Thursday, April 20, 2017

The 'Business' of Professional Cycling

This post was originally posted for Conquista Cycling Club & can be found here

At one of the first professional races that I participated in, I watched a fleet of brand new cars roll out, covered in stickers for the event to be used as team cars during the race. I thought to myself, ‘Wow, that is a pretty big financial commitment from the car manufacturer. They have provided around 40 brand new cars to be used in a bike race!’ When I asked my teammates and manager why a car company would be willing to do this and what is in it for them, I was told, ‘Don’t ask that question!’ The more I thought about it, the more intrigued I became with the business of professional cycling.

Cycling is a very unusual sport. It is one of the oldest professional sports and has been around for over 100 years with origins that are deeply rooted in tradition and passion. To this day, it is still one of the truly 'free' sports because all you really need to participate is a bike. You don't need to join a club. You don't need a huge stadium to practice in. You don't need to have a team around you, and you don't even really need an opposition or another team to compete against. Just get on your bike and pedal and technically, you are a cyclist.

Even watching a bike race is free. They are held on public roads without grandstands, corporate boxes or season tickets, so anyone can go and watch at no cost. Last year alone, the Tour de France had around 11 million people lining the road to watch the race go by. All for free!

If you want to watch a football match, you have to spend a relatively large amount of money to get a seat in the grandstand where you may just about need binoculars to make out the players. Even if you want to watch the game live on television, you need to pay for a subscription channel or fight for a seat at a local bar that is showing the match. In cycling, you get within arm’s reach of the riders and even foolishly run beside them in the mountains... all for free!

Even with cycling’s lengthy history, it is still growing in popularity around the world. While it is free and easily accessible, it is still a sport that is commercially underdeveloped, and this does not work in its favour.

In sports like football, they have a business model that allows the teams to essentially operate as a business. Football teams cover their costs by selling tickets to their matches. They sell merchandise like jerseys, flags, banners and sports equipment. They charge other companies money to endorse their products and put their logo on pretty much anything. Many leagues sell the TV rights to their matches do to make money. This allows football teams to be profitable and team owners to earn a profit or invest back into the team to buy better players, staff, and equipment so the next year can be even more successful.

In professional cycling, teams cannot do this. There is no stadium or venue for teams to charge an entry fee. The teams do not produce the equipment or the clothing, so they do not make money from sales. The teams do not organise the races, so they do not make money from the television rights to those races.

In its current form, the business model of professional cycling is not a business model at all. It is essentially a charity model. There is no way to make money other than to raise revenue from sponsors and donations. This means that professional cycling teams do not aim to be profitable, they simply try to ensure they survive and can race in the following season.

Here is how professional cycling teams currently operate:

Someone sets up a holding company, which goes out and tries to raise enough money and sponsors to offer riders and staff contracts and purchase equipment. The more funds available generally equals better riders, staff, and equipment. This means that a team's performance is often a reflection of their annual budget because with more money means better riders. All cycling teams are sponsorship-dependent, and there is no other sport in the world that operates with this model.

How do teams raise money to fund their operations? There are basically three ways:

1.    A wealthy donor. Someone that is passionate about cycling and can afford to run a professional cycling team. Think Oleg Tinkoff and Andy Rihs. Usually, the donor has a company that they use to name the team and get some publicity. For Oleg, it was Tinkoff Bank. For Andy Rihs, it's the BMC bike brand. The problem with receiving all of your money from a wealthy donor is that when that donor no longer wants to provide large amounts of money, the team may end up folding. This happened to Tinkoff last year.
2.    Teams raise money through government support or a country's cycling federation. Think Astana or the Russian Global Cycling Project, which became Katusha. The problem here is that government money usually doesn't last forever and teams typically must hire riders and use equipment from their country to display their patriotism. This can limit the depth of a roster.
3.    Teams raise money through a commercial sponsor that is looking for publicity. Think Trek or Cannondale. Teams sell jersey space or naming rights to a company or companies that are looking for advertising and exposure. The team serves as one big advertisement. Like any advertisement, companies like to see a return on their investment to ensure it’s worth the cost. Yet it is challenging to calculate a value of impression-based publicity.

In addition to these three models, some teams come up with a combination. For example, Orica-Scott or Greenedge has financial backing from cycling enthusiast Gerry Ryan, but they also receives support from the National Cycling Federation and sells naming rights and jersey space to Scott. This seems to be a well rounded and more secure option because if they lose one donor or sponsor, it doesn't necessarily spell the end of the team.

Regardless of the method a team uses to fund itself, one thing is certain... funding can disappear at any time, so professional cycling teams have no guarantee that they will continue past their sponsor's contract agreement. In turn, riders have no security that they will have a job in the following year. Most riders and staff only sign one to two-year contracts because teams must rely on sponsorship agreements to pay salaries.

