HOW THE TOUR DE FRANCE MAKES MONEY
Updated: Sep 10, 2020
Right now there are more than 150 of the world’s most elite cyclists competing in the most prestigious and most difficult bicycle race, two months later than planned and under the shadow of the coronavirus pandemic.
The 2020 race will see the competitors traverse some 2,165 miles up and over 8 mountain passes, over the three week period between August 29th to September 20. Each rider will spend more than 4,800 minutes in the saddle, and reach speeds of up to 63 MPH, as they vie to bring their countries, teams, and sponsors glory.
The Tour de France is a historic and global phenomenon, which I have written about before. However, despite the event's popularity, the economics of the sport have been largely shrouded in secrecy.
How does the Tour de France, an event that is free to the public, make money? How does the sponsorship model of a professional cycling team work?
The Tour de France was originally born out of financial necessity for the French newspaper L'Auto.
L'Auto and successor paper L’Équipe would utilize the same methods to monetize the world's most famous bike race, up until the 1960s.
The first method utilized was to auction off stops along the route to the highest-bidding cities. Secondly, they would charge companies a fee to follow riders in branded publicity “caravans” and throw out swag to spectators. Thirdly, physical ad space along the route would be sold. Finally, organizers would find local brands to sponsor the tour.
During this time the event's revenue streams were largely focused on monetizing the large number of spectators, who would gather along the route.
The Tour de France would end up on the end of heavy criticism from French newspapers due to the overabundance of brands and sponsors. Which was seen as corrupting the purity of the sport.
"This caravan of 60 gaudy trucks singing across the countryside…is a shameful spectacle,” the French journalist Pierre Bost wrote of the caravans. “It bellows, it plays ugly music, it's sad, it's ugly, it smells of vulgarity and money."
In 1965, the race would be taken over by its present-day owner, the privately-owned French sports organizer, Amaury Sport Organisation (ASO).
Immediately, ASO would set out to diversify the event's revenue streams. Initially, focusing on improving the current broadcast technology, so that they could grow the race's global reach. The tour is now broadcast in 190 countries each year.
Today, 55% of the tour's revenue comes from television rights. Broadcast rights in France is reportedly worth $25m per year alone.
Town hosting fees now only account for around 5% of income. However, there are still some locations that are willing to pay big to host part of the route. As highlighted by Denmark reportedly spending $3.9m to host 3 stages of the 2012 Giro d’Italia, another major cycling event.
40% of the event's revenue is generated through sponsorships. This can be broken into three major sections.
Firstly, publicity caravans, where around 33 brands pay $250k to $600k each to be in the caravan. During the 21-day race, they collectively hand out 15m items to fans. Items that were handed out during the 2019 event include hats, t-shirts, tote bags, stationery, keyrings, Dijon mustard, and Cochonou meat sticks.
The caravan is made up of around 250 vehicles and spans 12 miles, taking 45 minutes to pass by.
Secondly, brands can sponsor the four different types of special jerseys worn by riders. This includes the yellow (overall leader), green (best sprinter), polka dot (best climber), and white (best young rider). The bank LCL spends around $12m per year to have its branding on the yellow jersey. While carmaker Skoda pays $4m to be placed on the green jersey.
Thirdly, the tour has a number of miscellaneous partnerships such as time trial sponsorships.
The final 55% of the tour's revenue comes from the television revenue
ASO has been generally kept its revenues a secret. However, a number of sleuths have tried to piece different pieces of information together and have an estimated that the tour's revenue is somewhere between $60m and $150m per year. A rough estimate on the event's yearly profit is around $30 million.
ASO however is only one piece of the Tour de France puzzle. An entire second thriving economy has been built around the teams and the riders who compete.
Each year sees 22 different professional teams and 178 riders take part in the Tour de France.
In a team's budget, the rider's salaries account for the majority of it. However, the list of resources needed to kit out 9 riders is scary.
34 staff members (mechanics, drivers, sports doctors, nutritionists)
55 bikes (6 per rider), at $13,000 each
80 spare wheels, 82 spare cassettes, and 57 spare chains
4,360 energy gels and bars + 3,300 water bottles
40 bottles of massage cream
100 rolls of bar tape (changed every 4 days)
5 air purifiers, 9 AC units, and 9 dehumidifiers
Each year, cycling teams can easily exceed a $20m budget. So, how do they fund all of this?
Teams unfortunately have to almost entirely have to rely on sponsors or donors, if they want to survive.
Generally, 70% of the team's budget is generated from their title sponsor. The title sponsor can pay anywhere between $5m to $15m for the rights and in return, they get the chance to name the team and plaster its logo all over the uniforms.
Sports intelligence firm, Repucom found that investing in a cycling team can be very much worthwhile, as the average team is worth $88.4m in media exposure
The current slate of title sponsors are almost entirely conglomerates, insurance companies, and telecommunications firms.
The reason for this is locked into the sport's history. Up until the mid-'50s, only bicycle companies were permitted to sponsor teams. However, bike sales plummeted in the ‘60s. This opened the door for local products to fill the void, such as alcohol and food products.
As the sport began to reach a new broader global audience, UCI (cycling’s governing body) implemented a new professional licensing system that would drive up costs.
For most of the 20th century, professional cyclists did not receive salaries and would have to live off of the prize money they received from winning races.
Today that is no longer the case, compared to other sports cyclists do not receive large windfalls from winning races. In fact the total prize money available at the Tour de France is only $2.7m. And $595k of that goes to the yellow jersey winner. If you were to finish between 20th and 160th place you only receive $1.2k.
Winners of the green, polka dot, and white jerseys take home between $24k and $30k each.
The sport has mandated a minimum wage for a pro cyclist who participates in the Tour de France of $35k. However, if you are one of the sports more established athletes, such as 4-time Tour de France winner Chris Froome (@chrisfroome) you are able to command salaries in excess of $6m+ per year.
Power of Sponsors
The heavy reliance on sponsorship dollars can come with downsides for cycling teams. Often teams have to work their Tour de France strategy around maximizing the visibility for sponsors.
It is not uncommon for teams to send lesser-known riders to break away from the pack to give sponsors some media time, even if it is counter to the team's best strategy.
“The entire Tour is about getting eyes on the company on your jersey,” said an anonymous ex-pro. “Because if the sponsor isn’t happy and cuts funding, your team is probably shit out of luck.”
With the strain of the pandemic hitting everyone hard, the 2020 Tour de France may be more important than ever for teams to keep sponsors happy.