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JUNE 30, 2003
Is Lance Just Too Good? As team sponsors get shaky, Armstrong's dominance isn't helping Every sports sponsor should be so lucky. In 1998, the U.S. Postal Service hired Lance Armstrong, then still recovering from cancer, to lead its pro cycling team. The rest of the story is legend: Armstrong overcame the aftereffects of chemotherapy and went on to win the Tour de France in 1999 and every year since. Sports Illustrated named him Sportsman of the Year in 2002, and he's the heavy favorite to win a record-tying fifth Tour beginning on July 5. But Armstrong's success may be hurting the sport that made him a global star. Another victory would be great for U.S. Postal, but not so great for teams in Europe, pro cycling's heartland. Cycling has long been a sport that depended on the sometimes unreliable largesse of cement makers, purveyors of baked goods, and other sponsors that aren't exactly household names. Now pro cycling is suffering from cuts in corporate marketing budgets even as it recovers from the doping scandal that marred the 1998 Tour. On top of that, Armstrong has overshadowed European riders. "When someone always wins, it gets boring," says Arnold Hermanns, a marketing professor at Bundeswehr University in Munich, who has studied pro cycling. The financial strain is showing. In May, the cycling world was shaken by the collapse of the team sponsored by Coast, a midsize German clothing chain whose stable included 1997 Tour winner Jan Ullrich. The International Cycling Union, based in Aigle, Switzerland, has been concerned enough about the solvency of several pro teams that it has required them to provide proof they were paying riders on time. "Some teams have had temporary problems, but nothing compared to Coast," says Alain Rumpf, director of pro cycling at the ICU, who refuses to name the teams. For most sponsors, he insists, "the return on investment is huge." That's certainly true if your captain happens to be Lance Armstrong. The USPS started sponsoring cycling in 1996, figuring it was an easy, uncrowded sport to break into. Cycling stands for teamwork and endurance, its marketing people reasoned, and they say those qualities have indeed rubbed off on the much-maligned Postal Service. "Lance has completely changed the meaning of 'going postal,"' says spokeswoman Joyce Carrier. In addition, the sport reaches a big audience outside the U.S., where the USPS is trying to build awareness as an international shipper. The company signed Armstrong for a base salary of $215,000 plus bonuses based on performance, he writes in his autobiography, It's Not About the Bike. His salary is now $4 million, according to Outside magazine, but that's still a phenomenal bargain. Last year, Armstrong and crew generated some $19 million in free advertising in America for U.S. Postal, according to ad agency Foote, Cone & Belding -- despite the fact that the team races almost exclusively abroad. The Outdoor Life Network, which broadcasts the Tour in the U.S., says that last year 425,000 households watched the event at its peak, good ratings for a cable network and OLN's highest ever. While the USPS won't reveal how much it spends, top teams often cost over $10 million a year. The post office pays the lion's share, with some 20 other sponsors kicking in. The return for lesser teams is not so dramatic, especially with Armstrong around. As a result, companies are taking a more systematic look at how they spend their sponsorship dollars. While there hasn't been a wholesale defection from the sport, organizers clearly worry that there could be. On June 6, the ICU's governing body for pro cycling agreed to move toward a system as early as 2005 that could cut the number of teams to as few as half the 30 now in the top tier. "It would be better to have fewer teams but have them be more solid," says Daniel Baal, director of cycling for Paris-based Amaury Sports Organization, which plans the Tour. Until Armstrong flags or retires, none is likely to be as solid as USPS. And rivals -- especially French lender Cofidis, which dropped Armstrong's contract after his treatment for cancer -- can only be kicking themselves that they didn't take a chance on Lance.  By Jack Ewing in Frankfurt and Christina Passariello in Paris Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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