WSJ Story - "For Cycling's Big Backers, Joy Ride Ends in Grief"
by Jimbo... on Dec 26, 2010 11:47 AM EST
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Like the sun rising in the east, at any family gathering, without fail, one of my relatives who knows I'm into cycling will bring up Lance and doping. What do I think of this, what do I think of that, do I think he's guilty, do I think he's being framed, etc, etc. It never fails.
Depending on who is asking, my strategy ranges from patiently trying to explain the history of doping, impress upon them the insane physical and mental demands of pro cycling, explain the incentives that drive some to win at all costs, put it into context with other pro sports and their doping problems, in short, try to be the shepherd. But usually I politely shrug my shoulders and change the subject as soon as I can. At Christmas dinner this year my father-in-law handed me a clipping of this story from the Wall Street Journal which I put in my pocket and immediately forgot. Turns out it's a fairly interesting telling of the same old story, but from the perspective of the financial backers of Lance and US Postal, and the other big money guys who funded Tailwind Sports. For those of you who follow this stuff way more than I do, which is probably most of you, it may be more of the same. But I found it interesting.
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Interesting article. What continues to amaze me
is the growing number of people that find themselves pushed aside or alienated or infuriated (as Dave Williams is in the article) by either Armstrong or Livestrong or some form of the group around those organizations. Will there be a tipping point where the feel good story of “lets get rid of cancer” no longer carries enough good to outweigh the number of people that have learned the true story?
I wouldn't hold this WIlliams guy up as a shining example of a victim of Big Tex
His beef is that he donated a million bucks to Livestrong and they wouldn’t let him sell Livestrong branded shoe inserts?
Jens! Voigt puts the 'laughter' in 'manslaughter'
So
A bunch of rich guys want to feel like they’re super cool so they blow a bunch of money to ride with Lance Armstrong. Where were the profits supposed to come from? Also, they lost a $mil. What’s that, about 2% of their annual bonus? Only the Wall Street Journal could paint these guys as the victims.
Meanwhile, cycling is profitable for people who have something to sell, besides pyramid schemes. Remember that for next year Jimbo.
"Next year we will build a strong team around Tom. We don't need pseudo-stage racers any more in this team." -Patrick Lefevre, 2005
by Chris Fontecchio on Dec 26, 2010 1:33 PM EST reply actions
Wait, are you calling the WSJ biased towards rich guys?
My favorite is this dude Williams who donated a million bucks to Livestrong with the expectation that he would get to use the brand to sell shoe inserts? What a tremendous dick.
Jens! Voigt puts the 'laughter' in 'manslaughter'
Is owning a team profitable though?
I think sponsorship is a no-brainer for companies.
But I think of all the teams that are owned or backed as pet projects of rich people – BMC, Quickstep 2011, early years (and maybe more) of Slipstream, Team Highroad. It makes me sad that owning a pro cycling team is usually a net loss.
"Oh man, it’s going to take days to kill all these people!"
Seriously
if Tailwind’s investors (who include, don’t forget, Lance Armstrong) could not make money off of their investment . . . the business model behind professional cycling is broken.
Why is this a problem? (That started off to be a rhetorical lead-in to what I think might be an answer, but it’s really a significant question).
I don’t really know, though, how many sports entities are truly profitable ventures (nor do I know what provides the revenue that drives profitability). I do know, though, that 80-90% of major US college football programs LOSE money each year. I suspect (though I haven’t looked into it), that a significant percentage of major US pro franchises would not be profitable without league revenue-sharing.
I think, though, that since there is no real equity involved with owning a cycling team (beyond assets like bikes, equipment, buses, and service course facilities), the “owner” of a cycling team is reduced to perpetual begging and toadying to sponsors . . .
One way forward? Another question: does any race organizer share broadcast revenue with the teams participating in their races?
Another question
Who cares if a cycling team-owning company is profitable? The directors take a salary, you’d hope, and the company is about as large and complicated as a local Mexican restaurant chain. It doesn’t need to turn a profit. Nobody is hoarding their stock. If it pays the bills and everyone gets a nice salary, and the sponsors get good exposure for their investment, then isn’t that enough?
"Next year we will build a strong team around Tom. We don't need pseudo-stage racers any more in this team." -Patrick Lefevre, 2005
by Chris Fontecchio on Dec 26, 2010 10:11 PM EST up reply actions
Good point. I care because:
1. Profitability can equal sustainability. A lot of the suckiness that befalls pro riders is teams falling apart because sponsors leave or backers back out (Pegasus). If teams made a sustainable profit, I think that’d go a long way to reducing volatility in the sport.
2. Rich person backed teams buyout riders from teams trying to live on sponsorship deals alone. Sure, it’s just the market working and it’s good for the riders, but my problem goes back to my point #1.
"Oh man, it’s going to take days to kill all these people!"
But that's sponsors
I’m talking about the team owners themselves, in the new model where they’re separately incorporated. They need to balance the books, but really they’re just an empty shell through which to funnel sponsor money to employees. I guess if they’re profitable they can have the extra money in on the budget, but that only matters if sponsors aren’t covering 100% of the budget already. If they are, then the profit is just extra cash to the handful of shareholders, whose wellbeing usually doesn’t rely on profits.
