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October 21, 2017
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  • jules

    fantastic insight. thanks for this article.

    I’d offer a different take on the reasons for the rise on bike sponsorship of pro teams, though:

    “Many of the big money sponsors got out of cycling forever,” Paolo says. “And the ones that remained just weren’t willing to spend the same kind of money as before.”
    So the bike sponsors stepped in to fill the gap. And prices went up.
    /quote

    it strikes me as unlikely that a sponsor would pay more because the cost of running a team increased (i.e. through loss of revenue from other departing sponsors). normally a sponsor will offer an amount they believe represents value to them. if the team doesn’t need that money, they’ll still take it and buy a yacht or something.

    I think the bigger reason for bike sponsorship costs increasing is likely the growth in the sport globally and particularly in the US. this was why Heini baby was so keen on Lance winning Tours by any means necessary – it was money in the bank for cycling and its patrons. it also grew the market hugely for bike manufacturers, and therefore the value of sponsorship to them in ensuring they took maximum slice of the pie in that growth.

    • Rick Vosper

      Hi Jules, and thanks for the kind words. The rise in cycling popularity is a good point. I didn’t see it when I was sponsoring teams (at Specialized and Cervélo) and Paolo didn’t mention it in any of our conversations, but it may have just been transparent to us. All we saw was the prices going up all across the peloton. Which speaks to your question about why a sponsor would pay more just because team costs increased: supply exceeded demand, and because “everybody knows everybody,” going rates were an open secret, so everyone paid market price.

      Hope this helps.

      –rick

      • Larry Theobald

        Excellent piece Rick! Anyone who wonders what happened to many of the small (mostly Italian) brands who used to supply bikes to top teams can now understand how they’ve simply been priced out of the market. Do they know (or care) how much these costly team sponsorship programs add to the cost of the bike they buy? Probably not. One thing you left out was the dough put into teams (I’m thinking Big-S and a guy currently wearing a rainbow-striped jersey) to cover a star riders salary demands and keep him on their brand. Some have suggested that’s 3-4 million euros in addition to the rest of it? Sadly, it seems pro cycling wants to follow F1 down the same dead-end when it comes to soaring costs. Consumer-product companies (Bora, Segafredo, ?) are a small minority of sponsors these days compared to autocratic governments, gambling interests, the bike industry and a few cycling fans with fat enough wallets to bankroll a team. Long-term it’s hard to see this as a good situation.

    • campirecord

      Not to sound to bleek but teams are folding by the minute and are based on funding from oil princes and you believe this is a need and demand market ? Not really, no one is getting a yacht for fun.

  • winkybiker

    All money that can be raised is spent. More money coming into the sport, the more it costs to run a team. The money dries up and the costs reduce. There is no other way it can be. Why is Formula 1 so prohibitively expensive? Because sponsors are prepared to put millions into it. It is simply a reflection of the amount of money available.

    • campirecord

      There is also a very unfair balance. Rarely does a third tiered F1 make it to the top of the podium. Furthermore, a new phenom has entered this black hole. Drivers are now buying themselves a steering wheel. Just check Lance Stroll, then check out the new Italian model. You get to ride on a Conti team if you come in with a 50k sponsor. That’s because inherently cash is the big war. Finally, don’t think the manufacturer are making a killing with this. There are a few medium and small size makers who have completely killed whole R&D dept in order to cover the cost in free frames and distribution growth. Once they lose that Program thaugh, the wheels start all over as they get dropped from distributors and agents.

      • winkybiker

        You’re right. I wasn’t suggesting it was an ideal situation. The inequity in funding can reduce the nature of the spectacle. In some sense, that is self limiting. If one team in F1 becomes completely dominant, the interest and value to sponsors diminishes. But basically, professional sport is a cesspool of self interest. Cash wins, and there is no way to fundamentally change that.

        It is indeed a likely to be a big commitment for small manufacturers. One of my beefs with SRAM is that they invested heavily in marketing, to the expense of their engineering. They’ve pulled it back a bit now, but for a while their level of penetration into pro-cycling was completely disproportionate to their market share.

      • Rick Vosper

        “Inherently cash is the big war. ” Well said.

      • John

        Nothing new about pay-to-drive in F1 – it’s been around since the ’70s, although these guys have been turning up in bigger teams in more recent years. The same is true for cycling – lots of riders turn up on teams bringing personal sponsors with them. This doesn’t necessarily mean that the rider/driver is rubbish, though, (for example Nobili taps seemed to follow Ivan Basso through all his team’s), but it must widen their options at contract renewal time.

  • jon

    Now you can see why bike brands such as Specialized pursue the litigation route so aggressively, not that it is justified, but the reasoning is visible.

