Contents LIST OF EXHIBITS...... 1 LIST OF FIGURES ...... 2 WORD COUNT: 8909 ...... 2 ACKNOWLEDGEMENTS ...... 3 EXECUTIVE SUMMARY ...... 4 INTRODUTION AND PROBLEM STATEMENT ...... 5 AGR Team History ...... 7 AGR Team Cost Drivers ...... 7 AGR Team Revenues & Growth ...... 9 AGR Team Conclusions & Suggestions ...... 15 BACKGROUND OF THE PROBLEM ...... 21 MOTOGP BUSINESS MODEL ...... 24 EXISTING SOLUTIONS ...... 27 Revenue Sharing ...... 28 Exposure Sharing ...... 29 Talent Re-distribution ...... 31 Budget Capping ...... 33 Regulations of Technology ...... 35 Regulations on Score-system ...... 38 CONCLUSION ...... 39 Final proposal ...... 39 Implementation Plan ...... 41 Key Performance Indicators ...... 43 REFERENCES ...... 44 ANNEXES ...... 46 1. Competitive Balance & Uncertainty of Outcome definition ...... 46 2. Interview to Enric Rojas...... 47 3. Interview to Marc Saurina, Marketing Director of SuperBike World Championship.. 49 4. Interview to Oriol Gene, Marketing Manager at Pons Racing ...... 51 5. Interview to Iker Burutxaga, Team Manager of AGR Team ...... 53 FUTURE STUDIES ...... 55 ORGANIZATIONAL MANAGEMENT ...... 55 SOCIAL CHANGE – SUSTAINABLE DEVELOPMENT ...... 56
THE ECONOMIC RISE OF AFRICA ...... 58 MARKETING AND THE NEXT GENERATION ...... 60 THE BEST WAY TO PREDICT THE FUTURE ...... 62
LIST OF EXHIBITS Exhibit 1: Agr Team budget season 2012-13
Exhibit 2: Team Cost Drivers
Exhibit 3: AGR official website
Exhibit 4: AGR Facebook Page
Exhibit 5: AGR Instagram Page
Exhibit 6: Event Branding Delivery
Exhibit 7: Exposure Summary by Broadcast Portion
Exhibit 8: Brand Geographic Valuation
Exhibit 9: Brand Location Summary and Valuation
Exhibit 10: Gresini Racing Instagram Page
Exhibit 11: Marc VDS Team Official Website
Exhibit 12: Marc VDS E-commerce Platform
Exhibit 13: Sthil’s tools demo event by Sito Pons and Alex Rins
Exhibit 14: Sthil products TV add with Pons Racing official pilots
Exhibit 15: Sito Pons advertising Sthil products
Exhibit 16: MotoGP season world standing by teams 2000-2015
Exhibit 17: Motogp grand prix world standing by pilots 2010-2015
Exhibit 18: MotoGP Stakeholders flow chart
Exhibit 19: Dorna Sports Management Model
Exhibit 20: Attendance per Grand Prix in 2014
Exhibit 21: 2016 MLS Player Salaries by Clubs
Exhibit 22: Table of points per Grand Prix
Exhibit 23: Implementation plan
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LIST OF FIGURES Figure 1: MotoGP logo
Figure 2: Dorna Logo
Figure 3: AGR Team 2016
Figure 4: Montjuic Circuit, Barcelona. 1970
Figure 5: Honda- Campsa team official presentation 1980
Figure 6: Lateral fairings with min. radius of 2.5mm
WORD COUNT: 8909
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ACKNOWLEDGEMENTS We would like to thank everyone involved in helping us to investigate, develop and write this case management, including all following:
Dorna Marketing Department, especially Marc Saurina (Marketing Director of SuperBikes World Championship). IMG MotoGP Media Management Department, especially Enric Rojas for all the information provided. Pons Racing Team Marketing Department, especially to Oriol Gené. AGR Team, for constant support, help and information provided, special thanks to Iker Burutxaga. Chus Sánchez, AGR Team Tech Director, many thanks for all information, contacts and opportunities provided. Christopher Kennett and Aarthi Rajaraman who have been our promoters and have guided us since the beginning of this case management, providing us with contacts, books, information and many more. Also giving us feedback and advice throughout the whole time.
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EXECUTIVE SUMMARY This case management analyses the current situation of new teams entering the FIM MotoGP World Championship, what kind of difficulties are faced and which ways exist to succeed and become a sustainable or even profitable team.
To better conduct the analysis of such a case, a real one was selected, the AGR Team (Arguiñano Ginés Racing Team). We analysed their beginnings, cost drivers, revenue streams, how they could achieve growth, etc. After analysing them and some other teams we give the AGR Team some suggestions on which areas could they improve and in which ways with clear examples.
Moreover, during the investigation and development of the case, we realised that it would not really matter if we could help one single team, since many more are facing the exact same problems, which is the reason why we realised the problem was a managerial one. The entire championship is facing a problem of competitive imbalance, both affecting the teams who participate in but also the spectators, who are losing interest due to the lack of uncertainty of outcome. Then we realised that one of the main reasons why competitive imbalance is happening is due to the big differences on economic situations among teams. So, as both problems are highly correlated, a single solution could bring stability for entering and small teams, and at the same time improve competitive balance making the championship more attractive for fans.
Finally after analysing what existing solutions have been develop for such a problem in other championships and leagues such as NBA or NFL, we have developed a hybrid strategy trying to combine the best part of each already existing solution plus we have tried to give an extra of innovation coming from us. Following our strategy we have also developed and implementation plan and a way to measure its success.
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INTRODUTION AND PROBLEM STATEMENT With over six decades of history of elite competition, MotoGP is the world’s premier motorcycling championship, comprising an eight-month, 18-round season, in 15 different countries, spanning five continents. Dating back to 1949, it is the oldest motorsport World Championship in existence (History MotoGP, 2015).
Each Grand Prix brings together the most talented riders from across the world to participate in races across three distinct categories – MotoGP, Moto2 and Moto3.
The riders are widely recognized names in their respective home nations and beyond, with their individual characteristics collectively raising the global profile of MotoGP. The championship consistently attracts huge crowds to its Grand Prix events around the world, with about 2.5 million spectators in attendance to watch MotoGP live at the circuits in average per season (MotoGP review, 2014).
The racing is a superb spectacle; it is about speed, technology, pure adrenaline and passion.
All these is possible thanks to the collaboration between the FIM “Fédération Internationale de Motocyclisme” (International Motorcycling Federation) and DORNA an international sports management, marketing and media company, which since 1992 has been the exclusive commercial and media rights holder for the FIM Road Racing World Championship Grand Prix (MotoGP).
Figure1: “MotoGP Logo” Figure 2: “Dorna Logo”
Thanks to DORNA a total of 207 countries and territories receive live or same-day- delayed programming of the 18 Grand Prix due to the worldwide interest in MotoGP, with total broadcast hours reaching 7,456. More than 8,316 media representatives
5 from 59 countries attend GPs during each season, with an average of 462 media staff attending each event (MotoGP review, 2014).
In addition, DORNA has recently included to their media plan a new branch called NEW MEDIA which mainly consists on all its online communications channels (Marc Saurina, 2015) including motogp.com, social media (Facebook, Twitter, Google+, You tube & Instagram) and its mobile apps (MotoGP LIVE EXPERIENCE, VIDEOPASS APP, MotoGP HISTORY & MotoGP TRIVIA).
During its history the championship has achieved impressive growth rates both in terms of popularity and revenue-generating, especially in the past decade this growth has been greater than at any time of its history, which has ended in big manufacturers such as Honda, Yamaha, Ducati, Suzuki, Aprilia, KTM etc. investing huge amounts of money in their teams. Since the FIM does not regulate their budgets (Gené, O. 2015), as previously has happened in many sports and championships, the gap between the ones on the top and the rest has grown considerably. The teams with greater budgets get the best riders and best technologies as well, which combined, usually results in them winning the GPs and therefore having the greatest levels of media exposure. Of course when it comes to finding sponsors and seeing a return on their investment, those teams on the top are the ones which are more in demand and which can charge the highest prices.
On the other hand, for those teams with lower resource capabilities, being part of the championship is becoming a frustrating job. In order to be able to compete against the big teams for the top positions they need to invest in good riders and technology, but the only way they could achieve their competitors’ level is through an increase in economic revenue-streams, as they already invest all their own funds.
The question that arises is; “What strategies could a small team entering the FIM MotoGP World Championship follow to grow and become competitive against the existing top teams?” To better analyze this problem and its possible existing solutions we will focus on the real case of Arguiñano Gines Racing Team (AGR Team), a moto racing team that started on 2011 at the FIM CEV REPSOL Championship with one bike
6 and now races at both the World and CEV Championships with two bikes in each championship.
AGR Team History AGR Team, was started up in 2012 by Ginés Girado (Team manager) and Karlos Arguiñano, becoming the first Basque Moto 2 Team in history. The team was mainly financed by Bainet Media, a group of media communication companies whose activity takes in areas as diverse TV and film production, internet and new technology, advertising, book publishing and audiovisual licensing rights. Arguiñano is one of the main shareholders in Bainet and the main “brand image” as one of the most popular chefs in Spain with his own Cooking show, La cocina de Karlos Arguiñano.
