Sponsorship dependent business model
Cycling is an unusual sport. While most professional sports teams rely on ticket sales, merchandising, and broadcasting, cycling teams are strictly sponsorship dependent.
These sponsors range from wealthy individuals and governments to large corporations. Basically, professional cyclists are moving ad boards, getting paid to showcase the sponsors on their clothing during races. No other sport in the world operates this way, although some do use sponsorships as additional revenue streams.
This creates an unsustainable business model where teams are constantly on the verge of extinction. When sponsors change, with them go team names, staff, and riders. To illustrate, in the last decade, the World Tour team now known as Mitchelton-Scott has changed names five times. There’s even a team name history section on Wikipedia for each pro cycling team. Ultimately, fans don’t feel identified with a team like football fans do with their hometown club. After all, who feel loyalty towards a team named after a bank, airline, or shampoo company. As a result, cycling fans support with individual riders. For example, if fans followed Tom Dumoulin at Sunweb, they now likely follow him at Jumbo-Visma.
Nonexistent revenue distribution from race organizers to teams
When it comes to the conventional revenue streams in sports, it’s typically a mixture of ticket sales, merchandising, and broadcasting. For cycling teams, there are no stadiums or merchandise revenues for teams, so this leaves us with broadcasting, and you might wonder, who earns those revenues?
Simply put, the race organizers. The likes of RCS and ASO have the broadcasting rights to the biggest races in the calendar, yet they don’t distribute any of the revenues with the participating teams.
According to the current manager of EF Pro Cycling team Jonathan Vaughters, the race organizers of the Tour de France may generate as much as $200 million from broadcasting rights, none of which is distributed to the actual participants of the race.
The absurdity of this is that without the teams, the race wouldn’t happen. As Deceuninck-QuickStep’s legendary team manager Patrick Lefevre points out: “We have the actors, we pay them, and without the actors, there’s no movie.” The current business model where race organizers don’t distribute their earnings with the participating teams is unthinkable in virtually any other industry.
The UCI’s -cycling’s governing body- lack of regulation
The recent success of Team Ineos -formerly known as Team Sky- has only exacerbated the flaws of the industry. Since their inception in 2010, they’ve been known to have the biggest budget in the peloton, dominating the Tour de France by taking seven of the last eight general classification titles.
Although perhaps simplified, from what they’ve demonstrated, winning the Tour de France is directly correlated with the size of your budget. Fundamentally, the larger your budget, the higher the likelihood of wining. While other sports such as football have financial fair play regulations to prevent wealthier clubs from dominating in the sport, the UCI has not acted against the inherent imbalance in WorldTour Team budgets to promote a more balanced competitive landscape.
So, if you’re wondering whether professional cycling teams are profitable, the answer is predominantly no. Most teams barely break even. Despite the sport continuing to entertain millions of people, the business of professional cycling is in dire need for a reshaping.
To summarize, here are the main flaws in the professional cycling business model:
1. Team survival is solely dependent on sponsors
2. Nonexistent distribution of broadcasting revenues
3. Lack of regulation by the UCI
Potential solutions for professional cycling teams? On my next post!