Jonathan Vaughters probably needs no introduction, but for posterity: he’s the founder and General Manager of the EF Education-EasyPost WorldTeam and a former president of the pro teams association, the AIGCP.
Christmas Eve, 2011 – I had just parked at a cozy brick restaurant to meet my parents for dinner before midnight service. My phone lit up; it was Matthew Pace, a top-level attorney our Garmin team had used over the years. “This can’t be good,” I thought. I hoped it might just be Matthew wishing me a Merry Christmas. Instead, he blurted, “We need to get together on a conference call right now to discuss what’s going on at Cervélo.”
The news was grim. Cervélo, a major sponsor of ours from 2011 to 2014, was hours away from being taken over by a private equity firm. The prospective new owner immediately declared the intention to drop or severely reduce team sponsorship, which accounted for nearly 35 percent of our budget. We would have to shut down, leaving 120 people out of work, during the holidays, and with little hope of finding jobs for the season that was starting in just weeks. It didn’t matter that we had won some 30 races that year, including Paris-Roubaix, stages of the Tour de France, held the yellow jersey, and even won the team GC at the Tour.
The number-one ranked team in the world, HTC-Columbia, had just folded over lack of sponsorship, despite winning more than 50 races. I knew the game, and I knew how it usually ended. Regardless of team performance, cycling discourages investment and makes ownership and sponsorship tough sells.
If this were the NFL or EPL, with sets of binding rules, teams would never find themselves in the position I was in in 2011 or 2017, or the one Jumbo-Visma finds itself in now. But there are straightforward fixes – teams just have to band together to make them.
To minimize team meltdowns, the sport must provide teams with something of value – permanent participation rights in major events. While this may seem unfair to up-and-coming teams (and it is), it’s the only way to attract long-term investors (not short-term sponsors) to stabilize team finances. This requires that cycling be governed and organized like a true professional sport.
If we treated our sport like the NFL, team owners and major race organizers like ASO, RCS, and Flanders Classics would sit down and carve out a single, binding document that guaranteed entry into races, fixed the number of teams at the top level, and established spending limits. Such a league would instantly create assets for teams, stabilize the sponsorship market via scarcity, and create a mature and sustainable sport.
A lack of true assets
Unlike other league-modeled true professional sports, cycling teams lack a true anchoring asset that investors want to buy.
In healthy sports, investors or team owners logically seek to ensure the money invested will generate profit in the future. Contrast that with a sponsor, who seeks swift value in advertising and positive publicity for money spent, and you can see how interests diverge. Cycling offers tremendous media value for sponsors on money invested compared to other sports, but it lacks concrete value for owners, which leads to routine instabilities..
On a basic level, owning a cycling team is a liability, not an asset. To keep it afloat, one spends with no possibility of selling it for anything close to the amount invested. Teams own nothing beyond the buses and cars they use to travel to races (and which depreciate in value). We don’t own the right to participate in the most prestigious races in the world and what would make ownership more valuable.
Instead, we are granted short-term licenses to enter events, but a non-transferable three-year license from the UCI isn’t an asset, as the experiences of Katusha and CCC, whose licenses traded for as little as €1, show. A permanent place in a conference, the right to compete against the sport’s best, and guaranteed revenues due to the prestige and difficulty to enter the sport – those are real assets that provide stability.
The value of scarcity
Consider an NFL franchise. They are permanent, and their value appreciates because they are rare and limited. In contrast, with enough money to spend, anyone can find their way into the Tour de France within a few years, but that poisons an entire ecosystem for the short-term gain of one team.
Scarcity is key when it comes to sponsorship. In other true professional sports where few options exist for sponsors due to a limited number of teams, the value of sponsorship increases. In cycling, once again, we undermine our own marketplace by not guaranteeing sponsors that they will get what they paid for. Maybe you’ll race the Tour de France, maybe not. It depends on a three-year cycle.
Will you get value?
