Cycling’s economic challenges and disparities

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Consider two sets of figures.

Firstly, the difference between the budgets for Sky Pro Cycling and Trek Factory Racing, two teams competing in the WorldTour. The first has an estimated budget of 40 million Euro per year. The second is racing with an estimated backing of just one third of that, 14 million Euro.

Secondly, consider that of the salary portion of that budget, 45 percent is spent covering the wages of Trek Factory Racing’s top rider Fabian Cancellara.

The remaining 55 percent covers all the other salaries on the team, leaving little to secure other marquee riders.

Those constraints mean that if Cancellara is out of action at key moments, as has happened twice this year, Trek Factory Racing is left without its strongest competitor and is seriously disadvantaged.

For Sky, which has a much greater depth of talent, the absence of one rider doesn’t have anything like the same effect on its results.

Taking those figures into consideration explains why the team is working hard to find extra backing. It has ridden well with what it has got, but knows that it can do so much more if it can build its budget and make big signings.

Until then, though, it’s fighting a very unequal battle against the biggest players in the sport.

Taking on cycling’s Goliaths

Simon Thompson is the director of Sports Marketing and Racing at the Trek company and plays a very important part in determining what gets spent and where. He is clear about the need for Trek Factory Racing to be able to increase its budget.

“Consider what happened last year with other teams. They lost their top guy, yet they have got enough other guys who can step in and make a really good showing,” he told CyclingTips this week.

Simon Thompson
Simon Thompson

“But for us, when you have your top guy break his back twice in one season [as Cancellara did – ed.], then all of a sudden you haven’t got anything left. And 45 percent of our salaries are tied up in one athlete.

“For me that is the big difference between the teams. Everyone’s got pretty much the same operating costs. It cost the same amount of money to put two buses, two trucks, 14 cars around the world, all these people. But the rest is tied up in salaries. That is the difference.

“And Team Sky is spending more on riders alone than we are on our entire team.”

Thompson’s statement is not only relevant to Trek Factory Racing alone. A number of other teams are also fighting the same kind of battle, needing to punch way above weight for their survival.

They have smaller budgets and also much less long-term security.

Trek previously was a partner to other teams, supplying bikes and equipment to the likes of the US Postal Service, Discovery Channel, Astana and Leopard Trek/RadioShack.

They were competing successfully in the top races but didn’t have the desired amount of influence and self-determination.

Things changed prior to the 2014 season when the Trek company responded to the end of Leopard project by deciding to set up its own team. It signed riders such as Cancellara, the Schleck brothers and Jens Voigt and purchased a WorldTour licence.

Year one brought highs and lows. Cancellara took the Tour of Flanders, but 2010 Tour winner Andy Schleck’s attempt to return to his best form derailed when he crashed heavily in the Tour de France and was forced to retire.

The hugely popular Voigt also hung up his racing wheels, deciding that it was time to call it quits.

This year Cancellara has fractured vertebrate on two separate occasions, falling in the E3 Harelbeke and missing the Classics, and then crashing again in the Tour de France while wearing the yellow jersey on stage three.

The latter put him out of the race. As a result of bad luck, he missed out on two key periods of the season.

Frank Schleck also had problems, with a fall in Liège-Bastogne-Liège ruling him out of the Tour. Bauke Mollema had to shoulder much of the pressure in the Tour and while he finished a solid seventh, the performance didn’t gain anything like the same attention that the podium battle did.

The sequence of events underlines Thompson’s contention that teams with smaller budgets trying to fight the bigger squads can struggle to do so due to the constraints on signings plus the related lack of depth. The Davids may on occasion beat the Goliaths but, over the course of a season, the giants often come out on top.

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“Winning in cycling is always very difficult”

Speaking in detail to CyclingTips about the team sponsorship and the benefits and challenges that brings, he said there were three reasons why Trek backed a WorldTour squad.

The first was product development, being able to work with top athletes in the biggest events. “Working with them very closely helps us to develop the best products and the best technologies going forward,” he said.

The second element is marketing. “We are the number one individual brand in the world. We are a performance brand, we have always been a performance brand and racing is paramount to that,” he explained.

“Then the third is winning, obviously. Winning in cycling is very difficult – even the top teams and the best athletes don’t win very often, but it is the pursuit of winning, putting everything into that, that is so important.

“It is the milliseconds, the inches, the millimetres that you try to gain which push all of us to the very edge, which push us through those barriers.”

Asked to rank how successful things have been in relation to those three goals, he describes the first two as being of great satisfaction. “We are hitting it out of the park, it’s five out of five.”

However the third aspect is a concern. Thompson is frank about that.

“It is probably the winning bit that has been the least successful,” he admits. “That is the hard one anyway, even when things are going good. But the reality is that our budget puts in a position where we are only able to focus on certain parts of the year and certain races because we are competing against teams with twice our budget.

“That allows them to have the depth and allows them to have the resources that we simply don’t have. I would say we are extremely happy with what we have got out of it, but there is also that nagging thing about wanting to find another title sponsor or another couple of big sponsors that would invest and come for the ride.

