Interview by Jen See and Chris Fontecchio
[If you missed it, here are segments 1, 2, and 3 of this interview series.]
On December 10, Slipstream Sports owner and Garmin-Cervélo manager Jonathan Vaughters wrote an op-ed piece at CyclingNews calling for a new approach to structuring the sport of cycling. The editorial followed in the wake of the Geox disaster, in which the Pro Tour stiffed the team, the new sponsor threatened to jump ship, and the team suddenly stood on shaky ground.
Vaughters espoused some potentially groundbreaking ideas. In particular, he argued in favor of working with the Tour de France and other major races to secure long-term guaranteed invitations for the top-flite cycling squads. Maybe instead of fifteen teams fighting on a year-to-year basis, those fifteen teams would be given a ten year contract with all the top events. Their contract would be based on their history, their on the road performances, and their ethical foundations, Vaughters suggested. Then, the remaining 5-7 teams would be invited as new-comers and potential league members after the first ten years is up.
This naturally kicked off a couple days of discussion, and I wrote a post attempting to deploy his idea. In the space allotted — one op-ed and one Cafe post — I don't think either or both of us combined managed to remake the sport in its entirety. But it provided considerable food for thought.
Vaughters is a thinker. Sure, we all have ideas about how to change the sport, and unlike a lot of sports, cycling has plenty of work to do on its structural foundations. But if you want to bat ideas around with someone who's been a rider, manager, and team owner, someone who doesn't shy away from a fun conversation and from making daring suggestions, Vaughters is your guy. Join us for part 4, on the jump.
Creating Value for Teams
PdC: In your op-ed piece, you raised the need for longer-term commitments between the races and the teams. Because of your specific sponsors, you're looking for having this global appeal and -- that being a really strong opportunity for the teams -- in turn that's the reason you need that stable commitment from the races?
JV: Well, there are two major points in that op-ed. One, there should be a way for teams to survive a year or two even if they lost a major sponsor, it shouldn't be like instant meltdown, like, oh shit we lost a major sponsor, suddenly riders are out of work, mechanics are out of work, soigneurs. There should be a method that a team should be able to survive, you know, short-term, medium.
So what I was saying is that if teams actually had equity value, and that equity value was because you had a contract with major races, only 10 or 15 of them. If you want part of a team that does the Tour de France, you have to come to me. You can't go to this other guy over here who says he's selling the same thing because I'm the only one who has the genuine product. And then you could get, like, a private equity investor say "OK, I'll buy 40% of your team for x amount of dollars" and that's just enough to float you for a year without a sponsor.
PdC: Right.
JV: So that's the first one.
PdC: Right, that makes sense because then you don't have the startup costs of starting a new team because you lost your sponsor and had to fire everyone, and then you find a new sponsor...
JV: Right, and then I have to go rehire everyone.
PdC: And then start all over.
JV: Right. It's a stopgap. Right now, the organizations that run cycling teams (High Road, Slipstream Sports, whatever), what is it... if we were a company on the stock market, what value do we present? The value is just in the contact with the sponsor, and as soon as that's gone, that's it, there is no value. And I think fundamentally that's just wrong.
I mean, is ASO just worth zero? No. They have a product, and it's the Tour de France. Well, I have a product too. The problem is that my product is dependent upon races, so if Slipstream Sports is ever to be worth anything, if it's ever to be a real company where year-to-year employment stability and long-term employment for all the employees, not just the riders, and the possibility of floating us for a year without a sponsor or the possibility of other sources of revenue — if we're supposed to create that, the only way to create that is to have a symbiotic relationship with the race promoters.
If an investor wanted to come in and buy part of Slipstream Sports, they're gonna say, OK why would I buy this? And the reason you would buy it is because I have a ten year, 15-year, 20 year, I dunno, whatever, maybe like the NFL, an infinite-year contract with the Giro, the Tour, the Vuelta, etc. Eventually some sponsor is going to say 'I want in' because there' no other way to get in, so that investor will say 'I can see how I'll eventually get my money back.' So you'd create the possibility of not imploding the instant you don't have sponsorship.
And the second — and this is the more important point — it creates a much more stable sponsorship partner. Let's say if you're Crest, and OK, I'm toothpaste, I want to sponsor a bike racing team...
PdC: [chuckles] [adding, this would be awesome]
JV: You go in, there are ten, 15, 18 teams — again I'm not fixated on whether the license is ten years, whether there's ten, 15 teams, whatever, to me the principle — so you go in and say 'I want to sponsor cycling.' And you basically just line it up: there are ten licensed teams, these are teams that are guaranteed to participate in X, Y and Z. This one has an opening in the title; this one has an opening in the co-title; this one has an opening on the shorts, whatever. And, we want to spend $5 million on option B. And that's it: you're guaranteed to be in the Tour de France, the largest races in the world. It's stable, it's easy to understand. In the corporate marketing world that's something that's gonna happen.