Our team has never had enough money to spend to comfortably expect we’ll get huge results, so we’ve always had to work very hard on delivering value and standing out in other ways – things like kit swaps, deep marketing and innovation campaigns with partners, alternative calendars, global earned media – and we’ve had good success, but it’s a constant effort for us, since we’re chasing so often in other areas.
Financial fairness
In a sport without cost controls, budget caps, or financial fairness regulations, team performances – and largely media value returns – directly correlate to financial strength. The rich get richer, at least until they run into the greater market forces at work.
With many new teams backed by oil money, sovereign wealth funds, and ultra-rich hobbyists – which are not subject to the same budget discipline as corporate marketing departments – the cost of running a team has more than tripled since 2005.
This is where Jumbo-Visma ran into the brick wall that nearly forced them into a merger. They had to keep up with the influx of oil money to maintain their success, straining their finances to the breaking point and jeopardizing the most successful team of the 2020s.
As they won consistently, their expenses outpaced what the sponsorship market was willing to support. Some bad luck with current sponsors made it worse, and an inability to sell equity ownership to secure their finances in such an emergency left them vulnerable.
They wanted to win, did what was necessary to win, and were penalized for their success by a governance system that neither controls costs nor ensures their organization a future in the sport.
To change that, cycling must establish a system in which teams have an equal opportunity to succeed, characterized by financial fairness and a limit on spending. Everyone should start the race on the same starting line, not with some teams miles ahead of their competitors before the race even begins. Some teams will thrive in this system, and some will not. Still, any new sponsor or investor entering the sport can dream of winning the Tour de France. With financial fairness rules in place, I’ll never have to tell a hopeful sponsor, “I’m sorry, for $10 million, you don’t have a chance at winning the Tour. Maybe for $20 million? It depends on the price of crude oil.”
The payoff
But how is this beneficial for the athletes? Inflation in cycling budgets is mainly due to the top five percent of riders earning more and more. The average worker on a team hasn’t seen their income change significantly. A system grounded in financial fairness benefits 95 percent of riders by reducing the risk of their team going bankrupt, as the sponsorship market becomes more valuable and competitive. Sponsors know that everyone starts with the same opportunity. This isn’t about making more money for team owners; it’s about creating a stable market sponsors can enter with confidence. As scarcity increases sponsorship valuations, budgets – and budget caps – would increase, leading to a higher median wage. A rising tide lifts all boats.
Fans will benefit, too. The racing becomes more competitive. It becomes close to impossible for one or two teams to dominate events. The racing becomes more open and unpredictable. It’s much more fun to watch.
Why is the cap so challenging to implement? Unlike the NFL in the United States, with its hard salary cap and auditors ensuring everyone plays by the rules, cycling is multinational, with teams, athletes, and races scattered across various locations. In addition, in cycling’s current governance model, there is no codified pact or contract (league, basically) amongst teams that would make a budget cap contractually enforceable across borders. Enforcing spending caps in cycling is difficult. There would be a lot of Ferraris as birthday presents.
Ultimately, we avoided a meltdown in 2011, thanks largely to Pon rescuing Cervelo from its fate. And Jumbo has similarly managed – for the short-term, at least – to survive in its existing form. But those wins are always tenuous, at risk due to the sport’s instability.
Teams and race organizers need to agree we are one single business. We need to recognize teams do not compete solely with one another, we collectively compete against different entertainment products and other sports for viewers, fans, and revenue. Right now, we race to the bottom, undercutting one another for sponsorship deals, making our sport smaller and less sustainable in the process.
Financial controls and a league structure with teeth are two straightforward changes that would immediately address the instability in the sport. Neither will please everyone, but if the outcry about the need to change cycling’s business model is genuine, it requires leaders who are willing to shape the sport in a way that might not make friends but is good for its long-term foundation.
Escape Collective is always interested in first-person perspectives from inside the world of pro cycling. If you’re a rider, a team official or staff member, race organizer, or other participant in the sport and have a viewpoint you want to share, please get in touch with us at [email protected].
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