Thursday, December 9, 2010

"The Geox Paradox"

"The Geox Paradox" is a blog entry by Jonathan Vaughters, directeur sportif of the professional cycling team Garmin-Cervélo. Before proceeding to it let's review some of the information that has appeared here (Italian Cycling Journal).

August 16, 2010: A sponsorship agreement has been signed between Geox president Mario Moretti Polegato and Footon-Servetto general manager Mauro Gianetti. The Italian shoe manufacturer will take over as primary sponsor of Gianetti’s squad, while Fuji will continue as bike supplier.

“I was contacted in June asked to present a plan,” Gianetti told La Gazzetta dello Sport. “I didn’t know the company directors personally but I spoke with the president and he told me of his idea of entering cycling because it’s a sport of great tradition, with a huge following and for people of all ages.”

Former Tour de France champion Carlos Sastre, who won in 2008, was signed today. Damiano Cunego is rumored to be on the team’s wish list, but Sastre is the first signing for the 2011 season. (Complete article here)

August 21, 2010: 2009 Giro d'Italia champion and two-time Vuelta a España winner Denis Menchov signed with Team Geox on August 19th. "We're very happy to see Denis Menchov understood how deep the project we have in mind at Geox is," said General Manager Mauro Gianetti. "He'll be forming a very competitive pair with Sastre for the big stage races. Menchov is a rider who excels in the time trials, and his characteristics will perfectly complement with the pure climbing style of Sastre. The Geox team is getting formed right within our plans, and we will add some interesting riders by the end of the season."

September 29, 2010: Geox and TMC Transformers announced today that they reached an agreement with TMC Transformers to co-sponsor the team guided by Mauro Gianetti.

“We are very satisfied to have signed this agreement," said Andrea Colombo. "Cooperating with Geox is a further step for our company in using sports - and cycling in particular- to promote its brand. Passion for cycling has always been a part of our company, as proven by our 2009 sponsorship agreement with Mauro Gianetti’s team back then (FUJI-Servetto) and by our current partnership with the Italian Cycling Federation as well as our sponsoring some important cycling events. This partnership agreement with Geox makes us very proud. We share passion for sports, international market aims, high technological standards in design and production and a desire to always improve our results. We’re sure the GEOX-TMC Transformers team will well-represent the value of both sponsors, and that it will reward us with great results.” (Complete article here)

November 23, 2010:Despite having signed Carlos Sastre and Denis Menchov as team leaders the Geox-TMC was not selected as as UCI ProTeam (formerly ProTour) for 2011, instead being named a UCI Professional Continental Team. Now they can only hope that they will receive invitations to the major races rather then being guaranteed entry.

December 9, 2010: Now onto The Geox Paradox by Jonathan Vaughters:

"The Geox Paradox"

Although I'm not familiar with the details, there has been speculation in the past week that Geox are considering ending their sponsorship as a result of not being guaranteed entry into the top events on the World Calendar. Could you blame them?

Imagine you're the VP of marketing in a multi-national company and you get a proposal to sponsor a cycling team. My guess is this proposal would be similar to the ones we at Slipstream Sports are constantly pitching. In this proposal, it's clear that your team will participate in all the top races in the world, a few medium-sized ones in key areas for your company, and, of course, Le Tour. After a look at the demographics cycling fans cover, the total television audiences, the number of countries TV coverage goes to, the total volume of "all in" media coverage, you decide investment makes sense. Your CPT (cost per thousand) for viewership crushes any other sport in efficiency - you'll probably get a raise!

However, one small item: did you check to see that you'll actually get invited to all these races? Probably not, as why would this come in to question at all with a former Tour winner on the team you're looking at? Well, just in case, its best to put a clause in the contract that states: "...the team must race in the Tour de France or contract may be terminated."

Fast forward to today. The team sponsored by Geox has a small chance of riding the Tour de France and therefore the sponsor may terminate the contract. That would be a tragedy. No, I'm not talking about this being a tragedy for the riders and management. While 80 or so people losing their jobs would be tragic, that's only half of it. The other half is that a multi-billion dollar corporation with a great brand - and an interest in cycling - may just have been turned away from the sport, perhaps permanently. This would be an example of an absolute failure of cycling to arrive at a cooperative system that encourages stable, long term sponsorships to exist.