Figure 3: “AGR Team 2016”
AGR Team Cost Drivers The initial and minimum amount required to allow the AGR team start racing was about one million euros. In the beginning the full amount was covered by Bainet, only attracting sponsors that already had deals closed with Bainet Media or the Karlos Arguiñano “brand image”. In comparison with the rest of the teams, their budget was quite low, according to El Liberal (newspaper from Chile), the minimum budget needed to participate in the FIM world championship is about 6 million euros for MotoGP and between 4 and 2 million for Moto2 and Moto3. However, the top leading teams of
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MotoGP (Honda, Yamaha and Ducati) race with budgets up to 50 million euros per year.
As it was the first year for the AGR Team they decided to start with a minimum viable budget so they could test and set the bases to start working and growing for the following years; “by that time our objective was nothing more than being part of the championship, it was our first year as an official Moto2 team, it all was about testing, adapting and consolidating” – Chus Sánchez, Tech Director of AGR Team (interview).
To better understand how a Moto Racing Team budget works, how the costs are distributed and what are the main cost drivers of a FIM MotoGP World Championship team, here there is the official 2012-13 budget for the Arguiñano Gines Racing Team from Moto2 (Exhibit 1).
Exhibit 1:
AGR Team Budget for season 2012-13
The costs of the team can be divided into three main sections (Exhibit 2): (a) equipment representing around 35 percent of the total budget (bike, suspension, engines, wheels, brakes, truck, etc); (b) workforce representing another 30 percent (tech director, chief mechanic, telemetric engineer, team manager, etc); and finally (c) administrative which represents another 35 percent (logistics, hotels, plane tickets,
8 circuit inscriptions paid to Dorna, subscription to IRTA, etc). From those cost drivers the ones that grow exponentially in bigger teams such as Honda or Yamaha are specially equipment and workforce. In terms of equipment they have 2 times more equipment (up to 2 bikes per pilot) and their technologies can be more than 20 times more expensive (up to 2.000.000 € per bike, not counting on extra parts).
Exhibit 2:
Team cost drivers
Equipment Workforce Administrative
35% 35%
30%
At this point is where the big question for the AGR Team arises. Once the bases are set, and the team is ready to compete, what kind of revenues and extra income could be used to reinvest and keep growing until we become competitive enough to start winning championships?
AGR Team Revenues & Growth According to Iker Burutxaga, actual team manager for the AGR Team, there are two main ways to achieve growth for a Moto Racing team, either the team works both hard on and off the tracks, meaning to put all its effort on improving their performance at the GPs at the same time they develop and implement a great marketing plan, so the team gets big sponsorship deals as soon as possible; or the team finds a big individual investor who is able to afford what is needed to get the best riders and technology.
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In this case, AGR decided to go for the first option as they did not want more shareholders jumping into the team. They have invested time on tracks, hiring the best possible professionals (engineers & mechanics), getting the best technologies (Kalex Chassis), and hiring talented pilots (Axel Pons, Jonas Folguer & Marcel Schrotter) at the same time they train young ones (Jaume Macià). All this combined has led the team to improve their overall performance during the GPs, during last season 2015 they achieved 4 podiums (2 first places, 1 second place and 1 third place), Jonas Folguer got the 6th position in the final world standing qualifying and Axel Pons the 19th. Thanks to great results on track like these ones, the team gets more media exposure, not only during race time, but also before and after (conferences, television and radio interviews, sports news, etc.) and this is one of the most valuable things for an sponsor which is willing to promote its brand, product or service.
MotoGP industry business model in general is based on sponsorship, the industry connects MotoGP teams with firms and organizations that want to increase their visibility towards the MotoGP global audience. This way the teams get an additional source of income while firms and organizations have the opportunity to globally increase their brand awareness, as an alternative of traditional commercial and advertising.
The customers for the teams are companies interested in promoting their brand and activity by associating it to a racing team. They are usually global brands and consumer companies willing to reach a global audience.
To stablish such a business model and keep it going it is crucial to increase fans’ engagement; the AGR Team, and many others, have recently enhanced their marketing skills by stablishing dedicated department to take care of the team’s official website and social media channels, as well as coordinating activities of the official team’s fan clubs. By doing so, they are trying to increase their team’s visibility, in order to attract more sponsors or at least bigger ones.
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Exhibit 3:
AGR Team Official Website
Exhibit 4:
AGR Team Facebook Page
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Exhibit 5:
AGR Team Instagram Page
The way motor racing teams are selling “visibility” to external sponsors and partners right now, is by providing: (a) advertising space on the bike chassis (stickers with the sponsor’s logo), (b) logos on the clothes worn by the team members and the pilots, (c) the possibility to mention the moto racing team in the sponsor’s marketing materials (e.g. Repsol often displays the Repsol-Honda team in their advertising), co-branding advertising in and off-track events or production and sale of co-branded merchandise. Each team/company sets a price list for different level of sponsorships (the higher the sponsors’ investment, the bigger the opportunities for visibility), and the contracts are individually managed between the moto racing team’s marketing department and the sponsor.
In order to help teams monetize their “visibility” on the track, at the end of each Grand Prix and finally at the end of the season, Dorna provides all teams with a report on how much time they have been on TV, and how much this time should economically
12 represent according to levels of audience. Here we have an example of the past Qatar GP 2016 time report for Moto2 (Exhibit 6)
Exhibit 6:
Event Branding Delivery
Dorna also sends individual reports on each team, providing analysis of time exposure by each individual sponsor of the team during each GP and at the end of the season and how much this amount of time represents in money, again this example comes from the Qatar GP of 2016, concretely the report for the AGR Team (Exhibit 7).
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Exhibit 7:
Exposure Summary by Broadcast Portion
Exhibit 8:
Brand Geographic Valuation
Finally, Dorna sends a report on brand location in terms of from which part of rather the bike, rider, crew, garage or others the sponsor have had more visibility. In addition, they also specify from the bike which parts have been more exposed to TV cameras and therefore should be charged with higher prizes (Exhibit 9).
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Exhibit 9:
Brand Location Summary and Valuation
By using this kind of tools, AGR Team’s marketing department were able to increase their number of sponsorship deals from 0 to 7 in about four seasons,. In less than four years they have achieved several podiums, they got a racing deal with Kalex, the actual best chassis fabricant in Moto2, and seven sponsors that has allowed the team keep moving forward and improving, with not so much economic struggle.
AGR Team Conclusions & Suggestions In conclusion AGR Team has performed relatively well taking into account that the team chose the “hard path” when they decided to achieve growth and results by their own effort rather than taking the “easier way” and just look for big investors willing to spend cash for self-promotion purposes. However, there is always room for improvement, as a conclusion we would like to give some marketing strategy suggestions to the team in order to speed up their progression.
After analyzing the social media strategies of the teams participating in Moto2, it is clear that the ones which had spent more time developing their social media channels and had been able to stablish a constant two way communication channel with their fans, are the ones who are experiencing more “visibility” and media exposure, and therefore are the ones with at least a greater number of sponsors. One great example
15 to learn from is Gressini Racing Team, since 2016 season started they have even doubled the number of followers, likes and comments they receive through social media, with about 50k followers on Facebook, 45k on Instagram and 20k on Twitter. Their strategy is about constantly uploading content combining interesting info about their performance and results, combined with devotion, humor and proximity (Exhibit 10).
Exhibit 10:
Gresini Racing Instagram Page
Moreover, it is also very important to work on a great website page. Social media apps are just the tools that should be used to share what is created on the official website. The web must be used as the center where all content is at, the place where you can go and find anything related to the team, the championship, the crew, etc. It has to be constantly updated and it is basically the storefront of your “business”. In this case one great example of an official website for a Moto2 team is the Marc VDS Team (Exhibit 11). In addition this team is also using their online communication channel as a direct sales channel, generating some extra income. They use their website as an ecommerce
16 platform selling all type of merchandising and co-branded products from the team, pilots and sponsors (Exhibit 12).
Exhibit 11:
Marc VDS Team Official Website
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Exhibit 12:
Marc VDS E-commerce Platform
Finally, the most important thing to think about when developing a marketing strategy is how the sponsors will be targeted and what kind of deals will be offered to them. In this case, the best example in Moto2 both in targeting and offering sponsorship deals is Sito Pons’ Team: Pons Racing Team.
Sito is an ex-pilot for MotoGP World Championship well known for achieving a second position in 250cc category in 1986 season, a third position in 1987 and two first positions in 1988 and 1989.
According to Oriol Gené, marketing and design manager at Pons Racing, it is crucial to change the way sponsorship has been perceived over the past years, he says he does not even like to call them sponsors anymore, he talks about partners. Nowadays, most of the teams are offering mostly the same thing at similar prices to possible companies or businesses which could be interested in gaining some product or brand media exposure through a moto racing team. Oriol explains that if a team is really willing to achieve greater deals, more than a contract it has to develop a relationship, a partnership with such a business or a company. “It is not about getting a sticker on your bike for X amount of money anymore, it is about everything involved with the
18 moto racing world: Pilots, team, bikes, truck, website, events, merchandise, advertisements, press, etc… It is about developing a relationship where both partners build and image together to achieve their individual objectives together.” - Oriol Gené.
