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Your name here — improving sponsorship opportunities in pro cycling

Steve Maxwell explores the opportunities to improve sponsorship in pro cycling in this excerpt from Velo magazine

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(Editor’s Note: This article previously ran in the March issue of Velo Magazine.)

It is one of the great beauties (and ironies) of cycling that it is essentially free for fans to watch. The price, however, is a tremendous pressure on event organizers and teams to secure sponsors that provide the necessary lifeblood — the money — to keep the sport alive.

Pro cycling is nearly 100 percent dependent upon commercial sponsorship. The solution to this dependence is twofold: first, and most importantly, cycling must develop ways of reducing the dependence on sponsorship by introducing and developing new revenue streams. Second, knowing the sponsorship model will always be critical, we must find better ways to attract and retain committed, long-term sponsors to the sport.

The problem with sponsorship

Because pro cycling has been overshadowed by a continuous stream of doping scandals for the last 20 years, the sport has a very poor public image in the eyes of many existing and potential sponsors. Several long-term sponsors have abandoned the sport; think Rabobank, Liquigas, T-Mobile, and RadioShack, to name just a few. As Bob Stapleton, chief of the former HTC-High Road team, acknowledged, “You can’t talk about cycling sponsorship without confronting the doping issue.”

Philippe Chevalier, sports director at the UCI is more direct. “Doping is the main reason that sponsors leave, or don’t enter, cycling,” he said.

Some sponsors have withdrawn more quietly — Vacansoleil recently said that its “objectives had been accomplished” — while others have been more overt. Long-time sponsor Rabobank dropped out at the end of the 2012 season, wanting to distance itself from pro cycling so badly that it took the company name off the team’s jersey, even though it honored the contract by funding the team through 2013.

Stable, long-term sponsor relationships have unfortunately been too rare. “Longer-term relationships are definitely preferable, because start-up of a sponsorship arrangement can be so expensive,” said Karen Bliss, vice president of marketing for Advanced Sports, the owner of Fuji, Kestrel, and other bike brands. Even when a relationship has been created, the work is not done, however. “Every sponsorship has a shelf life; the challenge is extending that life,” said former Coors Classic race promoter Michael Aisner.

With so many pro cycling teams essentially living paycheck to paycheck, there is an underlying atmosphere of instability that affects everyone in the sport. Marginal teams come and go regularly. Team managers are forever on the hunt for new sponsors. Riders and staff worry constantly about whether their team is about to collapse. Should they be looking for employment elsewhere? There is no sense of security. The continuous turnover, uncertainty, and sense of financial foreboding are limiting the growth and prosperity of the sport.

Billionaire enthusiasts

With corporate sponsorships so challenging to find and maintain, pro cycling has seen a cadre of wealthy benefactors, or in some cases national organizations, underwrite several top teams and events. Wealthy cycling passionistas like Andy Rihs of BMC Racing, Zdenek Bakala of Omega Pharma-Quick Step, and James Murdoch of Sky, keep their teams afloat as much for the love of the sport as from any sort of proven marketing investment.

Slipstream Sports owner Doug Ellis has been a quiet investor in the Garmin-Sharp team since the mid 2000s. “Sponsorship typically doesn’t cover all the expenses; there is usually somebody behind the scenes absorbing the losses,” Ellis said. This may allow some teams to survive, but as Stapleton said, it’s not stable or sustainable — and it’s clearly not a good model.

The challenges of finding adequate sponsorship are perhaps most dramatically illustrated by the fortunes of Stapleton himself; his HTC- High Road team — one of the cleanest and most successful teams in the sport — could not find and attract the type of major new sponsor they desired when the HTC deal ran out.

And cycling events are just as dependent on sponsors as the teams are. In fact, sometimes they actually compete with each other. “The three major cycling events in the U.S. are totally subsidized by three rich guys — they are keeping the game alive,” Aisner said. Cycling needs a more stable and predictable financial situation, where sponsor benefits are easier to define and measure, and where more companies want to compete for the opportunity.

Unique revenue challenges

One of the most notable differences between cycling and other sports is the lack of gate revenue. Most sports are played in a stadium, and spectators buy tickets to watch the action; in turn, that revenue is somehow used to support the health and growth of the sport.

Because of this intrinsic difference, only a few of the biggest events in pro cycling are truly profitable. Indeed, some smaller pro races have teetered on extinction during the tough economic times of the last few years. Unlike the NFL, television is not a source of revenue at most races. In many events, the organizer has to buy TV time, in order to attract sponsors. There are only a few races, most notably the Tour de France, where television rights are a significant source of revenue.

