Herve Poncharal Marathon Interview Part 3 - How Tobacco Made MotoGP Too Expensive

After talking about the rookie rule in part 1 of our interview with Herve Poncharal, and the necessity of cost-cutting in part 2, in today's episode, the Tech 3 team boss turns his attention to the question of sponsorship. Along the way, we cover the question of how tobacco sponsorship nearly put MotoGP out of business, how many riders are paid too much, and how MotoGP can benefit potential sponsors. The series will conclude tomorrow, when Poncharal will talk about James Toseland, the 800s, and Ben Spies.

MGPM: One of the other things I've written about is the fact that MotoGP's expensive, but there's two ways you deal with that expense: you either cut costs or you raise more money.

HP: Absolutely, this is what I wanted to tell you. Clearly now we are too expensive, but as you say, what does it mean, too expensive? We are too expensive in the economic environment we are in, I think. I lived through the time that we saw the tobacco industry investing in motorsport. And because of their investment and because there were more tobacco brands than teams, you know, they created a really big inflation in all departments. The factories understood they could make some money and lease the bike at a more expensive price, and it went up. But it was not too expensive, because we could afford it! So I understood that if this (lifts up cellphone) costs 1 euro and you can't afford it, it's too expensive; if it costs 100 euro and you think it's cheap, then it's cheap. So, the riders took advantage of course, because there was a battle to get the big advantage. So everything went up, the mechanics, the travel, some of the teams were flying business, you know, it was very expensive, but nobody complained, because at the end of the day, you know...

MGPM: Tobacco paid...

HP: Exactly. And when the tobacco industry left, whaa! We found ourselves with the tobacco costs, let's call it like this, but without the tobacco support. And we understood, and we understand still, it's impossible to match that cost. So even before the credit crunch, for me, we are too expensive! You know, we were already too expensive, it's not only because of the crisis we are going through now, that we are too expensive. OK, this is even more obvious now. But even before you could see, what's the point being that expensive?

Anyway, we clearly have to reduce our costs, because I have some new companies that have been joining me, but they are not like Phillip Morris, or Altadis or Lucky Strike, the sponsors I have had in the past. You know, energy drinks are clearly the new product that will be more and more involved in here, but, they are not ready to spend the same amount of money. And then we have a lot of small companies helping us, but altogether we have to reduce the costs, so we are working on that.

Of course, we keep talking about the costs of the technical support, but there is another big expense in a team, and that is the riders. The riders were paid crazy amounts. And I think you don't have to have a rule for this, you have the market. I think the riders that are coming to the end with the contract in '09, my feeling is most of them - apart from Lorenzo or somebody like this, apart from the Untouchables - it will be 50, 60, 70% down. That will be a big, big saving. We always talk about the bike, but the riders department is sometimes bigger than the cost of the bike. On that point for sure we will reduce a lot. On the other expense which is the structure, which includes the salaries, the traveling, we are already bottom line. So, with the two, if we can have a good reduction, 30, 40% on the technical costs and 50, 60% on the riders, for sure we can have it cheaper.

And if we are cheaper, we will have the possibility to have more sponsorship, because at the moment, when you look for 3, 4, 5 million, it's almost impossible. But if you can sell your team for 1, 2 million, this will open you a lot of doors which you can't open now, because what's the point of offering a title sponsorship for 1.5 million when your team is costing 8 million? You can't make it. So if we are cheaper for sure it will help us to have more company having access and maybe spending more in the future, but the entry ticket should be a lot lower.

And I really believe that we need maybe to have more races on the calendar. Because, you know, if you look at Dorna, Dorna has three income streams at the moment: Sponsors: pzzt (makes "going down" gesture), like everybody, down. Then the second is TV rights. Fortunately, they signed some really good TV rights deals for 5 years. But still, they can be optimistic that when they renew they can keep the same costs, because the TV audience is very good. And most of the countries are up. Organizers: this year, we had a record crowd in Jerez, record crowd in France, record crowd in Assen, I think record in Germany last week too. So we were a little bit down in Mugello, a little bit down - I think 15% - in Laguna, but they were expecting [it to be down] much more, so we still have the two main forms of income. So it means racing is still popular, and although people are struggling, I was hearing the first figures of the auction for Riders for Health and it was incredible. You have a lot of people in the paddock too. Our merchandising is selling really well, so it means even though people are struggling, they can afford it or they are making sacrifices to come to buy a race ticket. And they are buying while they are at the track, they buy a jacket, James Toseland jacket or Valentino Rossi hat or something like that, so there is still an interest for our product which is good.

So when you see this, and when you know the amount of requests Carmelo Ezpeleta is having for new Grand Prix, then I think clearly, we've been reducing already quite a lot the winter tests, and we don't really need to have too many winter tests, but if we can have two more Grand Prix, why not? And if it's countries or organizers who want to spend a lot of money to have it, then why not?