The way Pons Racing targets its partners is by packaging their offer, they give their partners the opportunity not only to show their brand or product through the bikes but they include a full package of opportunities such as: team title sponsor, event inside and outside the tracks with team and pilots (Exhibit 13), VIP free passes, co- branded merchandise and products (Exhibit 14) and most importantly they have the opportunity to use the team image to expand its brand or products including Sito’s image (Exhibit 15).
In conclusion, AGR Team shares many similarities with Pons Racing in terms of both being Spanish teams, performing great by its own merits and finally they both have a main person who is a big part of the “brand image” of the team: Sito Pons and Karlos Argiñano. This is why it is believed that following similar strategies as Pons Racing could perfectly fit AGR’s Team and impulse their growth.
Exhibit 13:
Sthil’s tools demo event by Sito Pons and Alex Rins:
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Exhibit 14:
Sthil products TV add with Pons Racing official pilots:
Exhibit 15:
Sito Pons advertising Sthil products:
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BACKGROUND OF THE PROBLEM In the beginning of this case management, a problem was identified about how difficult it is for new and small teams to compete in the MotoGP FIM World Championship against those big teams with huge budgets. Our first analysis has been an individual proposal that might result in a solution to the problem for one or maybe few specific teams. However, it is believed that if this problem is not managed from a macro perspective it will never be solved and in the end will probably affect the entire championship, and not only those teams with lower resources.
The bigger the gap between the ones on the top and the rest of teams becomes, the lower the interest of spectators will be. Facts such as competitive balance and uncertainty of outcome are decreasing as it is becoming to be known who will always be on the top; therefore the attractiveness of the championship might decrease making it lose value in terms of popularity and revenues.
The hypothesis that arises is that by finding an economically sustainable solution for those teams with lower access to resources, “competitive balance and uncertainty of outcome” (Apendix 1) will increase on the tracks and therefore the crowd excitement and popularity will increase as well, which finally will be reflected on the overall championship revenue-generating growth.
To better understand the problem of competitive imbalance that MotoGP is facing, how it started and what has been tried to solve it, a quick championship history and results analysis will be undertaken.
During its beginnings, the championship was mainly comprised European manufacturers. Competition, resources and opportunities to win used to be similar and equal for most of them. Later on, Italian manufacturers, such as Mondial, Moto Guzzi, Gilera and MV Augusta, were the top teams leading the championship during the 50s.
During the 60s, the Japanese motor industry started to rapidly grow and expand, and soon manufacturers such as Honda, Suzuki or Yamaha, saw an opportunity in joining the championship. However, in the late 60s, their rising cost structures related to their MotoGP teams reached the point that Yamaha even had to give up the championship.
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In response, the FIM introduced new legislations that limited the motorbike’s engines in each category, directly reducing the teams’ budget in average.
In the following period, the battle for victory entered into a spiral of increasing competitiveness. The times when only few manufacturers from Italy or Japan were the ones leading the competition were over. European manufacturers like Bultaco, Kreidler, MV Augusta; Japanese, Kawasaki, Suzuki, Yamaha; or US, Harley Davidson; at least won one title. Even the Japanese brands managed to end with the hegemony of MV Augusta in the 500cc category during mid-70s.
Figure 4: “Montjuic Circuit, Barcelona. 1970”
Since 1980, again the championship started to be led only by the Japanese manufacturers Honda, Yamaha and Suzuki who had the greatest technologies, resources and pilots of the moment, such as Eddie Lawson or Wayne Rainey. European manufacturers such as Derbi, Garelli or Aprilia had to compete against the Japanese giants, which was quite a hard and frustrating task.
Figure 5: “Honda- Campsa team official presentation 1980”
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Again in response to this situation, the FIM has tried many modifications in the regulations of the championship especially in legislations related to the bikes; engines, tires, minimum weights, fuel capacity, etc. in order to give as much as equal opportunities as possible to all the teams and pilots, trying to balance competitive rivalry.
According to the following chart (Exhibit 16), it is obvious that those changes in regulations have not been able to balance the situation at all, as for the last nearly two decades, the championship has still been dominated by the Japanese giants Yamaha and Honda.
Exhibit 16:
MotoGP World Championships (2000-2015) 10 9 8 7 6 5 4 3 2 1 Victories 0
Moreover, if we not only check the teams’ results but also check how pilots are performing individually, according to the following chart (Exhibit 17) we can appreciate how unequally race titles have been distributed during the past five seasons. There has been a clear dominance of five pilots over the rest of participants in the championship, giving evidence that there is still lot of space for competitive balance improvement in the FIM MotoGP World Championship.
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Exhibit 17:
Pilots GPs Victories 2010-2015
Others
Casey Stoner Valentino Rossi Jorge Lorenzo Marc Marquez Dani Pedrosa Dani Pedrosa Marc Marquez Jorge Lorenzo Casey Stoner Valentino Rossi Others
0 10 20 30 40
MOTOGP BUSINESS MODEL The business model of MotoGP involves many stakeholders that participate in the championship. In the graph (Exhibit 20) we can see the relationship between them. As we can appreciate the center of everything is fans, it is true that many others are essential for the championship to exist, such as Teams, Pilots and Circuits, but the truth is that they need fans to survive. Fans are key because they generate income for the championship and the teams in many ways: sponsorships, broadcasters, merchandising rights, etc.
Exhibit 18:
MotoGP Stakeholders Flow Chart
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In addition, we would like to mention that there are three important factors to consider in a sport business: media rights, commercial rights and fans. Dorna Sports is an international sports management, marketing and media company, founded in 1988. They have been the exclusive commercial and television rights holder for the FIM Road Racing World Championship Grand Prix (MotoGP). Also, have the rights of Superbikes, FIM CEV REPSOL, Red Bull Rookies Cup and Asia Talent Cup.
Dorna has an all-encompassing Grand Prix event management philosophy (360º GP event management), with direct involvement in all areas of the championship (Exhibit 19): In terms of sporting, they manage close working relationships with the FIM, local promoters, manufacturers and teams; they supervise all technical rules as well.
Exhibit 19:
Dorna Sports Management Model
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Dorna is the owner of the media rights, and they produce, sell and distribute all media content to different broadcasters around the globe, allowing them to present the content in their local TV channels. Their main goal is to offer the best quality content for their clients. They are offering additional life content with the possibility of interaction with fans. They are present in different platforms like TV, computers, tablets and mobile phones. Lately they have also been present in different channels, they have started a new sub-department inside the media department known as “New Media” through which they generate and distribute all 2.0 media (Social Media, Official Web Site, VideoPass & APP). Dorna team is composed by 200 people working to make this happen, with more than 70 tons of equipment. There are 83 TV networks that show the races, and every year they are expanding the amount of time dedicated to MotoGP.
In terms of fans, we can see that year after year the awareness and the followers for the championship are increasing. The majority of them are interested in the category of MotoGP, but more often we can find fans that prefer the inter-medium (Moto2) and low (Moto3) category due to the rivalry, equality between riders and the huge number of overtakings per race. In relation, they will buy the tickets to go to a Grand Prix or buy the service of the TV to see it at home. Fans are key, they represent the connection of the whole business model, and the more popular MotoGP becomes the greater revenues it will experience at all levels. Fans are traveling more to follow the races in live. During the season 2014, the total attendance at all Grand Prix was 2,473,624 spectators, with an increase of 1.38% respects 2013 (Exhibit 20).
However, the negative point is for the audience in TV channels. Dorna decided to implement a private broadcast TV strategy and it seems that their fans are not excited enough to pay for the content. By “not excited”, we mean that the championship seems not attractive enough for them, due to the lack of competitive balance and uncertainty of outcome. The new season started on Sunday 20th March 2016, and the audience is still decreasing.
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Exhibit 20:
Attendance per Grand Prix in 2014:
COUNTRY-CIRCUIT TOTAL Qatar - Losail 17,890 USA - Austin 118,918 Argentina – Termas de Rio Hondo 125,961 Spain - Jerez 229,416 France – LeMans 178,073 Italy - Mugello 11,309 Spain – Barcelona - Catalunya 163,045 Netherlands – TT Circuit Assen 131,000 Germany - Sachsenring 209,408 USA - Indianapolis 132,817 Czech Republic - Brno 240,695 UK - Silverstone 138,000 San Marino - Misano 88,665 Spain – Motorland Aragon 112,331 Japan – Twin Ring Motegi 70,271 Australia – Phillip Island 77,900 Malaysia - Sepang 130,925 Spain - Valencia 197,000 TOTAL 2,473,624
EXISTING SOLUTIONS Knowing what the situation for the championship looks like, and after having analyzed the situation for a concrete team from a micro-view perspective, it is believed that by finding a solution (from a macro-view perspective) for the problem of competitive imbalance; not only will the championship experience a positive impact from a sports management perspective (economic growth, fans increase, global exposure, etc) but also a common solution will be found at the same time (from a micro-view perspective) for all those teams with lower access to resources. By this is meant that both problems are highly co-related and therefore by trying to solve the problem from a mega sports management perspective, both problems might be solved at the same time.