After such a bold statement, now I'm supposed to blame someone, right? Cycling has a great history of everyone blaming everyone else (an issue for another day.) So, let me dispel that: no, I don't blame anyone in particular, but I certainly see a huge need to prevent this from happening again.

So, how did this situation evolve? And what to do to prevent it?

Well, the evolution of how we got to the current selection system is long and complex, to understate it. This is a very simplified version of that history: in 2005, the UCI introduced the ProTour. The idea behind the ProTour was to modernize cycling into an NFL-style league, where the top teams were consistent entities, year to year, and they competed in the same events, year to year. "The best teams in the best races" was the motto of the ProTour. Very similar to the model of professional sports used in the USA. However, it seemed that the folks organizing the races didn't want to be told which teams to invite to their events. Understandable, as they have been running these events for 100+ years. So, they refused to accept the ProTour.

Quite simply, most race organizers don't want teams to be guaranteed a place in their race, they want to choose who gets to come - or at least have a ranking system to make the teams fight for their entry. The UCI, conversely, wants to determine and regulate the selection procedures and make it uniform and egalitarian, not just invitational. Years of wrangling and fighting ensued which have gotten us to the point we are now, where the UCI has a system in place to determine which teams can race in the best events and the organizers have, seemingly, agreed to this same system.

While I see the logic and thought behind both the UCI's and the race organizers' positions, and am happy that a compromise has been reached, I fear that teams' rights and concerns have been overlooked in this compromise. Is it a system that will prevent sponsors such as Geox from being potentially turned away from the sport? Or is it a system that will invite instability amongst athletes and teams and impede forward thinking and progressive movements in the sport? Is this the best system for the nearly 2,000 people employed by the professional teams in cycling?

As of today, the system that determines participation in large events consists of weighting the sporting value (ranking), ethics, and financial stability of each team. The first and foremost of these determinants is the sport value ranking system. This system places a value, in terms of points, on each and every rider. The higher the accomplishments of the rider, the higher the point value he carries. If a rider should choose to change teams, the points follow him. If a team wishes to participate in the major races, they'll need to be in the top 15 teams in the world (according to this system) to be guaranteed a starting slot (provided they have no major gaps in the ethics or finance category). If a new team, out of nowhere, can hire enough top riders to come on board, they can place themselves in the top 15 of the sporting value weighting system, and therefore get invitations to all the top races.

The riders carry all of the ranking weight. Not one ounce of a team's performance is attributed to the 80-odd people working as directors, mechanics, coaches, chiropractors, etc. Hence why we saw a team that has yet to race one day or pay one paycheck ranked as the number one team in the world. Quite simply: if you have enough money, you can plop into the very top of cycling without ever having raced one day.

Now, while this open system might seem to be something that would attract more sponsorship dollars, not fewer, consider the perspective of all of the current and future sponsors in cycling. Current sponsors have zero assurance that a team they sponsor will not have its roster raided, their ranking pulled from them, and not be upended by someone who comes along with a bigger budget. Conversely, potential new sponsors will have quite a few questions that won't be answered until after their commitment is made and it's too late to change directions. Am I getting involved with a team that will be in the top races for the duration of my contract? Maybe...or, as Geox found out, maybe not.

A possible solution

Would it not be more advantageous for teams, race organizers, and the UCI to have a system where a certain number of teams, and the management groups behind those teams, were assured of entry into top events on a long term basis? Maybe instead of 15 teams fighting on a year-to-year basis, 15 teams are given a 10-year contract with all the top events, based on their history, performances, and ethical foundation and then the remaining 5-7 teams are invited as new comers and potential league members after the 10 years is up.