This brings up another challenge. The global audience, visibility, and potential revenue-generating capability of pro cycling are all overwhelmingly focused on a single event — the Tour. With a reported 3.5 billion people in 188 countries tuning in, the Tour is one of the world’s largest sporting events. The upside is that there aren’t any other sporting events with that kind of reach, but the downside is that many other cycling events struggle to achieve recognition and profitability in the shadow of the Tour.

Just as the sport’s popular visibility comes largely from the Tour, so does the lion’s share of potential sponsorship return and profitability; it’s estimated that as much as 80 percent of the typical team sponsorship return derives from that single race. Thus, getting into the Tour is a huge consideration for sponsors, and unfortunately, the system for selection has historically been somewhat opaque.

“It’s not always clear how pro teams are selected, or what they have to do to maintain top-level status — and that is a huge risk and concern for sponsors,” Bliss said. This is another problem that cycling desperately needs to resolve, in order to maintain attractive sponsorship potential.

Unique opportunities — and possible solutions

It is not all bad news, however. Fortunately, there are solutions to many of these challenges. If pro cycling could develop better promotional strategies, the sport and its fans would find plenty of reasons to be optimistic about the future.

First, let’s consider the lack of gate revenues. The incredible access of cycling offers huge potential for some of the most exciting fan experiences and hospitality opportunities in any sport. For example, most pro races in Europe and North America host A-list tent events at start and finish lines, others offer VIP team-car access during the race; other events have cyclosportifs like l’Etape du Tour, the Paris-Roubaix Challenge, the Ronde van Vlaanderen Sportif, or the USA Pro Challenge Race Experience; some events offer helicopter viewing of the race and other experiences.

“There is huge untapped potential in cycling,” said David Porthouse of Sponsorship Science LLC, a sponsorship consultant. “The sport is still at a very early stage and the demographics of the audience, particularly in the United States, are very appealing.” It is a well-documented fact that, in the United States, pro cycling garners the wealthiest and most educated audiences of any televised sport. There is no shortage of companies that want to sell their goods or services to the people in that demographic.

Ellis said his Garmin-Sharp team had about 250 people at the 2013 Tour finish in Paris — “clients, potential clients, employees, all cycling enthusiasts, but all business people, talking, interacting, leveraging off each other.”

Aisner gives the example of Amgen, which derives a significant return from its sponsorship of the Tour of California via the opportunity to host 200 or 300 prominent oncologists in VIP tents at the finish line.

“You can’t take your client into the huddle of an NFL game, or to the free throw line in the NBA finals, but in cycling you can take your client right into the middle of the action,” Hunter said.

And there is room for plenty of creativity. Former CSC senior consultant Joe Harris describes fantasy camps which his company ran several years ago when it was still a major sponsor, similar to the widely known baseball spring training camps. CSC invited key existing and potential clients to weeklong gatherings where the guests could basically meet, ride, and hang out with members of the CSC team.

“The opportunity to have dinner with Bjarne Riis and get a few training tips from Jens Voigt or Carlos Sastre undoubtedly had at least a little influence over who the client might choose for their next $30 million consulting contract,” Harris said. He compares the CSC program to Citibank or Accenture inviting top business clients to tents at the Master’s PGA tournament — a tough ticket to come by.

Another key attribute of cycling’s sponsorship potential is the ratio of spectators to participants. “Very few of the 75 million people who watch NASCAR actually drive race cars, but in cycling, something approaching 100 percent of spectators ride a bike,” Porthouse said. This has big implications, particularly for the ‘endemic’ sponsors — firms that are selling bikes, components, equipment, and apparel used by cyclists.

Looking to other sports for examples, Hunter said a big lesson learned from the successful and profitable U.S. Open in tennis is a general concept of “less is more” — giving the big sponsors an exclusive position in the event. Just as there is only one wristwatch sponsor at the U.S. Open, there is only one car company, Nissan, associated with the Pro Challenge. Amgen pays upwards of $3 million to be the title sponsor of the Tour of California. Does this mean we’re on our way to the “Tostitos Tour de France”? Not likely, but these types of title sponsorships represent considerable revenue opportunities for pro cycling.

In short, the potential exposure in cycling is hard to match; sponsors just have to develop more cleverly designed and better-executed programs in order to leverage the audience and the untapped potential. There are few other sports where one event has the opportunity to hit 188 different countries — and the cost of being a major cycling sponsor is small relative to almost all other sports.