Consequently, teams continuously come and go. Sponsors change and therefore so do team names, yet, the team may still have the exact same structure. They look different, so there appears to be no continuity. For example, look at Lotto Jumbo NL. Before this name, they were Belkin, Rabobank, Novell, WordPerfect, Buckler-Colnago, Superconfex-Yoko and originally Kwantum-Decosol! 

Teams may get new equipment sponsors, such as new bikes or clothing, and the change is just as difficult. Changing product sponsors means that old clothing and equipment becomes redundant and can't be used anymore, so teams need to start from scratch. For a team, replacing entire fleets of bikes is not an easy thing to do. For the manufacturer, they know that sponsoring a professional cycling team can mean a large increase in sales, so they are willing to do it. Take Trek for example. After hiring Lance Armstrong to the Trek-sponsored US Postal team in 1997, their popularity and sales skyrocketed.

Over the years, the cycling industry has benefitted greatly from the exposure that professional cycling teams give them, so many companies are willing to sponsor teams with their products. This has led to the development of several new technologies over the years as manufacturers work with teams. One of the problems with this relationship is that with so much potential commercial gain, some argue that manufacturers are using the pro peloton to simply push new products onto consumers rather than what's best for racing.

Take a look at the current disc brake debate. A survey has shown that the majority of professionals don't want them in the peloton and their safety has been questioned after a couple of incidents, but manufacturers and the UCI continue to push for their use.

I read a comment on Facebook recently that suggested that manufacturers do not need the pro peloton anymore because recreational cycling is big enough and popular enough without it. They claimed that cycling is moving away from racing and more towards adventure cycling and other forms and can support itself. If this were to happen, it would spell the end of professional cycling as companies would no longer need to sponsor teams to get the exposure they want or need to make more sales.

There is no denying that the 'business' of professional cycling is in dire need of a makeover. You have the teams in one corner wanting to race but unable to raise money. The sponsors are in another corner providing the money in exchange for exposure. Race organisers are in another corner essentially making money off the teams and finally the UCI is telling everyone the rules that they need to play by. All parties involved need each other to exist, but they are at a stalemate when it comes to finding a solution that works for everyone. At the end of the day, race organisers make money, the UCI gets funded, sponsors sell more products and teams fight for existence. Ironically, if one of them falls, then the whole sport would be likely to collapse with it.

The commercialization of professional cycling would mean that cycling teams would be self-sustainable and not have to rely on sponsors to exist. The problem is that the non-commercial nature of cycling and its deep history of tradition is one of the main reasons that it is so popular.

When the partnership was formed with global healthcare company, Novo Nordisk, Team Novo Nordisk became the first-ever professional cycling team to feature an all-diabetes roster. Every single rider on the team has Type1 diabetes. Novo Nordisk is the world’s largest manufacturer of insulin, so the partnership makes sense in terms of advertisement and marketing alone. However, Team Novo Nordisk falls under the company's 'Changing Diabetes' program. The company’s main focus is to discover, develop and manufacture better medicines; they also understand that it takes more than just medicine to combat diabetes. Through various partnerships, including Team Novo Nordisk, the ‘Changing Diabetes’ program aims to address risk factors in urban areas, ensure people with diabetes are diagnosed earlier, have access to adequate care and medicines and can live their lives with as few limitations as possible. The team mission to educate, empower and inspire people around the world affected by diabetes fits perfectly with the ‘Changing Diabetes’ program.

Why is TNN so important for the diabetes community? Out of the 18 riders on the pro team, 15 of them were told when they were diagnosed that racing a bike at a professional level would be out of the question. Sadly, this is still a common prognosis given by health care professionals around the world and is one of the myths that the team is working hard to dispel.

2017 marks the fifth year of existence for Team Novo Nordisk and the team continues to be a vehicle of empowerment for people with diabetes worldwide. We have the largest social media following of any professional cycling team and most pro sports teams in general. As well as competing in races around the world, we also attend events and speeches through various patient and health care professional outreach programs. The accessibility of cycling races also means that at every race, we meet young children and other people with type 1 diabetes who come to the team bus to meet the riders and share their own stories.


Team Novo Nordisk may have the typical cycling business plan and is still 100% dependent on sponsorship for survival but we have a greater cause and motivation to race. We don't represent a country or only a sponsor, but over 415 million people living with diabetes around the world. I feel motivated to race not only to do the best I can, but also to empower and inspire those affected by diabetes to achieve their goals. It is a unique opportunity that no other professional team has in their ‘business’ plan.

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