Moving Billboards

Sponsors are the life-blood of cycling teams—without them, the cycling world would be very different. In the early days of the Tour de France they dressed from head to toe with what they personally owned. Only after some time did some manufacturers seize the opportunity for having their products seen by tens of thousands of people. Today, there are millions of people looking on at Tour.

It was good to learn that Skype has stepped in as one of the sponsors for the HTC-Columbia team now taking part in the Tour de France.

One of Skype's managers summed it up nicely when he said, "That's the beauty of Skype; it allows people to do the things they normally do together even when they are thousands of miles apart." I've used Skype for several years and it's a great program.

But, who knew there was still room on the kit for yet another logo!

The Business of Cycling — Frame & Fortune

All bicycles are not created equal. Just as there are varieties of electronics or clothing, there are, of course, bicycles that are higher in quality than others – and much more expensive. This got me to thinking about the value of the merchandise that’s rolling along the roads of Australia right now, at the first event of the UCI’s 2010 calendar.

Cycling is a team sport and the teams must have various sponsors in order to exist. Bicycle manufacturers agree to supply the bikes for a certain period of time and some manufacturers—like Specialized—sponsor several teams at a time.

This is good business for the manufacturer since the athlete’s win is also the bicycle company’s win. Seriously. They actually do count the spot on the podium as their own. For example, Gitane Bicycles says on their website that they have won all of the Grand Tours and their “bicycles have won just about every major road race over its ... history.” Trek Bicycles claimed in one of their advertisements that “it’s got to be the bike”, after 9 straight wins at the Tour de France.

Alberto Contador, the 2009 Tour de France champion, signed an individual contract worth 700,000 Euros (US$987,275.89) to ride Specialized Bikes. His team Astana, also riding the same brand, has its own separate contract.

Meanwhile, back at the lab, bicycle technology keeps improving. Early bikes were very heavy machines, the frames being made of iron. Today, engineers continue research to produce the lightest and fastest frames, and wind tunnels are used to test the bike’s performance. Now a cyclist can ride a bike that he could lift with one finger. The gears may be electronic. And when a high-profile athlete is part of the team, a bike is designed specifically for his height and build.

In this regard, VeloNews says: Contador said he’s satisfied with work with new bike sponsor Specialized to improve his position over the bike. “There was a study done by Specialized and I’m happy with it, because they are people with a lot of experience and we studied my position to improve the efficiency of the pedal stroke,” he said. “My sensation is that when it comes time to transfer power to the bike is better now.”

Because George Hincapie (at right) is 6-foot-3, BMC Bikes built a custom frame to suit not only his stature but that he's a Classics rider, that is, he specializes in one-day races.

Trek states that "all it took to produce [their newest Madone] was tens of thousands of hours of development, 70 designs and re-designs and a refusal to accept anything less than perfection." The goal is to have the cyclist go at least a fraction of a second faster than the next guy. And when there’s a major win, sales to the public will most likely soar.

Taking part in the Tour Down Under are 133 riders forming 19 teams. Specialized Bikes are sponsoring Astana, Saxo Bank and Omega Pharma Lotto. Each of these three teams sports high-profile athletes. Pinarello Bikes are supplying Team Sky and Caisse d’Epargne. Felt Bikes sponsors Garmin-Transitions, Scott Bikes supplies HTC-Columbia and Footon-Servetto, while Trek is providing for RadioShack. Other capable competitors in this bike race are Cannondale, Giant, Orbea, Merckx, Ridley, Focus, Lapierre, BH and BMC.

So just how much is the peloton worth? Let’s scribble some math.

I couldn’t find out the prices of the bikes that are being used in the race. However, I checked some online retailers and used the most expensive figure since it would cost the average consumer less than what it costs to outfit a professional at that level. (Figures are in US dollars.)

Specialized – $4,800.00

Pinarello – $9,000.00

Felt – $9,000.00

Scott – $5,300.00

Cannondale – $7,000.00

Trek – $8,000.00

Giant – $13,900.00

I reckon some of these figures are very conservative. Nonetheless, it's probably safe to assume an average cost of around $8,000.00 per bike. Multiply that by 133 cyclists and you get over $1,000,000.00 of ongoing scientific research under some firm and toned butts, racing around the roads of Australia.

And that figure excludes differently designed bikes used in races that have Time Trials and mountain stages, members of the same teams taking part in races in another part of the world (simultaneously) and other items – apparel, helmets, shoes and even costly eyewear – that make up each team’s entire outfit.

The Business of Cycling — Sponsors

It's been fascinating learning more about the sport of cycling—and I don't only refer to being in the saddle. I mean the business aspect of it. I always knew lots of money was involved, but I wasn't aware of how many players there really are in the sporting world and they aren't just the ones you see on the court, in the pool or cycling on the road. David Walsh's book From Lance To Landis, gives an interesting insight into this. It has to do with Sponsorship.

A company, say, a sport clothing company, eyes a talent in a particular sport and offers him a sponsorship contract. With all eyes on him as he parades around in their shoes and shirts, their sales will naturally increase, which is desirable for the company. Included in the contract is an agreement that the sponsor will pay him a princely bonus should he win this or that competition in a specified period of time.

The sponsor may not want to have the responsibility of actually paying out such a hefty bonus themselves, so they make a deal with another company which specializes in covering the "risk" that the athlete may very well win the competition.

This company works out the odds of the athlete winning the event and charges the sponsor a premium, which is really a small percentage of the total winnings offered to the athlete.

It reminds me of insurance companies—you pay them a yearly premium so that in the [highly] unlikely event that your house burns down, they will hand you a cheque many many times the amount of the actual premium, so you can get your life back again. Except that if your house does burn down, they must first investigate the circumstances surrounding the loss, before they go forking out any money.

Interestingly, a Texan company underwrote the risk of Lance Armstrong's winning the Tour de France four more years in a row, after he had already won twice in a row. The total prize money offered to the cyclist was US$9,500,000.00 with the sponsor paying a premium of US$420,000.00 for the company to cover the risk. Armstrong actually won five more times.

This book is another fine read. It is written by a respected sports journalist and provides a good insight into what goes on behind the scenes in the cycling world.