The Upside of Private Testing: Turning Costs Into An Opportunity To Generate Income
The decision by HRC to stage a private testing session at the Austin MotoGP circuit in March unleashed a wave of criticism in some circles, especially from other teams. Yamaha eventually decided to join the Repsol Honda and LCR Honda teams at the track, but only after much internal deliberation, taking only a skeleton crew to the test. Ducati refused to go altogether as a political statement, saying that the costs were simply too high for them to ship all their equipment from Europe to the US, and then back again in time for the final IRTA test at Jerez. The costs involved have caused some inside the paddock to call for a ban on private testing, to prevent this situation from being repeated.
Certainly, the bare cost of testing at Austin was close to astronomical. Sources in Sepang reported that testing at the Circuit of the Americas would cost around 350,000 euros in total for the three days, including shipping, track rental, staff flights, accommodation, insurance and all the other odds and ends that are involved in traveling. That is a real stretch for Yamaha, the team already operating on a tight budget, and well beyond the reach of the satellite teams, with the exception of LCR Honda, who had some help in getting there. Even for the mighty Honda, largest and richest of the motorcycle manufacturers, dropping that kind of coin on a three-day test pushes budgets to the limit, and it is not a simple decision to take.
So how did HRC manage to afford it? The answer is simple: marketing footage. The private MotoGP test at Austin was not just a chance for Dani Pedrosa and Marc Marquez to get to learn the track at Austin. It was also a chance for HRC to unleash their marketing department, unhampered by the restrictions of filming at a Dorna-organized event.
Contractually, all video material produced at events organized by Dorna requires a license from the Spanish organization to be able to use. Even promotional material, such as the footage shot by Yamaha's MotoGP team at Jerez, needs a license from Dorna for its use. Want to shoot some footage to use in a TV ad campaign? You need a license from Dorna. Want to shoot some footage for your sponsors to use for their marketing campaigns? You need a license from Dorna. Want to put that material on the web? You need a license from Dorna, but first you'll have to wait until hell freezes over and pigs start operating an avionic shuttle service across the Mediterranean. Those licenses are not cheap, and the control you have over the material which has been produced is restricted. It is an expensive and frustratingly restrictive affair, shooting material which may not suit your purposes completely and cannot necessarily be used in the ways that you would want to.
The way around these draconian restrictions is simple: you organize your own test. At that test, you are free to film what, how and where you like, and you are also free to use the material you have obtained in any format, in any medium and in any way you like. If your sponsors want material to put on their website, you can provide that. If you want to post on-track or off-track footage on your website, go right ahead. Need a cool video to go viral on your Facebook page or Twitter feed? You're in with a chance, and if it fails to go viral, at least you haven't thrown away the money spent on licensing the content from Dorna.
This is exactly what HRC did at Austin: Honda's marketing arm came to Texas in force, aided and abetted by Red Bull's broadcasting unit, the Red Bull Media House. You may not have heard of the Red Bull Media House, but you will almost certainly have seen their work. They helped turn Felix Baumgartner's attempt to break the world record for the highest parachute jump into a multimedia extravaganza - and a massive bonus for their sponsorship business. At Austin, HRC and Red Bull went all out: multiple GoPros were fitted to the bikes of Pedrosa and Marquez, and footage shot in every flavor and variety you care to mention - including using a remote-controlled helicopter camera. That footage is set to be released in stages throughout the year in various media, and will be turning up on websites, on TV and in newspapers and magazines in the near future. More importantly, the footage will also be available to Honda's sponsors, including Repsol, who have already released some footage filmed at Austin, as well as Honda's distributors and dealers around the globe. It can be saved for TV, used on social media, posted on Youtube or shown on displays in Honda dealer showrooms, with no extra licensing cost or restriction on its use.
So the cost of booking the Austin circuit for the test and flying team and equipment out to the track to ride there may well have been large, but the expected exposure and marketing return will be just as big. Some industry insiders expect that the marketing return from Honda's media offensive at Austin will cover the entire cost of the test, or more. Though this is not quite the same as making a profit on the test - the costs are being borne in part by Honda's marketing department, rather than HRC itself, but they are still coming out of Honda Motor Company's budget - it does mean that the test will have no impact on the Repsol Honda team's bottom line. Essentially, Repsol Honda - and LCR Honda, who got help from Red Bull, backers of Stefan Bradl - got a free test at the Circuit of the Americas.
And it's not just in MotoGP. Moto2 and Moto3 teams are also turning their backs on the official tests, preferring to organize private testing and use the opportunity to generate video footage they can use for their sponsors, and raise the profile of their team and riders through a little guerrilla marketing. With the cost of technology plummeting - a GoPro Hero 3 capable of producing HD quality footage costs just $400, a drop in the ocean compared to the 1.4 to 3 million euros a Moto3 or Moto2 team costs to run - this strategy is becoming ever more affordable, and ever more important. As technology costs drop, the value of ingenuity and talent rises, freeing those involved (in this case, motorcycle racing teams) from the shackles imposed upon them by those who can afford to own the hardware. In future, attendance at the Dorna-organized Moto2 and Moto3 tests may get more sparse, as teams choose to organize their own testing free of media restrictions. In fact, there is a gap in the market there, for anyone wishing to set up a business providing race testing along with media services.
A ban on private testing may save some money in the short term - Yamaha could have saved an awful lot of money if they hadn't attended, but given that Jorge Lorenzo is the defending champion, they simply couldn't afford to skip the test - in the long term, it could end up making teams poorer. By tying the hands of the teams when it comes to fundraising, and providing their sponsors with value for money, Dorna (and the teams) could end up spending more money, rather than less. After four years of cost-cutting, MotoGP now needs to focus on generating more income. Restricting teams in their ability to serve their sponsors does not help that. The only way a ban on private testing will help save money is if the restrictions Dorna has imposed on the use of video footage filmed at official events is lifted. That does not fit with Dorna's current business model, but in the end, that would be the best thing for MotoGP.