For such a reason, a deep analysis has been conducted on what strategies could be followed to increase both competitive balance and uncertainty of outcome in mega
27 sports championships and leagues. The analysis is composed by seven different strategies: revenue sharing, exposure sharing, talent re-distribution, budgeting capping, regulations on technology and finally regulations on score-systems.
Revenue Sharing Having a better understanding of what concepts makes a championship or a league successful, it is also considered key for this project to define what revenue sharing mean in professional sport leagues.
Revenue sharing can be defined in sports as a way to improve competitive balance. In its most simple form, a revenue sharing system requires that the home club gives the visiting club a share of the gate revenue for each game played; this is known as “traditional revenue sharing” (Easton, S. 2002). This concept has evolved and adapted during time and can now be applied to many revenue streams such as: Media rights, commercial rights, sponsoring, etc.
It is felt that teams with larger revenues streams are able to afford more talent over the long run. According to the sports economics literature, if teams maximize their own respective profits, then the talent will keep moving in the same direction, rich will get richer and poor will get poorer. Revenue sharing would lower the marginal value of talent and therefore allow this talent to equally distribute among teams, raising competitive balance and uncertainty of outcome.
The best examples of revenue sharing are the big four American sports leagues: Major League Baseball (MLB), the National Basketball Association (NBA), the National Football League (NFL) and the National Hockey League (NHL).
Revenue sharing in the NBA addresses the inequitable circumstances between small and big markets. As a result, all teams pool their annual revenue together and redistribute it from high grossing teams to low grossing ones. By these means, each team will receive revenue equal to the salary cap that year. In order to receive the full revenue sharing benefits, the revenue structure requires small market teams to generate revenue equal to at least 70% of the league average.
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The business model generated in the NBA takes into consideration the different revenue streams like broadcast rights, advertising, merchandising and concessions. Television deal is an agreement with ESPN and Turner Sports that consist in nine years valuated in $24 billion annually. So, the salary cap is expected to increase from its current $63 million to $108 million for the 2016-17 season. Sponsorship produced a growth in the revenues. The new partnership with Nike represents a 245% annual increase from previous deals, the contract was eight years for $1 billion. Moreover, NBA have sponsors with high levels of recognitions like Pepsi, Anheuser-Busch, Gatorade…
Consequently, if we implement a revenue sharing in the business model of Moto GP we can provide more opportunities for the smaller teams. After analyze the example of NBA, a league recognized worldwide and with a high level of profits, we can say that for Moto GP can bring a raise on the competitive balance and also can generate more emotion on the Championship. Fortunately, this competitiveness will attract more people to follow them and generating more profits (merchandising - sponsors/ TV rights - media exposure) and will be beneficial for the different categories. Nevertheless, those teams which dominate the championship right now can be against as they will not have the same advantage that they have nowadays. They only difference between them and the rest of the teams will be only on the drivers, and they will lose the advantage in the materials or technologies that they can have for the simple reason of having a greater budget.
Exposure Sharing The 21st century is based on communication, be connected and especially be aware of everything that happens around us. For the same reason, the exposure sharing that we provide to the audience is so important to improve the championship.
The best example in this practice is Futbol Club Barcelona (FCB). It is world renowned Club and with fans around the globe. FCB develops a clear strategy in digitalization, as they keep their audience updates with the latest news or with the whole information related with matches, players or different activities.
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They key of the strategy is reach the audience, engage the audience and monetize the audience. They have presence in different social networks (Facebook, Instragram, Twitter…) but also, they consider the cultural aspect of their fans. “If you want to sell a sponsorship in China, and you can show a huge digital fan base on (the local microblogging site) Weibo, then it is much easier to convince the local partners”- Lee. Member of the board and director of technology for FC Barcelona. Furthermore, the team website is based on the same strategy keep in mind the fans across the globe. They don’t translate their website into nine different languages, they generate local content for local people.
At the present time, if we generate content on the different social networks we will generate more opportunities of interactions with fans. The reason is because we will create a channel of communication with them and if they have the feeling of “privilege” or “exclusivity” we can obtain more revenue through TV rights (people will be more interested on the Championship), on merchandising (they will be more likely to buy staff) and sponsoring (brands will be interested in do a deal to have exposure). As a result, Dorna can invest more effort on the digital exposure aspect. The company has its own MotoGP online store “store.motogp.com” from which they sell merchandise products from some of the top riders including Rossi, Marquez and Lorenzo. They also sell products of the MotoGP brand, Paddock Girls Fan and even MotoGP VINTAGE. However, this platform is not managed by Dorna itself; MotoGP has entrusted E-Solutions Insiteout S.L. with its online purchases, operations, technology and customer service – sector leader in e-commerce services and high-quality solutions for top, international companies. Beside this, the webpage have updated content, calendar of races, photos and everything that fans need to be informed.
Therefore, the main strategy for Dorna will be based on social media. They can follow what FCB is doing, generate content for the different types of fans that they have around the world. Another idea could be separate the different riders by their nationality and create information through the country where they are from. That way teams would be sharing their media exposure through the championship organization and hopefully sponsors would be more interested in more teams rather than not only the winning ones.
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The result of this strategy is have in mind the concept of “league thinking” as the main idea is try to achieve as many audience as is possible for the championship. If we achieve this goal we are opening a strong base for new sponsor interested in be part of the Motorcycling league and be a financial support for different teams. Exposure sharing is beneficial for both (league and teams) cause the league can have more market opportunities in different communication channels and as a result teams will have more diffusion around the world.
Talent Re-distribution The distribution of talent is due to the inequality between clubs to attract the most talented players. Generally, the big clubs with better economic position gets the best players. This effect leads to a very unequal distribution of talent, which generates a lot of difficulties, and keeps the interests of viewers low and therefore is reducing the income of the clubs.
There are many different theories related with talent re-distribution. The following fragment is related with the highest bidder in the market for talent in sports leagues by Roberto Burguet and JÛzsef S·kovics
In actual fact, this may involve complicated forms of multilateral negotiations, but -for simplicity- we model it as a collection of simultaneous sealed-bid auctions, where the clubs bid competitively for individual players. We show that this -highly decentralized- market does not lead to much additional analytical complexity, as the bidding equilibrium always leads to a single wage paid/offered to all hired units of talent. The nature of equilibrium is determined by the clubs’ demand functions. All the conceptual complications stem from the endogenous nature of these: how much a club values an extra unit of talent depends not just on its own talent level but on the distribution of talent across clubs at which we wish to evaluate this marginal effect.
Finally, we show that revenue sharing simply dampens the incentives to hire talent, with no effect on its allocation. This does not leave us without a motive for intervention though: since the clubs coordinate on bidding for the same
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players, they may compete too fiercely, even from a social welfare point of view. As revenue sharing softens the competition, it may be welfare improving.
The key to understand the theory is: The willingness to pay of a club for an additional player depends on where this player would go if they were not hired by the club
In conclusion, if Dorna implement a system based on competitive balance they should promote and encourage all the teams to have the same accessibility or opportunity to have talented riders.
For that reason, there can be a rule that said that the riders can only sing 3 years with the same team, not allowing them to renew the contract after at least 3 more years. If we encourage this change of team we will generate more accessibility to the teams for some top riders. Surely, the big team like Yamaha and Honda will be against as they invest a lot of money to obtain the best riders in their structure, but the others teams will be very satisfied as they will have access to work with many more riders. Although, we need to consider that top riders might go against of this new system, as they want to be loyal to one manufacturer during their whole sports career in the Championship and if we suggest this changes their loyalty will disappear. On the other hand some riders will be interested in that change as they will have the opportunity to learn more in the different team manufacturers. Talent redistribution is a great idea to promote competitive balance as will provide the same opportunities for teams to reach all the riders.
Moreover, during the interview with Oriol Gené he explained that Pons Racing Team look for the top riders and as they are one of the big teams in Moto 2 they have the opportunity to access to them. Despite that Gené said that the second rider normally is a young rider that is in the Spanish Championship (CEV) or in a lower category, so they encourage to create talent in young riders with less experience. Therefore, Pons Racing Team is developing talent re-distribution inside their infrastructure they have a good rider for win races but also they have a second rider that should learnt on each race. So another idea for implement the distribution of talent is have one top rider and
32 another one with less experience and teach how to improve in each Grand Prix. As a result small and big teams will have accessibility for talented riders.
Budget Capping The theory of competitive balance also consider the budgeting capping. The main point is reduce the budget of some teams or clubs to obtain revenue. This type of reduction in the budget can provide an amount of money that can be invested in different areas for example: hiring best players or obtaining the best technologies.
A clear example is the Major League Soccer (MLS). The following points were rules and regulations for the 2015 season:
The salary cap will be $3.49 million per team, not counting the extra salary of designated players.
