Defending the ProTour - Part 2 (TV rights)

In my last column, I discussed the potential benefits of the UCI ProTour system to the business of managing a professional cycling team. This time, I’ll examine the other controversial part of the UCI’s proposal to shift cycling to a league sports model, the effort to consolidate the television broadcast rights of all ProTour events.

First, a brief explanation of what TV rights actually represent. The primary concept is that the right to televise an event and sell advertising during the telecast is a clearly defined property owned and saleable by the event owner – whether the event is an office park crit or the Tour de France.

Obviously, demand to watch at on television grows accordingly as the race becomes more popular. Ratings increase and so does the price to advertise during the broadcast. Since there is strong demand among broadcasters for events that command high advertising prices, the TV rights to these events become a precious commodity.

For example, ESPN will pay $1.1 billion per year for the rights to broadcast Monday Night Football starting in 2006.

In cycling, the events with the most valuable television rights are – not surprisingly – the Tour de France, Giro d’Italia, and Vuelta a España. In addition to being the most popular events, they’re also three weeks long – so there are 21 times as many advertising spots as in a single-day race.

The UCI believes that networks would pay a premium to become the exclusive provider of opportunities for advertisers to associate their brands with world-class cycling in a given country (TV rights are typically sold on a per-country basis). If this were to happen, sales of the ProTour’s TV rights would generate more revenue than the sum of individual events’ TV rights without the ProTour. Revenue from ProTour rights sales would be passed through to the event organizers, mostly likely in proportion to each event’s contribution to the value of the rights package.

The Grand Tours are skeptical. They have a rich history, they have longstanding relationships with TV networks around the world, and they’ve stuck around for so long in part by growing conservatively. Furthermore, they supply the vast majority of the value of ProTour rights package, and they don’t feel compelled to share that with the smaller events. In other words, the Grand Tours don’t need the ProTour and it would be an uncharacteristically risky move for them to sign on.

But clearly, it’s possible for this model, where different event organizers combine their television rights into a single package, to succeed. NASCAR is a perfect example. Each racetrack is owns and operates its Nextel Cup event, but NASCAR is solely responsible for selling the TV rights package and then kicking back a significant portion of the revenue to the race organizes.

Making it as easy as possible for broadcasters and advertisers to access as much of the season as possible is a big part of how NASCAR’s TV rights grew in value from $3 million in 1985 to about $400 million in 2001, when Fox and NBC agreed to split the season for roughly $200 million each.

While that kind of increase is unlikely for the ProTour, it’s certainly not discouraging.

Nonetheless, the UCI has reached an acrimonious stalemate with the Grand Tours’ organizers, due as much to the governing body’s heavy-handed approach to implementing the ProTour as to the events’ pursuing their self-interest.

Perhaps the only possible resolution would be for the UCI to put its greater-than-the-sum-of-its-parts theory to the test by raising investment capital to buy the rights outright and then assembling the ProTour rights package. But don’t hold your breath for that, either.