Belkin sponsor exit underscores teams’ vulnerability, frustrations
Belkin riders woke up to the shocking news Tuesday morning that title sponsor Belkin is abandoning the team at season’s end.
The departure of the California-based electronics company casts the Dutch team’s future in doubt, and serves as a reminder at just how tenuous title sponsorships are for elite professional teams.
Belkin cited a shift in marketing priorities behind its decision to leave cycling after less than 18 months in the sport. Its departure leaves a gaping hole in the peloton.
“It is unfortunate that this new collaboration is not going to be extended,” said Belkin team manager Richard Plugge. “We will now start an intensive search for a new sponsor to be able to continue the journey that we started. We have full confidence in the future, and expect to appear with a new sponsor on the [jersey] at the start of the 2015 season.”
While team officials expressed optimism publicly, the news of Belkin’s departure was not expected. The timing certainly is not ideal, especially with the Tour de France looming, a period when most top riders lock up contracts for the coming season.
Even if Belkin officials can scramble together a new title sponsor — they insisted Tuesday contacts have already been made with potential new backers — the team still could lose several top names with its future far from secure. Wilco Kelderman, the promising young Dutch GC prospect, has already been linked to Orica-GreenEdge. Other top riders, such as Lars Boom and Bauke Mollema, will not be willing to wait around too long without securing their respective futures.
Belkin’s difficult situation is not isolated. Other teams are struggling to find title sponsors for next season, including Giant-Shimano and Cannondale. Other teams are said to be still negotiating to secure sponsors ahead of the Tour de France.
For many insiders, the sudden departure of Belkin as a title sponsor underlines a permanent anxiety that exists for most major teams.
“There is never a good time to lose a sponsor,” Luuc Eisenga, manager director of the AIGCP, the pro team organization, told VeloNews on Tuesday. “[Belkin’s] exit came as a surprise to the team. Those guys did a great job transforming that team. It’s unfortunate for them.”
Without a strong backer, teams live precariously year-to-year, trying to piece together sponsors willing to lay down tens of millions of dollars a year to back a top-flight pro team.
Bjarne Riis, for example, cobbled together sponsors for years, sometimes even using his own money to carry the team’s budget, until he finally sold the entire program, last fall, to Russian businessman Oleg Tinkov for an estimated 6 million euros. Riis said the pressure of trying to find sponsors was demoralizing.
“It was a full-time job to find sponsors,” Riis told VeloNews in an earlier interview. “I didn’t want to sell the team initially, but if I didn’t, the whole thing could have collapsed. With Oleg, this gives the team stability.”
The average UCI World Tour team budget hovers around 20 million euros per year, though there is quite a range within the top teams. Well-funded teams, such as Astana, BMC, and Sky, are said to boast budgets of nearly $30 million, while others, such as Garmin-Sharp and Europcar, are on less than half that sum.
Pro teams receive nearly 100 percent of their operating budgets from a mix of title sponsors and suppliers, so when a big backer like Belkin suddenly pulls out, teams find that the carpet is ripped out from underneath them. If a new sponsor cannot be found within months, teams simply fold up shop. The most notorious example was the collapse of HTC-High Road after the 2010 season. Despite being the No. 1 ranked team in the world, and one of the most important forces in the transition from the EPO-era to a newer, more transparent peloton, the team simply vanished.
“Everyone is looking for stability, but the No. 1 team in the world folded. It shows the system we have now just doesn’t work,” said Garmin-Sharp boss Jonathan Vaughters in an earlier interview with VeloNews. “No one is looking at the big picture of the sport. Cycling grew up organically over 100 years, but what worked before doesn’t work anymore.”
Teams are trying to take control of their collective destiny. Last year, they formed what is called the “Avignon Project,” meeting twice to broadly discuss ways to alter the financial hierarchy in cycling. First reported by Stephen Farrand on CyclingNews.com in January, the group consists of 13 major teams (the French teams and others, such as Astana and Katusha, are not participating) looking to band together to press their agenda.
One team official confirmed to VeloNews that so-called Avignon Project is alive and well.
“We are working together to build new solutions,” the team official told VeloNews earlier this month. “It’s going to happen. The teams are going to stick together. We need to modernize the sport.”
