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The changing face of pro cycling team sponsorship

Nick Busca
8 Mar 2019

Name changes and early closures are common occurrences for cycling teams, but some are looking at better ways of retaining key sponsors

When Team Sky announced the termination of its team sponsorship in December, it was only half-newsworthy. There had already been plenty of rumours around the impending end of the most successful team of the decade. Besides, cycling history is full of 'now-defunct teams'; teams change names and investors as often as snakes shed their skin.

The real news and most urgent questions at the time were: Will they be able to secure a new backer before the end of season? And will they be able to match their previous budget of £35 million per year?

It now seems that Team Sky may have found a new sponsor for next year. But how hard is it actually to secure a sponsorship in cycling these days?

What do the team managers need to do in order to secure the existence of their squads season after season? Is there a different model the sport should look at?

It’s a tough job…

'It’s quite hard [to find a sponsor] because it’s a lot of money and the budgets are high,' says Ralph Denk, team manager of Bora-Hansgrohe, the German team who count the number-one cycling star and the three-time world champion Peter Sagan as chief rider.

Denk also says that depending on the specific goals and models of the investors, team managers and teams need to work out specific ways to approach them and different ways to showcase the possible Return on Investments (ROI).

'Every sponsor is unique and different,' Denk explains. 'But in the last five to 10 years the budgets increased a lot. If we’re speaking of a WorldTour team with a budget of 20 million [euros per year; the average of WorldTour team is reportedly around 16-17 million], the ROI is still good.

'But over 20 million the ROI is not so attractive for the sponsors anymore.'

The now-called Bora-Hansgrohe was founded in 2010 as Team NetApp, then it became Team NetApp-Endura in 2013-2014, Bora-Argon 18 in 2015-2016 and Bora-Hansgrohe from 2017.

The vision and the goals of the team since its inception have always been to guarantee its investors a good ROI on a global scale, but also a good combination of exposure in the media and a good internal communication and hospitality policy.

Bora-Hansgrohe, like the majority of other cycling teams, don't share the actual figures of their annual budget, but they make it clear they’re not close to Team Sky’s numbers. They’re closer to the average of other WorldTour teams.

… but teams are getting more stable

The Dutch team Jumbo-Visma have also changed many sponsors and names in the last five years. They were known as LottoNL-Jumbo just last season, Belkin in 2013-2014, Blanco in 2013 and Rabobank from 1996 till 2012.

The former cycling journalist Richard Plugge took the reins of the team in 2012. Although their budget is not comparable to what Rabobank used to have (Plugge said they now have a budget that’s in the lower range of the WorldTour average team budgets), Plugge also believes that in the last decade cycling teams have, however, become more and more stable, and they show they can survive for a longer period of time.

'Of course it is still difficult [to find a backer], and sometimes teams have to close because sponsors walk away, but several teams managed to survive,' says Plugge.

'It’s a more stable structure now, there is a lot of work done by the team and there is generally more stability.'

Plugge says that having a good structure, showing professionalism within the company and having a good reputation are all crucial factors that attract investors to the sport.

'We need to tell them what we do and explain what a cycling team can mean for them,' he says. 'Our main goal in 2012 was to survive. Having done that, I started to look forward with a five-year plan with the goal of building the team on the young riders we have and develop them.

'My philosophy is that we have to work every day really hard to get the results, but also be smart and efficient in finding young talents and develop them in to big stars.'

It’s not only about winning

There are different types of sponsorship in cycling. The most common one is the 'commercial one' where one or more private investor puts in the big cheque and gets its name on the jerseys.

Alternatively, a cycling team can be backed by whole countries and national federations (like Astana, Merida, UAE and Katusha), or by having the luck to have found a wealthy 'angel' and private donor – like Andy Rihs was for BMC or Oleg Tinkoff for Saxo.

Finally, there can be a mixed model combining those two approaches. But in any given situation, the teams need to give something back to their investors, and not only the hands raised to the sky in a victory V at the finish line.

'We work very closely with our sponsors to get a good output of their investments and we look at the TV numbers, the media as well as the online values of their investments,' explains Denk, adding that, however, 'it’s a daily challenge to keep the costs under control.'

The priciest part of a cycling team budget is the salaries of the riders (and staff), which together can count for the 75-80% of the whole pie.

The rest is spent on travel and accommodation expenses, infrastructure, hardware and various equipment if the sponsors don’t cover these aspects.

Of the total expenses, the sponsor investments normally cover up to 95% of the budget, while only 5% (if not less) is covered from other sources of income, like merchandising.

As the Team Sky model teaches, if you can afford to pay (or to keep) the best riders on the market, then you also have better odds of winning races. Although in the business of cycling, winning isn't everything.

'Of course, if you win the job is done. You’ll be everywhere,' says Plugge. 'But most of the time you don’t win. Even QuickStep's 70 wins last year came from 285 days of racing.'

Yet even with those 70 wins, they still struggled to find a main sponsor for 2019 until the aututmn, when they secured their future as Deceuninck–QuickStep.

'That’s why we have to be prepared to make sure the marketing around the team is still in order,' says Denk. 'That is why we have several companies working for us doing that, and our sponsors also measure the output of our market value.'

Other business models?

When the Russian banker Tinkoff left cycling at the end of 2016, he said that the business model of the sport needed a change. Since then, a lot has been said about making it more profitable.

Options like sharing the TV rights between organisers and teams, and caps for salaries and budgets have been proposed. The directeur sportifs of the teams have different opinions, but they all seem to agree that the system can and should be improved.

On sharing the TV rights with the organisers, both Denk and Plugge concede that it’s not the main point teams should be focusing on.

'First the production costs for TV coverage for cycling racing are higher that other sports: you need helicopters, a lot of motorbikes and a lot of equipment,' says Denk. 'I don’t think this can be as helpful as some people think.

'It’s not huge money we’re talking about; it’s not like in football. We have to be realistic. I think much more helpful would be a budget cap from the UCI, like we have already in US sport [NHL or even Formula 1].

'I think the UCI has to work more to keep the salaries of the riders under control and to have a good balance between the super-rich teams and the teams that are more on the average side.'

Plugge thinks that the TV rights will more likely to be kept by the organisers because 'nobody wants to give away what they already have.'

But on the budgets, he thinks that they should not be capped because 'we should all grow and not limit the growth. If a team can grow, let it grow. It’s professional sport, let’s let all grow.'

The way forward, according to Plugge, is a closer cooperation between teams, organisers and the UCI on new series and races and the possibility to share more profits and bring more money into cycling.

'I think we’re on the right path and UCI boss David Lappartient also promises that,' says Plugge. 'It has already started and it will take time because it is going slowly, but it’s moving and times are changing.'