MGPM: Abu Dhabi? That sort of place?

HP: Why not? I don't know, this is in the hands of Carmelo, but we have a lot of countries, in Asia.

MGPM: One of the things that I've never understood is that Formula One teams can get 200 - 300 million in sponsorship, and the TV viewing figures are maybe 20, 30% better than MotoGP, and yet it's impossible for MotoGP teams to raise 10 million. Do you think Dorna has a role in trying to get more sponsors for MotoGP teams, or are they just having problems getting their own sponsors?

HP: No, no. They are working, they have a big marketing department which is working very hard. They are also working to help the independent teams. So we have access to their marketing team and they are helping us. And most of the time when there is a sponsor that has an interest to support the championship, they are telling them "We have an interest only if you are also willing to help one of the independent MotoGP teams." So clearly, they are working. But it's not easy, within this economic environment at the moment.

But why is Formula One so much more expensive and with TV figures and even spectator attendance? Because, we were I think bigger than them in Barcelona. Clearly in Germany we are much bigger, although they have BMW, Mercedes, you know, all the German brands. But I think the car industry is so much bigger worldwide, they have some communications and marketing budgets that are incredibly bigger than us. Motorcycling is a niche, compared to cars. Cars are a worldwide product. Especially when you go to emerging market countries, you know this is a big, big impact for potential sales.

And now you could see that with the "bras de fer" (armwrestling match) between FIA and the makers, the makers won. Because they have the power. For sure, when you are Toyota, Mercedes, BMW, Renault, Fiat, when you are altogether, you are strong. Here, who do we have? We have Yamaha, it's not the same. But I mean, I'm happy, again, I don't want to be costing 200 million. I think we have to keep down to earth.

For example, we are with DEWALT [the power tool company], they have been in NASCAR, they have been with Williams, and they were telling us how much they were spending with Williams, and they could only have a sticker inside their office and do one conference inside their facilities. So they are very happy here, for sure, for with the small amount of money they have so much more. And we are showing them enthusiasm, we are giving them a lot opportunities, Paola [Tech 3's PR officer] is doing a lot of work for them, and Dorna is giving them a big space for them to have their operation in the public area.

MGPM: So you are offering them real value for money?

HP: Absolutely. B2B opportunities and be part of the team. And... I'm not saying we're better, we're different. We will never be Formula One, never ever, we don't want to be Formula One. We have to cost a lot less, and we have to bring them, we have to give them still the human feeling, the right support, the enthusiasm and the feeling that they are part of the team. We don't want to be Formula One, you know, it's: they can, we can't. And I'm happy, because ...

MGPM: Even if you could, you wouldn't...

HP. You know, today, I've been receiving a couple with a very sick baby, you know leukemia or something like this. I was touched, they came with a wheelchair, and we saw the Day of Champions. I think it will be impossible to organize that at a Formula One race. All of the riders do their bit, you know, meet the fans, talk, share, all the public knocking at the motorhome, because you know there are a lot of people saying that in Superbike you can do that, in MotoGP it is like Formula One. This is not true. Maybe it's a little bit more strict than WSBK but you can still have it, and we have to keep this.

MGPM: Do you think the separate MotoGP paddock detracts from that?

HP: This was again a big thing in the press. There is not a separate MotoGP paddock. Anybody has a ticket can go everywhere, can go and see Valentino Rossi behind his garage, Dani Pedrosa, Casey Stoner. The only place that 250 and 125 guests - because any team member has access to everywhere - can't go is to the hospitality. And at the end of the day, what is the point of a 125 team to see his 125 guests going to see the MotoGP hospitality, going to see Valentino, etc. Even for them it is bad. Because at the end of the day, he wants to show his guest what he is doing.

And for us, it was too crowded, and let's be honest, we also wanted to give the possibility to our sponsors to be treated a bit more VIP. And if you give the same return for 125 team as for a MotoGP team, what is the point for a sponsor? If you give him the same space in the paddock, the same TV coverage, the same everything, yet you are asking him to spend 10 times more, he will say "No way".

So we have to let especially the investors understand 125 is 125, you can do a lot, 250 (Moto2 soon) is 250, and this is MotoGP. Otherwise nobody can understand what is what. And we don't have to forget that although we are three classes, and we will keep these three classes almost forever, the driving force and the leading class is MotoGP. But the other two benefit from this. Because if the championship is healthy because of the MotoGP class - not only, but mainly - with it being let's call it the money machine, you know, why everybody wants to switch from 600 to here? Because this championship is the one where the promoter is distributing more money to the teams. This is why, much more than anywhere else. So, if the promoter can give the support to the 125 and 250 that he is doing it is because altogether, he can make some money. And clearly, you can't sell 20 riders.