Among other issues, the group is grappling with issues of how to grow cycling’s TV market, and then share any future profits between organizers and teams.
Under the current system, race organizers individually sell TV rights to their events to different broadcasters around the world. Teams believe they deserve a share of those profits, something race organizers jealously guard.
The biggest fish in the TV rights market is Tour de France owner ASO (Amaury Sports Organisation), but they are loath to give up their lucrative TV rights for what they view as their property.
Some estimates put Tour de France TV rights into hundreds of millions of dollars, but sources close to ASO insist those numbers are grossly over-stated, pointing out that the largest TV sponsor of the Tour is French TV, which pays an estimated 20 million euros per year. Even if that number was split up between teams, it would not even cover half the salary of what the top riders are earning today. And race organizers say they already pay teams a portion of TV rights. The Tour, for example, pays each team 60,000 euros in start money. With 22 teams starting, that’s 1.3 million euros that ASO is doling out to teams.
Vaughters, who served as the president of AIGCP for several years and recently finished an MBA program, insisted that teams are not trying to take money away from organizers, but instead said the idea is to grow the pie collectively, and share any future financial growth between teams and organizers.
There is a natural resistance to change from race organizers, but Vaughters said the sport could gain a lot by reconsidering its century-old business model. He believes such ideas as permanent licenses, and guaranteed starts in the Tour, would allow teams to build franchises, along the lines of major soccer clubs or major US pro sports. That would allow teams to reduce their total dependency on the fickleness of title sponsors.
“Right now we have donors in the sport, not investors,” said Vaughters, pointing out such national projects as Katusha or Astana backed by government money. “If you have a permanent license, with a guaranteed start in the Tour, that has a value regardless of a sponsor. You could open up the sport to equity investors. Look at Manchester United [UK soccer team], they issued bonds! … There are not that many people in cycling willing to buck tradition, and to bite the bullet, and take that next step.”
Even when cycling does spark the interest of a big sponsor, its existing rules can sometimes serve as impediment to future growth.
Formula One superstar Fernando Alonso wants to start a new team, and has reportedly signed a major deal with the United Arab Emirates to back the team for five years, but has been hesitant to move forward due to uncertainty over whether or not the team would be allowed to race in the Tour in its first season as a team.
The Alonso project seems stuck in the mud, raising speculation that the team might not happen at all. (Though Alonso could ultimately pick up an existing program, such as Belkin, Giant-Shimano, or Cannondale.)
Tinkov, who bought out Riis last year, said cycling is still “cheap” compared to other sports, but said it needs a major overhaul before it can break the dependency on title sponsorship to underwrite team budgets.
“It’s a good opportunity now. The sport is still very cheap,” Tinkov told VeloNews. “I like the idea that Alonso is coming. He will bring his smart ideas from Formula One. It’s very positive that he is coming. We will more competition for riders, maybe prices will go up, but overall it’s very good a guy like Alonso comes to cycling. My advice would be to buy a team.”
In fact, high-rolling entrepreneurs like Tinkov are helping to keep the sport alive. A quick glance down the sponsorship of today’s major teams reveals that it’s now a minority that follows the traditional model of a sponsor looking to pitch their products to a wider, larger world audience.
Four teams are backed by bike manufacturers (BMC, Cannondale, Trek, and Giant); while five others are backed by patron backers or government funding (Astana, Omega Pharma-Quick Step, Orica-GreenEdge, Katusha, and Tinkoff-Saxo). Four French teams seem content on the domestic market.
The UCI, meanwhile, is trying its best to listen to grumblings from the pro teams, and balance that with what it views as the wider interests of the sport. Cycling’s governing body is currently working on a major overhaul of the elite men’s road racing calendar that will dramatically reduce the number of racing days, and attempt to bring season into something more cohesive and ideally more digestible to fans and sponsors alike. A new calendar is expected to be unveiled by the 2017 season. How this might harmonize with — or conflict with — Project Avignon, remains to be seen.
In the meantime, teams will continue their two-front battle; the first, to win and compete on the road, and the second, to secure financial backing to stay in the game.
A few more teams might collapse before any true change occurs. The Tour de France remains eternal, but what does not are the teams that show up to the start line. That logic seems to suit ASO’s needs, but it may prove to be unsustainable.