The announcement shook the cycling world: HTC-Highroad — seen by many as the best team in the world — is disbanding due to lack of funding, owner Bob Stapleton announced earlier this month. Stapleton said that efforts to re-sign current sponsor HTC, or replace it with another company, had finally come to an end.
In an article in Cycling News, Stapleton said he was “frustrated by the indecision of our title sponsor HTC who, after many months of assurances, had not come forward with a commitment to the team.” That behavior “remains a mystery to me,” added Stapleton, who is now urging riders on both the men’s and women’s teams to join other squads for the 2012 season.
According to Cycling News, Stapleton’s call for funding included reminders that the team “had generated in the region of $400 million in media exposure during its tenure in the sport.”
How could such a high profile team — which had made a respectable showing in this year’s Tour de France, and whose owner is widely respected as a savvy, ethical businessman — take such a fall? Knowledge at Wharton financial coordinator Dominic Johnson — an avid cyclist — suggests that the team’s failure to find a new sponsor is due to several things: the bad economy, lack of TV revenue sharing in cycling, and of course, the many doping scandals which make cycling sponsorship less attractive. But he says the brand issue is the most interesting aspect of this: “Unlike most American and European team sports, where there is a team name/brand based on a location or mascot (Phillies, Chelsea, Giants) — and sponsors of that brand by association — cycling teams are generally named after their title sponsors,” he notes, citing Garmin-Cervelo, Saxo Bank Sungard, Rabobank and RadioShack as examples.
One might assume that “sponsors would love to be the brand of the team,” Johnson adds, “since in those other sports, no matter how much money a sponsor gives, there will never, I hope, be the ‘Pepsi Phillies.’ However, my feeling is that the lack of non-sponsor brand and constant change in team names make it difficult for fans to really get behind a certain team. For example, the team I support has gone from Slipstream-Chipotle, to Garmin-Chipotle, to Garmin-Slipstream, to Garmin-Transitions, to Garmin-Cervelo, all since 2007.”
Wharton marketing professor Leonard Lodish, also an avid cyclist, has a different take: “I think the issue is not branding of the teams. If a sponsor has a consistent positioning that is reinforced or strengthened by being named as a cycling team, then it has a chance of being more profitable in the longer run,” says Lodish, who several years ago took a 40-day, 3,238 mile bike trip across 14 states with his wife. “The bigger issue seems to be the costs of the sponsorships versus their possible incremental value. Without TV revenue sharing and with the risks of negative associations with doping, I don’t know any company that I would recommend take such a risk.”
The problem, adds Johnson, “is a self-reinforcing one. The low incremental value causes the sponsorship turnover, which then completes the cycle by not allowing a sponsor to gain a strong position and return on investment.” Until there are enough companies willing to stomach the initial low returns and risks in order to build a brand and a team, “we are unlikely to see any significant changes.”