Why The Tour de France Should Be More American

Another fantastic Tour de France ends this weekend. While the event enjoys widespread popularity and prestige, the ways in which professional cycling and the Tour are organized and operate contribute to a perpetual lack of stability that is detrimental to the sport. Professional cycling would be improved if it operated more like an American sports league.

The Structure Of Professional Cycling

As explained more fully in an earlier article, there are numerous actors and entities involved in professional cycling.

The Tour is put on by the A.S.O. - Amaury Sport Organisation (ASO), a French sports marketing and event management organization that organizes various cycling races.

The sport of cycling is otherwise regulated by the Union Cycliste Internationale (UCI), a non-governmental, non-profit association, based in Switzerland, which is recognized by the International Olympic Committee as the governing body for cycling. The UCI sanctions the WorldTour, the elite professional men’s road cycling tour.

Importantly, the UCI does not operate most of the events on WorldTour calendar. Instead, races are managed by various private operators. The ASO organizes nine of the 35 events on the schedule.

Then, of course, there are the teams and the riders. 18 teams participate on the WorldTour, with the bottom two performing teams subject to being relegated to the lower level ProTour. The teams employ 30 riders on budgets ranging from about $10 to $40 million. Those budgets are almost entirely dependent on sponsors, for whom the teams are named. And in turn, those sponsorship agreements are almost entirely dependent on the team’s results and short in duration (typically one to two years).

The teams, through their Association Internationale des Groupes Cyclistes Professionnels (AIGCP), and the riders, through their Cyclistes Professionnels Associés (CPA), negotiate “Joint Agreements” setting forth some minimum terms and conditions of employment. Specifically, the 2024 minimum salary for a WorldTeam rider is € 68,957 (about $74,300) for veterans and € 55,793 ($60,100) for rookies. Two-time Tour de France winner Tadej Poga?ar earns a reported € 6 million ($6.47 million) from his team, UAE Team Emirates.

Yet, neither the AIGCP or CPA has any formal role in the operation of the Tour de France or any other WorldTour race.

The American Sports Structure

The major American professional sports leagues – the NFL, MLB, NBA, and NHL – are all organized in the same way. The teams are individual legal entities that come together to operate a joint venture – the league. The specifics of that joint venture are set forth in a central document, called a Constitution or Constitution and Bylaws.

These Constitutions govern important league matters, such as ownership, franchise relocation, stadium or arena requirements, team territories, team and league finances, playing rules, the role of the Commissioner, dispute resolution, and more.

From a business perspective, leagues and teams are constantly seeking to expand and maximize their revenue streams. Nevertheless, one revenue stream remains by the far most important – broadcast rights.

The leagues’ annual revenue from selling the broadcast rights to their games range from a low of $1.3 billion for the NHL to $12.39 billion for the NFL. These broadcast agreements make up nearly two-thirds of the NFL’s estimated $20 billion in annual revenue and about a fifth of the NHL’s estimated $6.8 billion in annual revenues.

The NFL is unique among the major American leagues in that the teams collectively sell the broadcast rights to all regular and postseason games. By comparison, each of MLB, the NBA, and the NHL sell a portion of their teams’ games to national broadcasters, leaving the remainder to be sold by teams to local broadcasters. Local broadcast revenues are most important in MLB, a function of teams’ 162 game schedules, collectively compromising more than $2.5 billion. For example, the New York Yankees receive a reported $143 million annually for their local rights from the YES Network.

Aside from broadcast rights, the leagues and their teams collectively make billions of dollars annually from ticket sales, suite sales, sponsorships, and other stadium-related revenue streams (e.g., concessions, parking, events).

The principal expense for the teams is of course the players. Through their unions, the players negotiate collective bargaining agreements with the teams that cover a wide range of issues important to them and the league, including but not limited to salaries, player contract terms, salary caps, free agency, drafts, benefits, discipline, health and safety, schedules, and roster sizes. Those agreements generally provide the players with between 40 and 50% of the league’s revenues.

While the collective bargaining process can be challenging and even litigious, the end result is certainty through long term agreements and a partnership between the teams and players to grow the revenue pie. Indeed, all of the leagues have generally settled into a productive (almost boring) cadence with their respective union counterparts.

La Différence

All of the above-described revenues for American sports leagues and teams – with the exception of sponsorships – are made possible by the fact that the teams themselves are the organizers of the games in which they play. They sell the tickets, hot dogs, and t-shirts. More importantly, they own the intellectual property that is the television broadcast of their games.

The American sports model is thus markedly different from that of professional cycling, in which teams play no role in the organizing of the events and hold none of the related intellectual property. In other words, they have no right to any of the broadcasting revenues. Instead, the teams are mere applicants to the Tour, generally willing to abide by whatever terms the ASO imposes. Indeed, the team which wins the Tour de France (calculated from each team’s three best riders), receives only € 50,000 ($53,700), among other smaller prizes (though the individual winner receives € 500,000 or $537,000).

Without the consistent and predictable revenue streams that come from operating events, the teams are subject to the financial whims of sponsors. And if sponsors only agree to fund a team for a year or two, the team cannot agree to pay its riders any longer than that. The result is the absence of long-term stability for both the teams and riders.

Does it have to be this way? The ASO or its predecessor entities has been running the Tour de France since its inception in 1903 and certainly would never willingly give up control of the event to the teams.

The teams’ plight recalls the NHL’s difficulties in 2005. After the collective bargaining agreement expired following the 2004-05 season, the league imposed a lockout, seeking to negotiate a harder salary cap with the players. The NHL claimed at the time that most of its clubs were losing many millions of dollars a year. Bain Capital, a powerful private equity firm, offered to buy the entire league and all 30 of its teams for $4 billion. The team owners declined but had they accepted, Bain would have been in a position to cut costs and try to turn around the business’ fortunes, a staple of Bain’s business model.

Private equity investment in American sports teams is a recent and rapidly developing trend. MLB, the NBA, the NHL, MLS, and the NWSL have all amended their ownership rules in recent years to permit varying degrees of ownership by private equity firms. The NFL is exploring the issue and expected to soon open its doors as well. These specialized funds are able to offer large infusions of cash to fund the teams’ increasingly expensive operations and endeavors.

Cycling teams suffer from essentially no centralized decision making or revenue generation. The collective value of the ProTour teams is probably under a billion dollars. They thus could theoretically be an attractive and palatable opportunity for a private equity fund to take over in their entirety or near entirety and be more assertive, efficient, and opportunistic (though there might be issues under antitrust/competition law).

Additionally, the teams do not have any kind of meaningful relationship with their athletes through which they can collectively and predictably move the sport forward. Consider, for example, that the Joint Agreements between the AIGCP and the CPA is 17 pages. By comparison, the NBA-NBPA collective bargaining agreement is 676 pages.

Recently, European soccer seems to be learning from decades of legal developments in American sports. It seems about time that cycling did the same.[1]?

[1] For more on this topic, see my article “Putting Shoulder Pads on Schleck: How the Business of Professional Cycling Could Be Improved Through a More American Structure,” 37 Brooklyn J. Int’l L. 65 (2011), at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1958146.