ride with the star of the team.

      As to your suggestion that professional cycling is a “tiny sport with a dedicated few followers,” that’s only accurate if you look at cycling in English-speaking countries. In terms of worldwide viewership, the Tour de France is the largest annual sporting event going. Nothing else comes close and the only event that ever tops it is the World Cup, which occurs every four years. For a company looking for a worldwide marketing reach, cycling remains one of the best values going … so long as none of your riders test positive.

  8. Touriste-Routier

    Just because a sponsor leaves the sport after a few years doesn’t mean they felt they were sending money down the drain. All things have a beginning and an end. Marketing dollars often need to be shifted in other places after a few years in order to accomplish other things; Motorola left the sport after accomplishing all of their goals.

    From what I understand in terms of cost per impression (a common advertising metric), pro cycling has a very high value for the sponsor. However, when there are negative headlines, and you can’t be guaranteed entry into all of the top races, the value proposition diminishes.

    There is a business model to road cycling, it just doesn’t make rational sense, and can’t be compared to a league, which is essentially what the UCI has been trying to build via the Pro Tour. Of course with very little thought, one can see how tenuous this effort is.

    Currently, there is no incentive to own a team, because there isn’t any tangible property to own (the vehicles & bike equipment really don’t have anything other than short term value). Everything on the team and rider side focuses on annual earnings rather than equity, as equity in the team has no value.

    The races are owned by other parties; there can be income/profit year to year (sponsors, TV rights, etc.), and larger/historical events become a tangible asset in and of themselves, albeit comprised mostly of good will and historical profits. The top race organizers have little incentive to become part of a UCI league (after all some events have succeeded on their own for 100 years), which is really at the root of the UCI vs ASO/RCS battle of a few years ago.

    All of this supports JV’s argument for longer pro tour team licenses, so that the licenses have value; hence they become an asset that can be sold. Of course this is fraught with other issues.

    Of course cyclocross and track cycling have different models, because it is easy for them to collect gate fees and concessions if they chose to do so. Since top riders can earn good wages on the CX and 6-Day circuit alone (and don’t need to be part of a “team”, the organizers can tell the UCI to go pound sand, and they can sanction events themselves if they so desire. In these segments the only power the UCI really has is to suspend riders competing in non-UCI events, preventing them from competing in UCI events. But if you can make a living on the track, in the mud or in the non sanctioned road scene (some crits, kermesses and Gran Fondos), certain riders might not care.

    Apologies for the long diatribe, but as you can see in addition to doping problems, the sport has significant structural inadequacies.

  9. Touriste-Routier

    Fan based support models have and do exist, though usually as a subsidy to commercial sponsorships. The Rapha Pro Team is the most notable recent example. Their supporters club has evolved to be more of a real cycling club with an association with the pro team.

  10. Robot

    Just an addendum to this storyline, did anyone else think, as I did, that the Pegasus meltdown was informative for the fact, only recently divulged, that RedBull was on board as their title sponsor UNTIL Contador’s positive test scared them out of cycling.

    RedBull spends a ton of money on sports sponsorships. To lose them in this fashion is a blow to the sport.

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