The maximum salary for any one player is $436,250.
A designated player counts $436,250 against a team's cap. However, if a player joins his team in the middle of the season, the charge against the budget will be $218,125.
Players who are in the roster spots from 21-28 will not count against a team's cap. They will be known as off-budget players. Generation adidas players are off-budget players and not counted against the cap. Those in roster spots from 21–24 have a minimum salary of $60,000 (up from $48,500 in 2014), and slots 25–28 have a minimum salary of $50,000 (up from $36,500 in 2014). Additionally, those who earn the lowest possible league salary must be 24 or younger during the 2015 calendar year.
When a league decides to implement a salary cap is because they want to implement a method to maintain or reduce cost, and ensure parity between teams ensuring that big teams are equal as the smallest teams. In the Exhibit 21 we can see all the player salaries by clubs. The first column is the player’s current base salary and the second is characterized as annual average guaranteed compensation.
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Exhibit 21:
2016 MLS Player Salaries by Clubs
The benefit of budget capping is a good way to ensure that small teams can have acces to talent players or riders. each team will have the small power to have all players . in consequence the talent will be distributed equally so the league will be more strong and will create a powered brand for spectators.
Implementing the methodology of budget capping in Moto GP will be interesting for clubs. This strategy will be close related to talent re-distribution. The organization (Dorna) would enhance equality between big and small teams. Having a salary cap all teams must have the same opportunities for the riders that they want to hire for each season.
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By the other way, to reduce cost,budgeting capping could be apply for the over consumption. Big teams such as Honda or Yamaha have more opportunities to have more engines or interchange part, so they can change as many time they want. Therefore, if we establish a maximum of material that can be used it will be an equilibrium between big and small team. In case that some team excess this number will have a economical penalization. This sanctions can be invested in teams that have more problems to cover their budgets.
In conclusion, the idea is have equal opportunity or access to riders or equipments among teams. The budget capping for Moto GP will be based in two different areas. The first one for pilots putting a limit on their salary. Creating same opportunities to teams to have access to the best riders. The second point is based on reduction of cost. Big teams have more money to invest so they will have more material or their riders, but if the organization decides to put a limit each team will have the same advantages.
Regulations of Technology When Dorna works in the regulation is thinking in how they can promote a competitive balance between the big teams (normally the first ones in the Championship) and the smaller ones. The idea is to have more competitiveness, excitement and spectacle for the viewer. This would generate an increase in public exposure in the championship and as a result a larger number of audience and revenues.
The following are the modifications in the official regulations that together the FIM and Dorna have imposed for season 2016 – 2017:
For all categories: “Spoiler" in fairings
In the interest of security, aerodynamic appendages integrated on the fairing, must have a minimum radius 2.5 mm as an edge (Figure 6).
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Figure 6: “lateral fairings with min. radius of 2.5mm”
Ducati developed these spoilers to improve grip performance both on the curves and on the straights. In addition it gives the pilot an easier and softer braking. Different teams saw the competitive advantage that they were generating and decided to implement the same spoilers in their aerodynamics. For that reason, the organization wants to provide the same opportunities for all the teams in the grid.
In terms of tires, Michelin will be the sole supplier for the 2017 season. During the whole weekend the tires suppliers provide a range of 3 types of wheels to use in the free practice and the race on Sunday. In 2016, the Open Category was the most privileged in using the soft tires but now they want to offer the same wheel for everyone. Offering the possibility to have the same opportunities to be in the front row or, have the same problems that the others.
Electronics: computers use a single unit with the same software for all teams developed by the Italian company Magneti Marelli, for that reason the teams will be unable to develop their own software. In fact, any change in the software must have the unanimous approval of the Honda, Yamaha and Ducati manufacturers as well as the organizer of the World Championship.
In the past, the big manufactures like Honda and Yamaha had more opportunities to invest in the most innovative technologies and implement the best software on their
36 motorbikes; both were the only ones in winning races. The new regulation wants to present a solution for the teams that have less profit and are competitive. The single software will benefit manufacturers with lower access to resources like Suzuki or Aprilia whose chances to be in the front of a race or win will increase. By generating more opportunities for this smaller teams, in a proximate future their will experience an increase on their revenues, providing more resources to invest in innovations for their bikes and finally an overall increase in performance for the Championship.
Every team will have access to seven engines per season. However, we must take into account the points’ system concession. That is, when a manufacturer reaches 6 points, loses the ability to perform unlimited test and the use of official drivers for these tests, going to have five-day test and only with test pilots. The same happens at that time they will stop with the engine development. For the teams that do not meet those 6 points, the number of engines are nine per season and have the possibility to make changes to the engine during the season, this way the teams who are slower in development (usually due to their lack of resources) have more opportunities to catch up with the teams who thanks to their great technologies and staff can achieve great results in smaller periods of time.
The maximum fuel becomes 22 liters and the minimum weight of the bikes will be 157 kg. Both changes are designed to have “similar” bikes on the grid, and that all teams have “same” materials and opportunities, trying to stress the importance of the riders, who will be responsible to generate the difference among their rivals.
Those kinds of modifications in the regulations of the FIM MotoGP World Championship that are based on the bikes and its technologies are something that has been tried before and in general it has not worked as expected back in history. This is the reason why it is considered important to complement those technical modifications with managerial ones. If the organization works to create more equality between categories, this could bring an increase of interest in Moto2 and Moto 3 races.
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Regulations on Score-system The score system in Moto GP is divided in two different modalities: Riders and Constructors (manufacturers). The punctuation system for riders is based on the points gained in each race. The scale of those points is reflected in the following table (Exhibit 22):
Exhibit 22:
Table of points per Grand Prix:
The Constructor Championship is only the highest placed of a given manufacturer will gain points, according to the position in the race.
In the event of a tie in the number of points, the final positions will be decided on the basis of the number of best results (number of first places, number of second places etc.). In the event that there is still a tie then, the date in the Championship at which the highest place was achieved will be taken into account with precedence going to the latest result.
The problem with this system is that big teams will always have more opportunities to be in the first part of the punctuation as they have more technology and resources to
38 win races. For that reason the ideas to generate same opportunities for all teams is conducted through a new system of free practice and qualify sessions.
After analyze different options these are the best ones. First idea is make two rounds of racing. The first round with the classification obtained during training and, the second round in reverse, so the last in the first race now turns to be the first one with the pole position.
Another option could be based on social networks. Fans could decide some positions of the starting grid. This system would generate more participation in the official social media, generating a growth in people interested in the championship. It is a risky option but can generate recognition around the globe as will be a very innovative system. However, there will be some riders against this option but the strategy to be followed by the riders is to gain the confidence of the viewer to get the best starting positions. This will allow pilots to know the opinion that the viewers have of them.
Even so, these options need to be tested before; there can be some changes or some new ideas to be implemented in order to try to have a competitive balance among the riders and team participating in the Motorcycling World Championship.
CONCLUSION To conclude this management, we would like to propose a hybrid system that would take the best part of each of those strategies previously analyzed. Thanks to such a system, it is believed, that both competitive balance and uncertainty of outcome will boost. Therefore the overall championship levels of audience and income will increase as well and at the same time small teams access to resources will also raise.
Final proposal First of all we think revenue sharing is key for the development of such a strategy, the way we would implement it is by stablishing a system pretty similar as NBA. Average annual team revenue must be developed and all teams over that average will have to donate a percentage of the part exceeding the average to a “pool”, teams that want to participate on the championship will have to at least generate 70% of that average revenue. Those revenues will come from any source of income including, sponsorship
39 deals, winning prizes, merchandising, etc. The money accumulated on the “pool” will be proportionally distributed to those teams with more economic needs.
In terms of exposure sharing, Dorna will have the responsibility to co-work with all teams from all categories to compensate the media exposure that winning teams are receiving during race time. The best way to do that is generating social media content for each specific country talking and showing their local pilots. Also by generating local events off-championship like dirt track races, supermotard, or even bike driving courses. This way all teams will gain media exposure and more sponsors will be interested in signing contracts with them.
A big topic in the field of competitive balance is talent re-distribution. It will be very important and helpful for the Championship that the flow of talent accelerates and more teams have access to all kind of riders. To do so we propose a new Championship legislation that states that a rider cannot sing contracts with teams for longer than three year and that they cannot renew such a contract after three more years of the expire date. Such a rule will benefit the championship by allowing more teams to have access to more pilots, also pilots will have to demonstrate more skills as they will ride many different bikes and therefore uncertainty of outcome will increase as well.
To continue in the same direction, money is one of the greatest issues when talking about competitive balance, it is hard when budgets in the same championship are so different for the teams. Budgeting capping is considered a great solution; the way it should be implemented is by stablishing economic sanctions for those teams which act disrespectfully and also for the ones which overconsume resources (engines, tires, etc). That money will directly go to the revenue sharing “pool” to be redistributed at the end of the season.
Regulations on technology also help improve competitive balance because it equals the levels at which bikes perform, the strategy that the championship is already following is the one that must go on such as making every team use the same telemetry software or same tire manufacturer.