  • David Alexander

    Is Paolo’s anonymity actually important? Because I’m pretty sure I could find the guy with the details in this article, and I don’t know much at all about professional cycling. You might consider redacting some of it.

    • Olev

      You can be almost certain that they made half the personal background up, and threw in red herrings.
      As far as we know, Paolo loves disc brakes – he required a translator to communicate with CT and he never raced bikes.

      • George Darroch

        The person is (hopefully) a composite of several real people in the business who were willing to speak to the author.

        There’s a lot of insight here, and it’s appreciated.

    • Cruz er

      The fact they said his accent is a mix of everything, and he speaks perfect English… pretty much is telling you it’s all made up.

      • Rick Vosper

        I’ll be sure to tell Paolo that.

        • Cruz er

          I meant the hiding of his identity, not the information in the article! :)

          • Rick Vosper

            Understood and thanks. As to whether he’s a composite, I’m going to leave that open. But there’s a bunch of people in the peloton who speak perfect American English with any number of different accents and overlays. One guy I know had at least four languages and I’m told (by a native speaker) his Italian was excellent, too.

            • About accents in professional sports, I recommend this article “Translation please” on Sportscar365.

  • George Darroch

    This seems to explain why the industry is loathe to kick teams associated with doping out. Those teams come with sponsors, and burning those sponsors up for the sake of moral purity would sharply reduce the size of the funding pool.

    At the same time however, fewer new sponsors will come to the sport and risk millions on the chance that some of their riders ingest some special vitamins.

    • George Darroch

      Oh, and the sponsors should do more to let their viewers know what their business/products are. It may be plainly obvious to them, but I have no idea what or who Bora or Hansgrohe are, or Sunweb or most of the many other names out there.

      • Simon Wile

        Agreed on the sponsor limelight. Your names synonymous with a world level team but wtf do you actually provide as a product or service?

        • John

          What you’ll probably find is that sponsors only bother to do this in markets where they actually sell their product – they can’t afford to waste any more cash after the CEO has blown millions? on his current hobby. However, Sunweb are a European skiing holiday company, Bora make cooker extraction fans, and Hansgrohe make taps.

      • markpa

        Now we know Bora make cooktops, and Peter Sagan is a better bike rider than salesman.
        https://www.youtube.com/watch?v=Z4n4OWH4Ohg

        • campirecord

          It doesn’t really matter as the return on investment has always been poor. It’s a fact, commercial operations who invest do it for personal reasons. Barhain shampoo anyone ? Earring aid and cycling ? It’s really the choice of a CEO and when there is a change of guard. The plug is pulled. Pegasus, the Israel travel board and a bloody Gov Mail company USPS.

      • CapeHorn

        Hansgrohe make taps (and I assume, other bathroom/plumbing fittings)

  • Simon Wile

    Great article thank you. Really cool to get a deeper insight of the behind the scenes requirements. Makes our local NRS and Conti teams look very frugal indeed.

  • Anon N + 1

    The article states that current costs “more than triple what they had been 20 years before.” Has this analysis taken into account inflation?
    According to an inflation calculator for the UK I found on the internet, 1 GBP in 1997 (20 years ago) is 1.72 this year. In other words, inflation alone accounts for most than have of the increase. If we can assume inflation in the US and world-wide is similar to that experienced in the UK, we can revise the sentence to read, “after taking monetary inflation inherent to modern capitalistic economic management into account, the cost of running a pro team is about one and a half times what it was 20 years ago.”

    Not nearly as dramatic.

    • Rick Vosper

      Fair enough. I probably should have put that in.

  • cthenn

    Random thoughts:

    -“the exposure of widespread doping, which began with the 1998 Festina scandal and was, perhaps, bookended with the 2012 USADA report focusing on Lance Armstrong and doping practices at the U.S. Postal Service team”….mmmmmm bookended? Are we sure about this? Perhaps not as blatant, but I see a team (the biggest team) out there basically using the same tactics and calling card of that infamous team….led by a rider who is almost as dominant in the Tour.

    -“Paolo is not a disc fan.” I like this guy!

    -“Put another way, by signing a standard three-year team contract, each of these companies is placing a €15m bet on that team’s success. And, like businesses everywhere, they expect a return on that investment. But that’s another story.” It sure is another story…the pressure facing the riders is crushing. Imagine how a guy like TJVG feels, being “the best” (debatable) American rider where most of the manufacturers and money is. The pressure to perform has to be overwhelming, and I’m sure it’s a big part of the reason my first comment above is still relevant.

  • double A

    A few thoughts, but first great article.