“That would mean we would have a team that would have a bigger budget and would be more competitive. It would mean that we would be getting more out of it than we are today. That is probably the one frustration that we do have.”

Tour de France 2015 - stage 3

Seeking solutions amid growing disparity in the peloton

Thompson is speaking about Trek specifically, but the same could apply to other squads on a tight budget such as Cannondale Garmin and IAM Cycling.

Sky, BMC Racing, Tinkoff-Saxo, Astana and Katusha have far greater resources at their disposal. In most of those cases, though, the backer is either a rich businessman, a wealthy government or, in the case of Sky, a major multinational trying to increase market share in several different regions.

The budgets of those top teams are far greater than they were five, ten years ago. The rich players have driven salaries up with their bidding and with no salary cap currently in place, it is increasingly difficult for smaller teams to keep up.

Thompson notes that major sponsors are needed throughout the WorldTour, yet the current format of the sport doesn’t make that easy to achieve. “Right now, the economic model of the sport and the entire framework of cycling doesn’t offer much commercially to global brands,” he states.

“That is why, other than Samsung, which is a great partner of ours, there are no global brands in cycling.

“That poses a huge risk. It’s something beyond all of the stuff that gets written on a daily basis about the doping in the sport and all of that.

“In my opinion that [the doping controversy] is less of a risk than the fact that cycling is not a sport that has been engaging global brands on a regular basis.”

Asked to be specific about the current problem with cycling’s economic model, Thompson said that there is no clearly defined narrative throughout the year. For viewers not steeped in the sport, the current clutter of events can be confusing; he points out that it is possible to see the same teams racing in different events in different locations on the same day.

“For a fan who turns on the television, he can click and he might see one race and there are teams in it. Then he flicks the channel and the same teams are competing somewhere else… The fan says, ‘ah, it is raining in that one, but it is sunny over here. What is going on? Why are the same teams competing at the same time in different races?’ It’s very confusing.

“So the entire narrative of the sport of cycling needs to improve. The UCI are struggling to make that happen. The reform issues which are on the table right now have been beaten back, beaten back. I think that we will be lucky to see anything more than the status quo. And I think that is a shame.

“First and foremost, you have to change the economic model where the teams are completely relying on sponsors. Every year you have got all of these teams battling to try to maintain the sponsors that they have got and trying to bring some value.

“There is always the threat that the sponsors are going to pull out and the team is going to fold. That you will have 70 people all of a sudden looking for a job.”

In an interview printed separately this week on CyclingTips, Thompson spoke in detail about the current tensions within the sport. He notes that teams are trying to work together via the Velon group to build new revenue steams, yet ASO – the organiser of the Tour de France and many of cycling’s other major races – is trying to block any progress.

He insists that Velon isn’t a threat, and that if ASO works with it the overall value of cycling can be increased, benefiting everyone. However he laments that the French company is simply trying to block any gains being made, and feels things may come to a head due to that stubbornness.

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“Cycling has been extremely successful for Samsung”

In the meantime, Trek Factory Racing is hoping to increase its budget in other ways. Thompson refers to the work being done with Samsung, including hugely successful We Are Greater Than I video campaigns tying in with the latest Avengers movie plus the theme of domestiques in the sport. [Note – you can watch those here and here.]

“We are a global company, we are a global-branded team,” he said. “We are looking for a global partner to come on with us, global sponsors. And as I said, that sponsorship model doesn’t exist right now.

“The only company which has seen an opportunity and taken the leap is Samsung. They’ve been running a global campaign to celebrate cycling. So far that has been extremely successful for them.

“I think that is really positive for the entire sport. I think what it does is it shines a light on cycling and shows other big brands that cycling is a great way for them to get great value in sponsorship and to align their brand. To talk to their customers. It is a great opportunity.”

Thompson is hoping that other multinationals will see that example and decide to also get involved in cycling.

“Fingers crossed that [the success of the Samsung collaboration] helps to spread our message and let people know that we are open and looking for other partners to join us for our ride as well.”

He’s also hoping that Samsung may consider stepping up further.

“We have shown them great value and I think they have been extremely happy with the partnership,” he explained. “I am hoping that they will want to continue as well.

“We are hoping that they can invest a little bit further so we no longer have to look for someone else, we can give them all the value and we can hopefully make our team a little more competitive as well.”

Thompson and others still have a couple more months to try to nail something down. Whatever happens, the team will continue next season, having made an initial three year commitment when purchasing the WorldTour licence.

He doesn’t rule out the company staying as title backer beyond that, but is clear that the team wants, and needs, to grow. To improve. To raise the bar.

“We are committed to doing this. We are really looking for someone else to join us. We have put the foundations into building this great team. We have got everything in place now, we are in our second year, we know what we are going and we are focussed.

“But we really want to be competitive. We want to have a team which can compete all year long at the major races, and to do that we need to have another couple of partners who are committed to the project as well.

“Then we can absolutely have a long term commitment and keep this going. To have more assuredness around where we are going in the future as well, the same way that Team Sky is able to do it now.

“That is what we want to do. That is what we are aiming for.”

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