Beware the sponsor-owned team
Posted on 15. Dec, 2008 in Bike Racing, Sponsors
The Rock Racing rumor mill has been cranking today, as Rock & Republic announced a round of company-wide layoffs affecting team staff. Not even the riders seemed to know if the team was shutting down. Eventually, Rock Racing released a brief statement late in the day saying that the program will continue. Regardless, the story should serve as a reminder of why it’s dangerous for the sponsor to own the team.
Typically, a cycling team is a standalone company that sells sponsorship benefits to other companies. When Team High Road became Team Columbia, it was Highroad Sports, Inc. selling its naming rights to Columbia Sportswear Company, getting new jerseys, and going about its business as before. Having signed the deal, Columbia has to write the checks for the duration of the 2-1/2 year contract.
But in Rock Racing’s case, the team is part of Rock & Republic. So when the outlook for the company is shaky, the cycling department is just another place where belts can be tightened (pun intended, unfortunately). There’s no reason why that can’t include ceasing operations without prior notice, which gives team staff and riders on a sponsor-owned team even less job security that they’d normally have in the bike racing business.
On a traditional team, there are two ways for a team’s revenue to be cut off in the middle of a contract: the sponsor goes bankrupt, or the team violates the contract. Barring those outcomes, the sponsor is on the hook for the duration. Even if they withdraw their brand from the team, they still might have to fulfill their end of the deal. Such was the case with T-Mobile and and it would have been the case with Barloworld if they hadn’t reconsidered.
If the sponsor decides not to renew an expiring contract, their agreement with the team should require them to give the team enough time to search for a replacement. If one can’t be found, at least the team management owns a bunch of bikes and equipment that can be sold off.
But on a sponsor-owned team, the company can pull the plug as soon as they decide that they’d rather do something else with the money. Any staff that are employees of the company can be laid off in mid-season, when it would be almost impossible to find another team with an opening for a director, mechanic, or soigneur. Riders who are independent contractors might not be able to race even if the paychecks are still coming in.
To be fair, it could be argued that a company might invest more in a team that it owns than in one that’s simply an advertising vendor. There’s some logic to that, although cycling teams don’t have a great track record as investment properties.
(photo by Richard Masoner, www.cyclelicio.us)