Conversely, when you're a sponsor and you go to a team and ask are you going to do the Tour de France this year, they say 'yeah, sure.' 'Well, do you have any proof of that?' 'Oh, well, no, but don't worry, we will.' You could be talking to me, or you could be talking to some guy out of left field who has no idea what he's talking about. Quite frankly, there's nothing to stop a person... I dunno, my uncle Willie, there's nothing to stop Uncle Willie from just coming in and claiming he's gonna start up a team to do the Tour de France next year, because what's gonna stop him? Team Luxembourg — you got 20 million Euros? Boom, good job. The problem in the Luxembourg case, OK, fair enough, it looks like the people there are real and the financing is in place and they're going to do the Tour.
But how many sponsors have been pushed aside or just disillusioned with the sport when they've had to deal with charlatans who blatantly lie to them? As opposed to the very simple shopping scenario I proposed before, let's say Crest, they get five proposals, and one says $10 million and one says $1 million. They're like, whoa, let's do the $1 million, that sounds way better, so they put their $1 million down, and then in November the UCI says, no, this team's not gonna do the Tour de France. They're like, wait a minute! That sponsor's gone.
PdC: Right, and that sponsor thinks cycling is a crock, it's like playing the lottery.
JV: I think that happens more often than people think. The Geox one is more obvious, it's not clear whether they're gonna stay or go, who knows. That shouldn't even be an issue — there shouldn't that there's a moment where they're questioning it. And I guarantee you there are a lot of other cases like that that happen behind the scenes. That's bad. All I'm saying is let's just up the level of professionalism and simplicity to what we're doing here, so that it's clearly understandable to those multinational companies.
PdC: Right, it's confusing, if I were trying to sponsor a team, well maybe we'll get into this race, but we might not be. I can see that you're going to a sponsor and proposing "we want your money," the uncertainty would make it hard to make the sale.
JV: Right. And I've read on your site some criticism saying 'yeah, that's just him closing the door behind him,' well, no. I'm not proposing that every single slot of the Tour de France or these other races is closed up with these guaranteed teams. There should be some open slots, and there should be a process where, every ten years or eight years — again I'm not fixated on the number — where your team is allowed to come in.
If a sponsor in an organization really wants to be entrepreneurial about it, then fair enough, they should be entrepreneurial about it. They should start their own team, and take 2-3 years, and during those 2-3 years maybe they get a wild card one or two of those years, and then after 5-6 years they're considered for expansion. Maybe they get a wild card a number of those years. But the point is, there is an opportunity for entrepreneurialism to come into it, but conversely if there's a sponsor who says, 'I don't want this maybe/maybe not, I want to be in the Tour de France 100%,' then that also exists.
So it's not dissuading entrepreneurialism, it may be cutting down the number of opportunities for entrepreneurialism, but I think that's good too. If it's always seen by sponsors that cycling's easy to get into, that the Tour is easy to get into, that hurts us. It can be an honor to be able to get on a jersey of a tour de France team. That should be a sought-after honor. In my dream, it's such the honor that there's a point where there's so much demand by sponsors that one or two of them can't get in!
PdC: That would be awesome!
JV: Yeah, but we're so far from that at this point in time.
PdC: Right, I mean, even a team like Highroad, they're running their team next year without a co-sponsor.
JV: Right. My point is — and I'm not saying teams should try to pawn off other teams' sponsors — but why isn’t it High Road HTC-Geox? Geox would have gotten a guaranteed product and they would have known, and there wouldn't be this whole teeth-gnashing going on.
* * *
We ended here, but Vaughters called me back to add one final point, which for reasons too pathetic to get into I didn't manage to record. But the gist of it was: If I'm ASO, and I give a 10-year commitment, what commitment do I want in return? Naturally they would demand the highest level of assurance of clean riding, which means unparalleled anti-doping efforts and the resources that would require. If Garmin gets this very valuable guarantee, they can use it to sell equity, so it should be required that some of that value should be invested toward giving ASO a guarantee of authenticity.
In my view, this is a pretty enlightened idea. The concept of value is pretty ephemeral, but the basic premise is: cycling's economic value is its ability to advertise products to a rapt audience. That value is jeopardized in the current, chaotic system — with teams' ability to deliver the ad unpredictable, and with fans' reception of the message potentially devalued by doping.
The type of agreement Vaughters advocates is a neat trick, essentially asking the races to grant the teams with that predictability, which solves the first prong of the value directly AND ups the funding needed to address the other prong. Oh, and makes teams more stable so people don't get fired suddenly when a sponsor leaves. And maybe comes close to defeating doping (to the extent possible anyway). I speak on economic issues with all the expertise of the English major I am, but intuitively this makes oodles of sense, and gives us something to keep batting around going forward.
Thanks once more to Jonathan Vaughters for his time, and to Marya Pongrace of Slipstream Sports for arranging this — which is more work than it sounds.