But it pays, once fans are hooked. “Once individuals become engaged with cycling, they tend to become interested and hooked,” said Chris Aronhalt, managing director of event management firm Medalist Sports. “We need to better educate the public about what is really a pretty complicated sport.”

Cycling may have lost existing or potential sponsors, but Aronhalt is optimistic about the future. “Everything is up — bike sales, television viewers, amateur licenses, gran fondo registrations, everything — all the signs are positive,” he said.

Garmin-Sharp’s Ellis echoed this: “Cycling is like the new golf. I see more and more people riding their bikes at lunch in New York’s Central Park — and they’re not just eyeing each other’s bikes, they’re conducting business.”

The key challenge in sponsorship is what advertising people refer to as activation — how to make the sponsorship actually help you reach your business objectives. Aisner provides an illustrative example: “How do you go from watching the winning racer with the Saturn logo on his chest throwing up his arms in victory, to a person actually walking onto the lot and test driving a Saturn?” How can you connect those two events, and establish what Aisner calls the “connective tissue”? The bottom line is that effective sponsorship is sophisticated and complicated, and some sponsors are considerably more creative than others at juxtaposing their branding with lifestyle and consumer choices.

Who should do what?

Inevitably, the discussion often boils down to the question of structure and governance. Who is responsible — who should do what? Individual teams are increasingly trying to set tougher internal doping standards, and individual events are establishing testing requirements above and beyond the UCI’s requirements. As the sport gradually cleans itself up, more and more sponsors will come into the fold.

Sponsors themselves can also take more responsibility to incentivize and enforce a cleaner sport. In earlier years, the sponsors didn’t have much say over the management or philosophy of the team. Former sponsor Harris said the turning point came around the time of the Operacion Puerto scandal of 2006 and 2007.

“[Before then], many sponsors would just throw the money over the fence, step back, and let the manager run the team,” he said. Since then, things have been a little different, with some sponsors demanding at least some oversight of the team’s approach and philosophy. Harris said “CSC definitely became more involved in oversight of the team by the late 2000s. The company became extremely image conscious in light of the Ivan Basso affair and demanded better oversight by Riis Cycling, which ultimately resulted in the hiring of Rasmus Damsgard and the implementation of internal doping controls.”

The Belkin squad, which took over from Rabobank, has demanded that all members of the team commit to a pledge of zero tolerance as part of its sponsorship agreement with the team.

In addition to the teams, many observers say the UCI itself should be doing more to make the sport more attractive to big sponsors.

Alain Rumpf, president of Global Cycling Promotion, the UCI’s commercial arm, said that the UCI is focusing on the big picture — making the sport more interesting, stable, and accessible to a growing global audience. By strengthening the overall sport there will be a proportionately greater chance of gaining new regional and global sponsors. He added that the UCI is actively seeking out new markets for high-profile events, in order to increase the potential worldwide visibility for sponsors. In addition, the UCI is also working on various new “appeal” factors — such things as a more understandable calendar, a new points system, and various new technologies that will attract more fans and, in turn, more sponsors.

Moving beyond the dark days

Despite doping stories that continue to grab headlines, there are encouraging signs that cycling is moving past its dark era, and that potential sponsors are willing to take a broader view. Belkin International CEO Chet Pipkin acknowledged concerns about doping, but characterized it as “negative energy around the periphery. We’re able to look at cycling with a fresh set of eyes — look at it the way things stand in 2013,” he said.

There are certainly plenty of companies out there that should want to become sponsors of pro cycling. Besides the endemic bicycle and accessory manufacturers, cycling offers an excellent opportunity for other companies seeking an audience with active, outdoor, health-driven interests and lifestyles. Cycling sponsorship seems like a natural fit for healthcare-related companies, providers of natural foods or nutraceutical supplements, travel packages or destinations, and cutting-edge communications or tech companies (like Garmin) who have products to sell to younger, healthier, more active, and more educated people.

“Collectively, these sectors represent a large chunk of the overall economy,” Stapleton said. “We just need to make sure they’re not afraid to come into the sport.”

It’s hard to tell how much doping may have impacted sponsorship in the past, or how much it still causes reticence on the part of potential sponsors today. But everyone agrees that the current attention and scrutiny by sponsors is healthy and will help clear up the problem. Cycling sponsors can enjoy great value for the money if they take the time to develop sophisticated programs, and if they are willing to trust that the sport is finally leaving its dark days behind.

Years down the line, Ellis said, we will likely look back at sponsors like Sky as the smart ones — the brands that bought into the cycling market at the bottom.