"Next year we will build a strong team around Tom. We don't need pseudo-stage racers any more in this team." -Patrick Lefevre, 2005
by Chris Fontecchio on Dec 26, 2010 10:55 PM EST up reply actions
I think we're on different pages.
I think the sponsors (companies advertising) often do not cover the budget of the team. So the “empty shell” can not cover the salaries of the team and a rich person pays the difference.
You have a good point about the “who cares” part of it. I just don’t like the practice. I would like sponsors to cover at least 100% of the team’s budget.
"Oh man, it’s going to take days to kill all these people!"
ah
OK. In that case, I don’t know why a non-sponsor would give them money, other than as a vanity project. But anyway, whoever puts $ in deserves to get it out if possible. But where would it come from? Prizes?
"Next year we will build a strong team around Tom. We don't need pseudo-stage racers any more in this team." -Patrick Lefevre, 2005
by Chris Fontecchio on Dec 27, 2010 12:24 AM EST up reply actions
Without equity in the team ownership
Or profitability, or both, the team ownership is ALWAYS essentially at the mercy and whim of sponsor decisions.
Surely it’s clear how that helps nurture the conditions for unethical behavior.
by R Mc on Dec 27, 2010 6:56 AM EST via mobile up reply actions
Tv rights money, for starters
But this would likely mean a contraction of the racing calendar. And I’m not sure that’s a bad thing.
by R Mc on Dec 27, 2010 6:58 AM EST via mobile up reply actions
A lot of people have ideas like this
(including the Vaughter’s thing) that are essentially about creating a more stable environment at the top of the sport. The more I hear these ideas, that aren’t at all bad, the more I wonder if a return to a more defined division of the sport into Pro & Amateur ranks isn’t the only way for these ideas to become reality?
The future for lower level pro teams and minor races looks awful bleak in this vision but with a more pronounced amateur-status for them they could perhaps be subject to different treatment from federations and authorities. Thereby clubs, local and local teams get more defined roles as development squads working with smaller means. If there was a system of compensation from pro teams when they take over talents a trickle-down economy could help sustain the amateur level.
That last idea
Surely the pro team has to give the amateur team a little something? Maybe the team can sell the rights to talk contract??
We spoke to Vaughters a lot about his ideas. More coming, next week.
"Next year we will build a strong team around Tom. We don't need pseudo-stage racers any more in this team." -Patrick Lefevre, 2005
by Chris Fontecchio on Dec 27, 2010 11:42 AM EST up reply actions
I think Vaughters (and whoever his backer is) and Stapleton are trying
They both are trying to build a brand behind Slipstream and HIghroad.
I have asked about broadcast revenue here before and the answer I was told was:
1. No.
2. Broadcast revenue is rarely significant. ASO apparently has to bundle Tour de France coverage with coverage of smaller races to get the smaller races on TV.
"Oh man, it’s going to take days to kill all these people!"
Any citation for the 80-90% of major US college football programs losing money?
I’d be interested in reading about that. I know that quite a few college football teams lose money, but the major ones (Nebraska, Michigan, Texas, Florida, Ohio State, etc) absolutely make money. Partially due to historically large fan bases and partially due to the structure of the BCS and the way the large conferences benefit when one or more of their teams makes a BCS bowl game.
Though, I think your thoughts on major US pro-sports is right on. Every 4-5 years an MLB, NBA or NFL team has to relocate because they are losing money in their current market.
Eat rice, act nice, and let the good times roll
Go to NCAA website: "big blue circle"
Or something like that and look around. It’s a widely quoted stat.
Even more damning is that of the 118 bcs (or whatever they call it) football programs, I think 5 or 7 of those athletic programs were profitable. Texas, for example, took in$120 mil in football revenue and turned, I think, a 9-11 mil profit for the entire athletic program.
Most football teams LOSE money going to bowl games.
AND the NCAA doesn’t recognize the bcs game as a championship.
by R Mc on Dec 27, 2010 5:34 PM EST via mobile up reply actions
The NCAA does however try their hardest to not hide corruption
2010 F1 Champ: Sebastian Vettel-JAAAAAAAAAAAA!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Quitter's People United member # 42
Yeah, paragons of moral virtue those guys.
An ex-NCAA pres spoke at our school’s convocation in August and unwittingly nearly provoked a riot when he managed to offend pretty much every woman athlete AND every athlete of color AND insult the University of Texas.
I was ok with insulting UT, and impressed with his cluelessness.
If you read their website playoffproblem.com
you will realize just how out of touch with reality they are.
2010 F1 Champ: Sebastian Vettel-JAAAAAAAAAAAA!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Quitter's People United member # 42
Or just look at Cam Newton
“how could he expect to have known his dad was shopping him around??? It would be ludicrous to assume he would have knowledge of why he suddenly was told to to to Auburn!!”