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Last but not least come regulations on score systems; this part might be the one more innovative from our proposal. Firstly we would add a second round race at each category where all positions from the first race will be reversed, so last pilot on first race would be the first one on second race. More in the long run we also see an opportunity on social media, brining spectators as part of the championship. With a system develop through social media; fans could have the opportunity to help pilots gain positions on the grid. This is a totally new concept that might bring more competitive balance and at the same time can create a huge crowd excitement and all fans would definitely feel part of the Gran Prixes.
Implementation Plan It is well known that changes do not happen from one day to another, specially big changes like the ones proposed on our competitive balance strategy plan. For such a reason an implementation plan has been developed (Exhibit 23). It will take 3 entire seasons to implement the whole strategy, 2017-2019.
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Exhibit 23: Implementation plan
November 2016 Overall Strategy Plan Proposal Team Development (2 from each department) Regulations on Technology proposal Regulations on Technology communication
January 2017 Regulations on Technology implementation Revenue Sharing (RS) plan development Budgeting Capping (BC) plan development Exposure Sharing plan (ES) development
November 2017 KPIs Analysis & Report RS, BC & ES plan proposal RS, BC & ES approval and communication
January 2018 RS, BC & ES implementation
Talent Re-distribution (TR) plan development Regulation on Score systems(RS) plan development
November 2018 KPIs Analysis & Report
TR & RS plan approval TR & RS plan communication
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January 2019 TR plan Implementation RS plan implementation KPIs Analysis & Report (end of season)
November 2019
Final Report, Evaluation of KPIs Development of new strategies
Key Performance Indicators Finally, to ensure that the project is producing real value for the championship, it is necessary to find a way to measure its performance, which is the reason we have identified the following Key Performance Indicators (KPIS):
Number of TV paid subscribers Number of live ticketing sales Traffic increase in 2.0 communication channel (Web, APP & Social Media) Number of sponsors per team Equal distribution of podiums & pole positions
In conclusion, we believe that by implementing our proposed strategy, Dorna will build a sustainable future for the championship. Working on creating a more competitive balance competition among teams, which will increase crowd excitement and therefor will directly impact the economic development of pilots, teams and finally the championship.
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REFERENCES About the FIM: FIM Website (2015) Online (November 2015)
Cobbs, Joe (2012). Facilitating Sponsorship Channels in the Business Model of Motorsports
Diario Vasco. (2012) Arguiñano-Ginés Racing, nuevo equipo en el Mundial de Moto 2 (Online, December 2015)
Dorna. (2015) Dorna: The Company (Online, November 2015)
Easton, S. and Rockerbie, D. (2002). Revenue Sharing, Conjectures and Scarce Talent in a Sports League Model
El Liberal. (2014). El presupuesto más bajo para competir en MotoGP ronda los $ 67.5 millones y el más alto, trepa hasta los $ 560 millones (ONLINE, February 2016)
Forrest D. and Simmons R. (2002). Outcome uncertainty and attendance demand in sport: the case of English soccer
Gerrard, B. (2004). Still Up for Grabs? Maintaining the Sporting and Financial Viability of European Club Soccer.
IESE Business School, University of Navarra. (2010) Dorna Sports SL: Managing the MotoGP World Championship
Inside MotoGP: History (2015) History of MotoGP (Online, November 2015)
Interview to Enric Rojas (2015), Annex 2
Interview to Marc Saurina (2015), Annex 3
Interview to Oriol Gené (2015), Annex 4
Interview to Iker Burutxaga (2016), Annex 5
Rahim, Syarizal & Wahab, Norailis (2013). Motorsports Management: Opportunitiesm Issues and Challenges
Rondonuwu, Christin (2015). Analyzing the influence of attitude towards sponsor and sponsorship awareness to purchase intention in manado (case study: MotoGP)
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Stefan Késenne, (2014). The Economic Theory of Professional Team Sports: An analytical Treatment.
Syzmanski, S. (2001). Income Inequality, Competitive Balance and the Attractiveness of Team Sports: Some Evidence and a Natural Experiment from English Soccer.
Zimbalist, A. (2003a). Competitive Balance Conundrums: Journal of Sports Economics.
Zimbalist, A. (2003b). Sport as Business. Oxford Review of Economic Policy.
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ANNEXES
1. Competitive Balance & Uncertainty of Outcome definition Competitive balance is a frequently used term in the literature of business and economics of professional team sports. However, it is hard to find a very unique definition of competitive balance in this literature:
“I believe that competitive balance is a complex phenomenon, that it has many dimensions” (Zimbalist, 2003a)
“Competitive balance has become a catchall for the different aspects of outcome uncertainty and contest significance” (Gerrard, 2004).
In general the main description of the concept competitive balance takes into account relative quality in one form or another, but different experts in the field describe competitive balance from two different perspectives:
On one hand, there is literature that has explicitly considered the expression of competitive balance to be related to expectation of the future, Szymanski (2001) claims that competitive balance has to do with the expectation of who will be the winner. The competitive balance of a league would then be based on a priori information about the strength of the teams in a championship.
On the other hand, there is the a posteriori perspective, which is the governing idea in the literature and defines competitive balance as follows: “Competitive balance is the distribution of sporting quality between the teams in a league/tournament.” (Gerrard, 2004) Meaning by sporting quality the output of points scored or win percent achieved by teams in a championship or league.
As a common definition we could conclude that competitive balance is both about expectations based on teams’ strengths and their final results after competing against each other, assuming that a championship with proper competitive balance would be one in which resources, chances to win and actual victories are more or less equally distributed among its participants/teams.
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Again uncertainty of outcome is a key expression in the business and economics of team sports. According to Forrest and Simmons (2002) the concept is defined as follows: “meant a situation where a given contest within a league structure has a degree of unpredictability about the result and, by extension, that the competition as a whole does not have a pre-determined winner at the outset of the competition”. In other words, uncertainty of outcome means that fans/spectators cannot certainly predict what the results for the game/race will be.
This concept can be applied in the short, mid and long-term. As an example for MotoGP FIM World Championship, uncertainty of outcome in the short term would be not being able to predict who would get the pole position; midterm would be not knowing who would win the race for that specific weekend and finally long term would be about not being able to certainly predict who would win the championship at the end of the season.
2. Interview to Enric Rojas What is the relationship between Dorna and IMG?
Dorna has all the rights of organize and commercialization of the Championship until 2038. Dorna and FIM (Federation) sells the commercial rights. For example, they find promoters who wants to held a Grand Prix. The promote takes benefits for the ticketing and Dorna obtains the return based on the TV rights, title sponsors… Their main objective is commercialize everything around of each of the grand prix of the World Championship
The three main points in the commercial activities are:
- The amount of money that promoters pay to hold a GP - TV rights - Marketing plan for each GP
Dorna manage these rights on their own, they do not use third parties. Although, there are some cases that works with an agency like IMG. This agency started working with them 7 years ago and their contract finish in 5 years. In some countries they do not
47 need help like in Spain, but there are others like Italy that the partnership between Dorna and IMG was a key to do business related with the rights TV.
Dorna and IMG work together but the last decision is for Dorna. The organization wants to have a continue relationship with the broadcasters. The main goal is the growth of the out, increase promotion, increase public interested in the product that they deliver…For that reason, they have a direct and constant relationship with TV producers. Furthermore, IMG needs to be always working with them. Normally, the department of media of IMG are in all the grand Prix guiding the clients and showing how they work during the event.
Dorna created an exclusive final output, they invested a huge amount of money to have the same producers in all the countries. Is a team of 180 employees that travel around the globe offering the same product in each Grand Prix. The great successful is due to the importance that they saw in the TV rights for the motorsport industry.
Dorna have two mobile units. The first one has all the cameras on track and the other one is to send the best image. The producer director decide which image they can use and when they can put it, and it is the content that they send to the different TV channels. There are some TV channels like Telecinco or Movistar that have a team on site, so they have the opportunity to add interview in the international program. What they can do is ad content to the international program, but never manipulate it. The best idea is being on site in each Grand prix to have a complete program.
Dorna manage or regularized the sponsors?
The mobile unit has two personas that are in charged in exclusive to compute how many time and how long appears the different the sponsors (the team sponsors, the riders sponsor or the Title sponsors). For example, if some riders are at the end in the race, these two guys said: take care as those sponsors didn’t have exposure on TV. So they decide to show what this rider is doing. This technique is very important for small teams as they will not have the same TV exposure that then top riders, and Dorna is offering the same opportunities for each team and brand.
Dorna give money to the teams?
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Each team obtain some money to participate in the Championship. Normally, the cost are bigger than this budget provided for the organization, but always are a prize money for the ones that win the race. Although is not enough to cover cost and teams need to look for personal sponsors.
Dorna can help in the research of sponsors but they are not required to do it. There are some times that they search an opportunity and they suggest this sponsor to some team. For example, when the contract with Movistar was signed, Dorna knew that Yamaha team was looking for a sponsor. So, in the negotiations, Dorna offer the idea to Movistar to invest money in the Championship. The final deal was that Movistar had the TV rights, but Movistar provide the sponsor for Yamaha and a title sponsor in the Aragon GP.