What was strong in F1 was you remember the Prost-Senna fights, or Schumacher-Alonso or Schumacher-Hakkinen, you know, so we need to have three or four big heroes. You know, if we want to grow out of the small motorcycle world, which is very important, which is our heart, but if we want to be successful we need to open to more public that will help us to touch more companies to invest. And I think at the moment to see the rivalry between the young Spanish coming with the Italian icon, but with Casey and Dani being in the middle, this is a good story to write. You don't have 70 riders. So they should let us, and we need to understand that this MotoGP championship is not here to kill the others, is here to be really healthy, and the whole championship is going to benefit from it.

MGPM: What they call the trickle down effect, where the benefits at the top flow down to the bottom?

HP: Yes, yes. And also what we want to be clear is, you know Dani Pedrosa and Casey Stoner are the perfect examples of this. It doesn't always work, but: 125: start racing, then start winning; 250: start racing, then start winning; and now MotoGP, start racing, and now winning. So these three classes have a meaning. You discover this world, this way of working, the method through 125 very young; if you're successful, you go to the 250s. And then you move.

MGPM: Will Moto2 change that? Because the Moto2 bikes are going to be so different. The step from 125 to 250 is going to be much smaller than the step to a Moto2 bike.

HP: Honestly? I don't know. All of the riders have always said that the step between the 125 and 250 was a lot bigger than 250 to 800. All of them. Dovizioso said it again last year, they all say that. Talmacsi said it again recently, he said "Wow, it was much bigger change from 125 to 250 than to 800cc."

Personally I think Moto2 will be very close to 800cc. Because the chassis will very similar, everything apart from the engine will be very similar to what we have here. Very similar. So they will have to cope with the setting, to use this kind of chassis, it will be very similar. And the engine will be the same, just a bit less powerful. And for me, you can't say that 250 was not a good class for MotoGP, because you can see that top 250 is instantly fast, and I think it's going to be at least the same with Moto2. And all the 250 guys, like (Aleix) Espargaro who have been testing are amazed. And they say, wow, this is a real racing bike and this is going to be fun to ride and very close to 800cc MotoGP.

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Comments

I had never thought of tobacco sponsorship as a bad thing. This has only been discussed as a bad thing in when talking about when the conversation goes to tobacco sponsorship leaving.

this is an AWESOME installment guys; Herve is the man.

KRSR has been saying some of this for years and years. he said quite bluntly that tobacco made the teams not only more expensive but LAZY. marketing was left to dorna and suddenly when the cancer stick money left, the teams were left not knowing what the hell to do, who to call. empty rolodexes and blank stares is what they had to start with. it was back to the old days except the bikes are now expensive and most of the riders expect to be paid crazy amounts of money.

~j

,, one of the few branded high profit commodities that has no geographic boundaries. Regional products can never match those deep pockets. I can't support a "San Carlo" or "Mapfre" because it's not available where I live. I wonder why, when the "smokes" ban was planned (and there was plenty of warning) no real replacement was planned.

quite simply, money was so easy to get, the teams didn't build up a marketing/pr infrastructure strong enough to go out and get more. it's an interesting parallel to the current economic woes. the people closest to the solution were the ones completely oblivious to the problems. well, not all of them, but most didn't want to hear the bad news...

~j

You have to realize that the tobacco companies came into motorsports because they knew the advertising ban was coming. There had been pressure in countries around the world to restrict tobacco advertising, but it was clear from fairly early on that sports sponsorship would be allowed to continue once direct advertising had been banned. And so the tobacco companies only started to come in to motorsports because of the advertising ban, and once the exemption from sports sponsorship was lifted - an inevitability - then they, too, would be gone. Tobacco companies had no real affinity with motorsports, other than the fact that it was the only place they were allowed to advertise.

as Ezpeleta is a killer of 250 cc class , it looks like Poncharal wants to finish the job and kill motogp , for god sake who came up with the idea of production 1000 cc engines with motogp electronics , why dont we just call it motosuperbike instead , the sport was fine the way it was before you started to change the rules , has anyone noticed that the lap times and race time is lower by 2,5 sec from the 990 cc era , closer racing you say , i really dont think so , i have an idea that might save cost , why dont you just bring the riders all on sunday to qualify and go racing and lets skip the tests and the practice , please leave the sport that we love the way it was as clearly what you are doing is not appreciated by millions of fans that made the name motogp .......

Along with Herve's insight into the double-edged sword of tobacco sponsorship, I also was intrigued to learn that it's a bigger step from 125 to 250, than from 250 to 800. Helps to explain the instant form of the current pretenders to the throne. I imagine 250 to 500 was not quite as easy : )

Wonderful interview, thanks very much K!

i really don't think it's true that 125->250 is more difficult than 250->800. maybe from the point of view of running a team, but definitely not for the riders. i had a conversation with gabor talmacsi at laguna seca and, granted, he had very limited 250 time, it was the 800 that really surprised him, especially around the electronics package.

then again i'm not herve...