2010 F1 Champ: Sebastian Vettel-JAAAAAAAAAAAA!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Quitter's People United member # 42
yep
This last bit – about the lack of equity – is largely behind Vaughters proposals to make franchise style licensing. In his view, that would give the team value – that it has guaranteed access to x number of races – and it would make it easier to pick up sponsors. But also, in the absence of sponsors, he argues that it might be possible to pick up an investor to cover a short fall, then when the sponsorship side is more flush, the investor gets a return. With guaranteed access to races, the team has something of value it can offer.
And yes, like Chris said, more detials on this part of the story soon.
There are entire industries - that have lasted a very long time -
built on the premise of getting suckers to subsidize the profits of others by taking enormous personal losses.
No, way - no democratically elected government would let that sort of thing go on.
And the UCI failed… on all accounts. - tgsgirl
by omnevelnihil on Dec 30, 2010 9:02 AM EST up reply actions
Mostly
this article is further evidence that rich people will never, ever, ever stop complaining.
"Next year we will build a strong team around Tom. We don't need pseudo-stage racers any more in this team." -Patrick Lefevre, 2005
by Chris Fontecchio on Dec 26, 2010 10:13 PM EST reply actions
If he thought he had a handshake contract?
Does that change the reading of it? I mean, rich or poor, if you think you have a business deal, and then you don’t, is it wrong to bitch?
You can scratch your back
with some of the spokes from that Record hub I sent.
"Next year we will build a strong team around Tom. We don't need pseudo-stage racers any more in this team." -Patrick Lefevre, 2005
by Chris Fontecchio on Dec 27, 2010 4:05 PM EST up reply actions
yes, i made out well in that deal.
Sweet hubs aren’t they?
by Mr Van P on Dec 27, 2010 9:03 PM EST via mobile up reply actions
Anyone remember the secret of santa vittoria?
There’s one guy who’s always explaining, I scratch your back, you scratch my back; you borrow my ass, I borrow your ass." Which the other guy spoonerizes into something like “you borrow my back, I scratch your ass.” (Wonder if the movie’s still funny when you’re an adult.)
Well
who knows. Contracts are entirely a question of intent. If they had serious, clear-speaking conversations about who promises what, then he has a right to complain. A little. But not much, because if you’ve made it anywhere in life (and even if you haven’t) then you should probably know that contracts need to be written down. This isn’t an area like drug deals or espionage where you can’t put anything in writing.
"Next year we will build a strong team around Tom. We don't need pseudo-stage racers any more in this team." -Patrick Lefevre, 2005
by Chris Fontecchio on Dec 27, 2010 11:41 AM EST up reply actions
Let's not forget the business was a website selling shoe soles
This isn’t heavy industry we’re talking about. It’s a paint by the number dot com scheme. If I knew nothing about Lance Armstrong and you told me this story, I’d assume the “entrepreneur” is one step above a con artist trying to scam their way onto the Livestrong gravy train.
"Oh man, it’s going to take days to kill all these people!"
Yeah
A company Mr. Williams co-owned, eSoles, wanted to sell athletic shoe liners bearing the Armstrong Foundation’s “Livestrong” logo. Mr. Williams believed he had been given that right in exchange for his pledges to the foundation. But the foundation—which had an agreement with Nike, one of Mr. Armstrong’s top sponsors—said no.
This part isn’t even about cycling, it’s about Lance’s foundation licensing its brand. I have no interest/opinion.
"Next year we will build a strong team around Tom. We don't need pseudo-stage racers any more in this team." -Patrick Lefevre, 2005
by Chris Fontecchio on Dec 27, 2010 12:22 PM EST up reply actions
For a Texan
What’s damning about the Williams exchange is that in dismissing Williams, Armstrong quotes Rick Perry, who’s semi-famous for trying to weasel out of a ticket by saying that to the dps officer who pulled him over.
by R Mc on Dec 27, 2010 5:40 PM EST via mobile up reply actions
Well, the other 'Tiger' is as far from a con artist as they come.
You may also know he’s a good friend and supporter of many people and things associated with cycling. As it turns out, he is a guy that LA should have given a little more time. Rich people like their money too and some of them don’t take to well to being dismissed. Just another bridge Armstrong should have put some effort into maintaining… “Hindsight” is what LA is probably thinking.
"It's a lovely thing, feeling that momentum. If you're lucky, it's also about grace." Tim Winton
For me the questions come from my clients
What cracks me up is how they hesitantly approach the question as if the news might come as a shock. “Have you heard about this… investigation… and… the allegations?” Sometimes I play dumb (because it comes so easily) just to hear them continue telling this “shocking” revelation.
"It's a lovely thing, feeling that momentum. If you're lucky, it's also about grace." Tim Winton
Jimbo, just might be a blessed man who . . . .
. . . in the name of charity and good will, shepherds the weak through the valley of darkness, for he truly his brother’s keeper and the finder of lost children.
Or, he could just be the tyranny of evil men. . . .
What would Deming do? (+8:00 GMT)
The truth is
Phil is the weak, and Drew is the tyranny of evil men. I am the walrus.
Jens! Voigt puts the 'laughter' in 'manslaughter'
While at a family gathering, it is good to emulate the walrus . . .
. . . and "to talk of many things . . . . . "
What would Deming do? (+8:00 GMT)
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