Is Dorna involved in the research for sponsors?
No, they do not. Dorna does not run on manage teams. Sometimes Dorna complains that a driver win a lot of money and said that this is a problem as they are doing an unsustainable project. The organization encourage that Moto 3 and Moto2 are stages to growth, so they do not see appropriate that the riders in these categories had a huge salary.
What is your opinion with the new names in the categories?
At the begging was complicated, but actually I see it like a good decision. The Championship has the name of the maximum category and Moto 3 and Moto 2 looks like a growing stage until arrive to the top category. Furthermore, the changes in the name were beneficial for selling the commercial aspects as they did a strong brand.
3. Interview to Marc Saurina, Marketing Director of SuperBike World Championship Dorna is based in three areas:
- Races - TV rights - Exploitations of commercial rights
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The department of media is based in TV rights and, the exploitation of commercial rights and social media. Some years ago, there was not someone exclusive on media in charge of these rights but, now Dorna is more focused on the exploitation of it and devote more importance on it. The online channel has more power than others.
Which function Dorna has?
Dorna sports is an international sports management, marketing and media company. Their main activities are: events, TV content & production, media sales, new media , communication & PR, timing & data processing, marketing, corporate hospitality, licensing, sponsoring and operations.
If some company is interested in working with us we elaborate a proposal with the whole activities that can do a sponsor.
There are any difference between Moto GP and Superbikes?
No, there is no difference. All that has been done is the elaborate the differences among Championships, because the positioning of the products are different. Moto GP have more access to sponsors as their brand is world recognized. In contrast Superbikes started with 135 companies interested in sponsoring but only finished with 8 sponsors.
The first year, superbikes did a good economic proposition for brands but conditioned that if there was growing brands will pay more. There are brands that accepted and others not, but worked very well and now they are creating a strong brand (Superbikes)
How proposal of exposure works?
We hire an agency and they do the calculation to put an economical value for the exposure. It depends on how much time each brand appears on TV. This analysis is very helpfully for team to know the value of exposure that their brand has on the audience.
The most important is the exposure value. The price is related with companies so each sponsors though a formula decided the monetary value. The downside is that only
50 calculates the value of the logo but the experience of being in a Grand Prix and have that exposure is incalculable. Someone who does not like races will pay less but someone who is interested on it would pay enough money to become a sponsor and being part of a GP. Furthermore, the value depends if the race is in live or redefined; and if is a sport program or news programs.
The proposal should be clear because the ones that take the final decision are not in the first meeting. The proposal reflects how many times the logo appears in each of the supports (fences, motorbikes, riders). Actually, it is also done online because is increasing the presence on these channels. The Offline proposal is based on the experience that you can have on the races, in contrast online is more based on numbers.
How Dorna selects sponsors?
There are several criteria to get a sponsor. You need to search for companies that are legal or correct and, do not have any conflict with brands that have exclusivity by contract. It examines whether there are brands or sector growing. Also we can generate some contact with agencies that have clients who want to participate in the Championship. The main strategy is following trends on the market.
4. Interview to Oriol Gene, Marketing Manager at Pons Racing How do you get sponsors?
We are a top team that bet for talent and good drivers. Our philosophy is to find sponsors who share our values (effort, sacrifice). The main idea is achieve brands that share our values. In some cases, the research is reciprocal. Sometimes, brands come to our team to say that they are interested in be part of our project, or the other case, the team is interested in the sponsor and we offer to them different proposals of sponsorships.
How does the proposal of sponsorship works?
The main idea of these proposals is offering added value for brands. Our team has a strong added value that other teams do not have and for that reason we have more sponsors than others. We not sell only the teams, we offer different activities with
51 riders like photo shoot with sponsors, ads… that offer more value for the sponsor brand.
How do you search sponsors?
We list companies that can be interesting for us. Typically are Spanish brand because we are a Spanish team and, also are brands linked in the sector. For example, HP takes seven years working with us and we share the same philosophy. As a sponsor, HP collaborates providing laptops for engineers.
The process that we follow to know how many brand we need for each season is studying the budget that we need to cover for the whole year. The next step is divide the motorbike in parts in order to see the ones that have more visibility on TV as will be the most expensive areas. This exposure study is provided by IRTA. Depending on how many times will be these parts reflected on TV sponsors will pay more or less quantity for being on the motorbike.
Some teams decided to divide the bike in more pieces to have more sponsors and cover their budget. Our team has big spaces on the motorbike and for that reason we had less sponsors, but with the quantity that we have is enough to cover the budget.
Do you present investment-returns numbers for sponsors?
Yes, we do. It is a key part to offer the added value. The sport project is the most decisive point. One of the most important things is who the rider is. If you have an experience rider like Alex Rins the sponsor will be more interested in invest in the project, but if you have a rider like Edgar Pons that comes from the Spanish Championship (CEV) will have less interest.
Is it Social Media important for sponsors?
It is important because social media is a new channel of communication. The sponsor ask to have access to the riders and teams accounts so they will have a way to reach public. On the riders contracts, they have some clauses where puts how many tweets they need to write for their sponsors.
How has social networks evolved?
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It has changed the way you communicate to your audience. Moto GP has had to share exclusive content and be updated. I think this is the secret. Every team can offer different content to their followers. For that reason, the sponsor’s brands will want to use the social networks of the team and riders as they will have more exposure on their target audience. Social media means huge exposure since all of us go with mobile everywhere. The strategy for sponsor’s brands is adding unique value that can only be spread by social networks.
The plan is organize what you want to put on the riders’ social networks in order to promote what the teams wants. The most commonly used are Twitter and Instagram. Facebook falls a little behind. Twitter is the most important as you can share information, videos, photos or whatever you want.
We do not pay attention on the number of followers because we know that will be increasing if we share exclusive content. Sometimes we see that there are hooligan fans and brands are not interested on them because they will not buy anything related with the brand, but what matters is that these followers are big fans so they will be interested in buying everything they have the pilot.
5. Interview to Iker Burutxaga, Team Manager of AGR Team When the season begins, how you plan it?
As a team we plan to continue growing. At the level of structure and results, the idea is to getting a little better than the previous year. For example this year is the year that we have more bikes. We have 2 bikes in the World Championship and 2 bikes in the CEV (Spanish Championship) . Every time we are strengthening more. The most important thing is to have good results and have the economic side covered. So, earlier this year, we tried to close the budget with sponsors, although it is quite complicated and sometimes has lengthens during the year and, we must continue looking for sponsors.
Do you establish clear objectives? Such as a number of sponsors.
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The number of sponsors depends in covering the budget, which is always based on the previous year. Karlos Arguiñano and his partners, who are those who have invested in this project, are because they feel passion and love for this sport, but they do not see it for business because they have spent many years on TV. They do not see it as a business to make money but they do not want to become a hole full of lost. So, what we do is a budget basing on the previous year and the main objective is try to cover it as soon as possible.
The sporty growth you plan as a team also means an increase in costs and business activities. How you plan it?
This is all closely linked. The economic aspect and the sportive aspect is related. The most competitive team will have more ability to reach to new sponsors or, attempt to sell their product because it will have more minutes on TV. We try to improve everything, mechanism, sports aspects ... It is true that it is always more investment than revenues, but hopefully not impacts us so much. We renew materials but we always try to be in the margins.
Which steps do you follow for your commercial activities?
As our image is linked to Karlos Arguiñano, we have all related with the companies that reach Karlos through his TV program (Bainet).
Do you have the same strategy in the CEV than for the World Championship?
It is all inclusive. It is a pack. Our team proposes some ideas of sponsoring for the World Championship and be on the CEV is a plus option because the Spanish Championship has little TV appearance and few advertising campaigns.
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FUTURE STUDIES
ORGANIZATIONAL MANAGEMENT This management system is based on transparency and building trust. The idea is encourage and support workers as they are the ones that provide value for the firm. The most important aspects are believe in challenges and create vision for employees aligned with the company. In that way you are creating confidence in your employees and they will be working hardest to try to achieve those goals. You are giving the opportunity to be part of the business and this idea will create a loyalty between them. If company and employees work together the resources and client satisfaction will be double, as you are putting all your effort in the same way to try to achieve your objectives. So the firm will grow faster as you will have a good communication inside whole departments and this will give the opportunity to have a good problem solving. When managers believe in yourself or make a jump of faith in you, you will be more enthusiastic in working for them and you will try to obtain revenues, resources, client satisfaction… whatever company need. Because employee will feel as an important person for the company, not only an individual that works for them. Concluding, if businesses give confidence and let workers to show their opinions and values to improve, they will be interested in work as hard as possible to growth faster than competitors and the best evaluated company in their market sector. Nowadays, people have no motivation to work; they only look at the monetary part. To implement this system managers need to reinforce the motivation of employees. Tell them that failure is important for future success.