This system would allow a company such as Geox to look at various options clearly. Option A: sponsor a team with guaranteed, contractually-bound entry into the Tour de France and other top events, even if Geox can't be the title sponsor immediately (due to the title being occupied)...or option B: build a proprietary team, slowly, over time, that may one day be considered for a slot into the "league" that has guaranteed entry into the Tour de France. This creates solid, definable points of entry into top tier cycling. It also creates scarcity in the sponsorship market of top tier cycling, which in turn creates greater value in cycling. To sponsor a team that participates in the Tour is something to be fought over and cherished, as there are only a limited number of spaces to be had for the coming years.

The multiples and benefits of this solution are enormous. To start with, giving contractual participation provides guarantees to the teams and allows for them to cease the "hand to mouth" year-to-year fight for sponsor dollars. If a sponsor wants to be represented in Le Tour, for example, there are only so many options. This drives sponsorship to existing organizations and allows them to build long term and stable partnerships. This as opposed to new sponsors entering the sport with unproven or unstable organizations which can potentially damage current teams' and events' respective value by pirating riders and making the sport confusing to follow for fans (ie - who does he race for again?).

These limited slots, and their contractual rights to participate in top events, create value for the organizations holding the contracts. This value, in turn, allows raising money through sale of equity in said organizations, which hold the contracts for entry into the top events. The ability to sell equity would be the savior of many a team in lean times when sponsorship dollars are short. Both creating a limited and defined sponsorship market in cycling and creating value that allows different forms of fundraising outside of pure sponsorship would allow athletes and other employees of pro cycling teams to exist in a more stable and calm environment and keep them from making poor decisions in insecure and unstable moments (do I have a team next year??!). This in turn allows greater inroads to be made in anti-doping movements and culture changes, as people aren't fearful of their future quite so much.

For race organizers the influx of cash and value to the teams as a result of the sponsorship market scarcity and value created by guaranteeing the participation is beneficial as well. A new sponsor for a team would be likely to leverage their sponsorship long term by also becoming a partner of the events the team is participating in. Events and teams must become business partners when the relationship must continue for a long period. And as they know their team will be participating, long term, their investment in the event feels more comfortable.

Basically, what I'm proposing is the teams and the race organizers become partners as opposed to adversaries. Both succeed and fail under the same roof. To me the benefits of this, especially in the realm of increasing funding and effort for anti-doping, are immense. If everyone has a singular business interest, the need for fair competition for all is increased. If everyone is in the same boat, nobody is going to want a hole in the hull.

As it stands, we have created a system that encourages anyone and everyone to pitch a potential sponsor on Tour de France participation, no matter what their background or if they've ever seen a bicycle race. Imagine how confusing it would be for a sponsor to be getting various proposals from various organizations and all of them claiming the possibility of racing the Tour. Who's really going? Who isn't? This leads to a situation like Geox where promises were made, and now a disillusioned and disheartened multi-billion dollar sponsor considers walking away from the sport feeling misled, a team manager is angry and confused, and a ton of people are risking their jobs.

If the Geox situation were to turn out like that of Unibet a few years ago, cycling would potentially have lost somewhere near $50 million in total dollars due to opaque agreements and misunderstandings. Have the race organizers considered that in a true business partnership scenario that these dollars could have also contributed to their events' growth? Have we all considered that just 5 percent of these dollars could have made a massive difference in anti-doping research efforts? That's just one example of how a true partnership could be made to work. It's time to re-evaluate cycling, so we don't lose such valuable partners going forward. Instead of fighting for the crumbs, cycling needs to focus on baking more bread.

I don't have any fingers to point here. I don't think our situation is anyone's, in the singular sense, fault. It is just the result of years of confusing and bitter fighting.

However, now, and always, we have a chance to evaluate and perhaps rethink how the broad overview of this sport appears to large corporations that could enter cycling as sponsors. Cycling has such an incredible emotion and beauty to it, and its events are unique and brilliant in the world of sports. To settle for anything less than a solid, understandable, and clear interaction between teams and events does not do the sport justice. And, quite frankly, I get sick of hearing about "football this, soccer that, and Formula One blah blah blah" from potential sponsors...Cycling is a better sport. Period. Time to start making it a better business, too.

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