    When stacked against other professional sports teams be it North American or European, the cost of entry to cycling is peanuts. NFL, NBA, NHL, MLB, are all billions. Add in soccer/football in europe which are hundreds of millions if not starting with a B as well. So keep that in mind. $200mm, while nothing to scoff at, fractions to get into a pro level sport.

    The biggest issue facing cycling today is not cash, cash is a second order problem. It’s viewership and TV rights. Cycling is a sport that sucks for TV, but is even worse in person. You stand on the road to see the peloton go by in 25s. You don’t have a stadium to sell tickets, you go out on the road for free. It’s built for TV viewing (helicopter shots, motos throughout the peloton), but the long length, and undefined (game) time makes it difficult to fit into a nice TV slot. Compound that with the fact that ASO/Giro organizers seem hell bent on making the only way to watch pro cycling through paywall viewing, you don’t have the same kind of reach as other pro sports. Eyeballs are a measured metric, and they matter to companies when they are looking at where they put their money.

    You sort out viewership and TV rights and the money will flow. The other big leagues have figured this out, and it’s their biggest source of income.
    Then comes the cash, then comes the organizations willing to make longer term commitments to the sport, and everything flows from there.

    There is no doubt in North America particularly that the doping scandals hurt the sport. But let’s not kid ourselves, the NFL alone has had murders, rapists, wife beaters, child beaters, and its share of drug problems. And that’s just in the last 4 years. Sponsors don’t love it, but when they have ~20mm viewers PER GAME watching, they turn a blind eye.

    • ” Cycling is a sport that sucks for TV, but is even worse in person. You stand on the road to see the peloton go by in 25s. You don’t have a stadium to sell tickets, you go out on the road for free.”

      You are talking about road cycling. Other variants are more TV friendly.

      Moreover, circuit road races like the Paris stage of the Tour de France are very TV friendly.

      • double A

        sure crits are awesome both for TV and in person. The Peoples Choice stage (intro stage) of the Tour down Under is a great example. But aside from the final stage of TdF, and the some of the stage finishes of Giro/Vuelta where they do a lap of the town, there isn’t much.

      • George Darroch

        If the UCI was smart, they’d make crits worth a lot more to cycling professionals, teams, and sponsors. Look at what cricket did to bring with T20 – they grew their audiences massively.

    • Larry Theobald

      Rather easy to type “You sort out viewership and TV rights and the money will flow.” but how? Is Velon’s scheme the way to go? And is money flowing the best result? F! has lots of money flowing, but I hope like hell pro cycling doesn’t go down their dead-end road. MOTOGP seems to think it’s the direction they want to go, but I’m sad when so much about SPORT is tossed aside in favor of business/profit/greed.

  • Gerard Vroomen

    Hi Rick, interesting article, but Paolo’s numbers are off. The idea that everybody was paying 1M in the old days and 2.5M by the turn of the century is ludicrous. I can only speak for Cervelo, but when we started in 2003 it wasn’t even within an order of magnitude of that amount and we paid nowhere near that during 6 years at CSC, so all the way through to 2008, almost a decade later.

    It was only for 2009 that the demand all of a sudden shot up from way under to way over that, but that wasn’t because of the general market or because everybody knows everything, but because Specialized specifically targeted that team or us, not sure which. And then we decided to start the Cervelo TestTeam, which of course cost a ton of money. But even today, there are plenty of ProTeam sponsorships far south of the minimum 3.2M Euro mentioned.

    I think Paolo suffers a bit from a common disease in pro cycling. Because everybody knows everybody, they also think everybody knows everything. The general trend shown is definitely correct, but let’s say math may not be his strongpoint.

    • George Darroch

      Thanks Gerard, useful insight.

    • Ben Larsen

      Gerard, great and timely input.

      I have spoken at length with several players in the team sponsorship game [but all in the Northern Europe sphere] and most date Specialized’s contribution to CSC in 2008 [and subsequent partial underwriting of Contadors move to the team in 2011] as the catalyst for major increases.

      Most [even those within Cervelo] I have chatted with also agree that Cervelo was on a relatively low $ deal relative to other similar high profile teams.

      Speaking with a guy very much on the industry inside recently about Focus’ recent withdrawal from WorldTour Team sponsorship he made the quip that every sponsor without a team thinks they are missing out and every sponsor with a team keeps wondering whether it is worth it at all.

      When I see relative ‘minnows’ like Argon 18 and Factor taking on WorldTeam sponsorships that are still going to cost them at least $2M euro even with component manufacturer write backs, I wait for the brand to go bust. Without Andy Rihs’ levels of philanthropy, I can’t see how these brands will justify their sponsorship commitments if indeed they are at these levels.

      Prediction: Neither Factor nor Argon 18 will not be a World Team sponsor in 2019.

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