They need to follow the 3 questions that Vineet Nayar said:
- What business we are in? understand the business firm and create a unique experience for customers. - Who will create the unique experience? customers and employees. - Which is the need to be role in the company? enforce employees
These are the base of what a company need to have clear to develop this system. Is a hard management based on discipline. If managers train employees they will have more opportunities to achieve their vision.
Actually, customers don’t trust in seller. So if companies understand the needs and the problems with transparency they will provide trust. Also, if you as a manager create a good relationship between employee and management you will provide transparency. The management’s role is to enthuse, encourage and enable staff to build differentiated value for the firm.
Finally, when customers see this relationship and implication of the workers will be more interested to buy in this company. In 21st century, we have very high levels of competitions, so trying to implement “employees first, customer second” will provide an extra value for those companies.
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SOCIAL CHANGE – SUSTAINABLE DEVELOPMENT In the 21st century there are still people who have no awareness of sustainable development and do not realize that the hardest hit will be for us in the coming years. We are a society that moves in crowds. We need to create a movement of awareness to show what is happening in the world: climate change, mortality levels, pollution, and lack of food in developing countries....
The two ideas that appear on the video are:
- Understand how complicated is the world trying to fit together economical, social, environmental, political and cultural aspects. - Find sensible goals for crowd o Ethical approach o Social inclusion
As an individual my “mission” is try to understand what is going on in our society and makes some types of activities to improve the lifestyle of people. Most of the young people are the ones that are protesting to have better conditions on the jobs, claiming trust to governments, complaining to industries about pollution… We need to support those ideas because as video said “there’s not just one pocket of prosperity in a sea of poverty”. With that sentence I understand that we need to fight together and go in the same way to achieve a sustainable development and have a better future for the 7 billion of population that we are across the world.
As a business student, I know that the communication is one of the most important tool. We need to take some advantage from that and diffuse a massive message: if we are aware of sustainable development we can increase economically, increase our healthcare, reduce mortality… Some points to consider are: Reduction in emission in energy (use solar panels to take profit of that power of light), economical transportation (use electric cars, go to places walking instead of using a car…) and reduction in consumption (recycling papers, purchase durable goods…). These are some challenges that we can do to have a sustainable development and create a “healthy” environment around us.
In my case, when I finish my degree I want to work in sport sector, in particular motorcycling. I am aware that this sport polluter but maybe in a future can be some types of engines that reduce this impact on the environment. Another solution can be create a championship of green races with motorbikes that rides with electricity. But to arrive until this point we need to start working on how will impact in the different fields (economic, social, cultural…) of the society. I mean, this will be a huge investment so will be harmful for the economy so maybe we can have some problem.
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In conclusion, when society take care of what they do in the environment and the negative impact that have in our life, some chip will be connected and they will be more responsible to try to obtain a sustainable development. This is very important fact that we need to try to make happen together.
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THE ECONOMIC RISE OF AFRICA The economy is rising in almost every part of the world. We can see that some countries spend more years working in improvements than others but at the end they are in the same position.
The countries that we use to compare are United States and China. They are the largest power potential in the world but Africa is growing up faster than expected.
The majority of us think that Africa has a high number of poverty. The problem is that we don’t think that they are 54 countries and they have places with huge amount of knowledge and resources to increase their economies. Normally, we only pay attention to those countries that are in civil wars or have diseases, and we forget those that have potential to create opportunities and invest on their ideas.
Africa has entrepreneurship but is less regulated so their ideas don’t have the same opportunities that can have in Spain or in other part of Europe. Their ideas are creative, active… that their main focus is trying to create healthcare to the country. For example, new application for agriculture to know if they are working in good conditions and they are not wasting resources. They have good leaderships that want to highlight their idea in order to create new opportunities and with that create a new way of investment in their countries.
Their main trouble is that he government and institutions are working with FMI and World Bank directly, instead of asking the citizens of their needs and wants. So they are not giving support to entrepreneurship as they are only looking for their own interest than in a general interest. At that point is when corruption appears.
Also, they are rising in young people so they will maintain people that can be working on generating ideas to improve their lifestyle. Technologies can help at that point so they will have a decreasing cost and increasing adoption. These will be useful for them as they will not spend as much of resources and will be working efficiently. The result, in a long time, will be a strong economy with same opportunities than other markets.
When we think on Africa the first think that pops-up is invest in medicines and provide food for them, but now they also need to think is invest in education. In a video we have a clear explanation: Nobody gets out of poverty with food and medicine, but they can do with education. Other idea is working in cooperation, take out the barriers of transportation, have free trades and bring new technologies for them. These will generate new opportunities to increase economically and help on prosperity.
In conclusion, globalization is very important to have prosperity and help other countries like Africa to have same opportunities than the developed countries such as
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China and United States. African people have knowledge and resources, the only thing that they need are someone who invest on them and give the opportunity to show to the rest of the word their ideas. The most important is invested on that to try to eliminate their poverty.
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MARKETING AND THE NEXT GENERATION All of the trends are really important to consider for changes, as Gen Z are very different than Gen Y. But the ones that I select are:
Rally or renegades and rebels this generation want to have risk and break the system that we have now to turn it to more exiting. They have a vision and they will do everything to have success. They will skip conventional rules and will rewrite it. Is very important as we need to be entrepreneur as that market is very strong and plenty of opportunities.
Flaunting failures is very important to learn from our mistakes because is the way to evolve and have more opportunity to have success. As I said before we have a huge number of entrepreneurs, they fail a lot but if they are perseverant they can achieve the success. Gen Z is realistic but they fight for achieve their goals and improve the world.
Expanding “next of kin” they don’t have the concept of nuclear family, their concept of family adapt, expand and evolves in the most personal way. Generation Z don’t are traditional and don’t pay attention to those thinks, they look to more important problems like wars, recession…
First of all, we need to know what is Gen Z. Generation Z are those people who born in 1990 until 2010, but some people said that the first one were in 1996 when Google born. So they don’t have a specific data although the normal one is from 1990 until 2010. Those children grew up with technologies with continuous connectivity, communication and access to information, ideas…For that reason; they are more realistic instead of optimistic.
They are the first global generation. We can see that the world is more homogenous we are using products or service around the world like Facebook that is available to 70 languages. Generation Z see the value of brands, they consider to pay for some services that can increase value to their interest or in their daily life. Other important characteristics to be concerns of are: connected, multi-tasking and worried about the situation (wars, recession, crisis…).
As they have a different perspective of how to visualize a problem, we need to change our marketing strategies.
- Catch their attention quickly: give a clear idea of what is going and then when you have their attention explain the details. We have a lot of information and we need to summarize why we are more important of the others. - Speed up communication: generation Z cares about how quickly you are to respond their questions. If they see that a brand listen their comments and
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then answer or share feedback, they will be more confident to use that brand. They will think that this brand is close to their problems and really cares for them. - Try to create a campaign that people will want to share: If they share your work is because they think is honest and has credibility. If people start sharing you can be viral and get more market for your product or service.
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THE BEST WAY TO PREDICT THE FUTURE Affecting 1 billion lives in 10 years
Poverty means not having opportunity to live a long life, be healthy, creative and enjoy freedom and dignity. There can be various causes of the problem as political problems, natural disasters...
Poverty affects a quarter of the population of the developing world. Countries like South Africa and Southern Asia have a more widespread poverty. Although the percentage of people with this problem has increased in recent years.
I would like to invest in some ideas that can provide some program to reduce those levels of poverty and, also, convince the developed countries about the repercussion of their actions.
Current solutions
There are organizations, movements and NGO’s that are helping to convert that problem into a global benefit. One clear example is The World Bank Group that is helping governments to improve the investment in their environment and attracting higher levels of private investment. Last year, the International Finance Corporation (IFC), the Bank Group institution focused on the private sector invested a record US $ 20,400 million in 103 developing countries, which provided 2.5 million jobs. The profitability of these investments has been extraordinary. The average annual return on investment of IFC in equity worldwide in the last 15 years has been 20%.
Why is it so difficult to solve?
The problem is that currently 20% of the rich population consumes 80% of global resources bringing thousands of people into extreme poverty and destroying the environment.
In addition, the lack of political will and pressure from the elitist societies, affect the decision making to improve or solve this problem through government decisions, in order to try to end with the social inequality.
What has to be done?
There are two main points to consider:
- Ending inequality. There are many programs that had built in places where poverty was less, so we need to be focused in those places that have an extreme poverty. Therefore, it is important to work on those people more affected by it or that have a worse poverty as could be women, disabled, ethnic minorities, tribes or castes.
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- Set limits on extracted resources from countries with a high level of poverty. Putting a limit of people/ organizations/ governments that can exploit the resources of these countries, in this way would be reduced the local poverty. Therefore the main idea would be to manage the own natural resources of those countries.
The X Prize
The X Prize that would solve the problem would have the ultimate goal of finding a solution to decrease the World poverty levels below of 7% in 5 years, and 3% in 2030. The solution can be in form of investment in that countries, hire people affected by poverty to boost their economies or encourage companies to open new firms or factories/stores in these countries.
The World Bank Group will provide support to everyone interested in helping to reduce the poverty problem worldwide.
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