Sport is big business these days, players and participants are paid obscene amounts of money in the name of TV/streaming rights, sponsorship deals and ticket sales.

Right now most of New Zealand is gripped in Rugby World Cup pre-final preparations for the epic match with our arch enemy Australia! Rugby is big business as we know, our first real professional sport which has matured as a business growing from strength to financial strength within a relatively short period of time.

Meanwhile another rich sport I follow is facing a massive and absolutely fascinating dichotomy – MotoGP – their challenge is however a fundamental business challenge, supply and demand.

Oddly enough we were watching MotoGP during the last Rugby World Cup final, while the rest of our nation were biting their nails over a tight final with France, we were glued to our TV when tragedy struck causing the death of one of my favourite riders Marco Simmocelli, something I will never forget.

MotoGP the sport (tiny bit of background for context)

MotoGP is a motorbike racing sport. The company who own this event, Dorna Sports, also own the competing event World Superbikes, and are owned themselves by a massive Private Equity firm.

There are three classes of bike racing Moto3, Moto2 and MotoGP with graduated bike power and investment (like Formula One), riders tend to be very very young – one of my favourite moments is when the teenaged winners hug their Mum’s (sooo cute).

The main game MotoGP is rich with bike factories, tyre companies and product sponsors, the riders are well schooled in maximising sponsors logos in front of camera – another of my favourite aspects, watching the often hilariously deliberate product placements!

Amongst these young young men is one old guy, Valentino Rossi, known as Vale or “The Doctor”. Vale is Italian and at 36 years old (vs 17 when he won his first championship) is on the cusp of winning his 10th Championship title, he owns a racing team, merchandising brand of Yellow “The Doctor” / VR46 racing gear, is financially the most successful rider of all time and also on the cusp of becoming the most successful on the track. Some commentators call him GOAT – Greatest of all Time (I am assured he is not by the fan I live with).

I cannot understate how he is loved and worshipped by his fans and how he is “it” for this sport. We attended “MotoGP Misano World Circuit Marco Simocelli” near San Marino, Italy earlier this year – you can read my blog here – 95% of the crowd was dressed in yellow VR46 gear (or rip off versions of), it was a sea of yellow and I was in AWE of his business model. I have seen it on the TV race after race but to experience sitting in amongst the yellow madness was visually powerful. Not to mention the merchandise tents, 3 x VR46 tents for every other team (yes team no other rider has their own tent), with queues and queues of people trying to buy their latest cap, t-shirt, helmet etc etc.


Supply and Demand Business Challenge #1 for MotoGP – Personal Brand vs Company Brand

Vale has managed to keep his supporters with him each time he changes teams and this is unheard of in motor racing sport – if you are a Ducati fan, you are usually a diehard Ducati fan for instance (he races for Yamaha now).

Vale has also managed to keep and grow his fan base over a 19 year period – I know someone who wanted to name her first born Valentino and would bet there are many Vale’s in Italy named after him. This fan base is however his fan base, MotoGP must be very nervous right now as to the impact on their sport if their key draw card retires.

Vale is old which engenders a whole other level of loyalty in fans who are identifying strongly with him as a man now vs him as a rider previously, he is charismatic, highly controversial and as such has become the face of this sport.

My other favourite spectator sport is Tennis, specifically ATP –  here there is an old guy (34) who is often the worlds highest paid athlete (dropped to #5 in 2015 but hey he is worth heaps now) and who wins just enough to stay in the top 4 ranked players and keep us all on our toes. Federer however polarises people, they don’t worship him and the 3 x 28 year olds who are ranked in the top 4 players with him – Djokovic, Murray and Nadal – are all equally revered. When Federer retires Tennis will barely blink. Rossi’s retirement on the other hand could be catastrophic for his sport.

MotoGP the Controversy (some more context)

The other thing you should know about Vale is he likes to have a rival – a tactic that works for us in business too focus wise. This year however he is rivalling his team mate Jorge Lorenzo for the Championship, which would be Jorge’s 3rd title and has now come down to a deciding season finale race. So one can only speculate in this big $$ sponsorship business his team Movistar Yamaha MotoGP, have asked him not to be fighting with his team mate both in the media and on the track. So Vale has chosen last year’s winner the 22 year old Marc Marquez as his rival for this season.

Their rivalry has stepped up a few notches in recent races with – according to Vale – Marquez (who is out of championship points contention after a few accidents this year) “helping” Jorge win by battling with Rossi and keeping him from the lead. It’s made for fantastic racing, poor old Jorge has barely been on camera as the coverage sticks with these epic battles.

All of this came to a head this week in the penultimate race when – again according to Vale – pissed off with Marquez battling him and keeping him from Jorge who was one place ahead of them in 2nd, Rossi slowed down and rode out wide to – according to Vale – tell Marquez to cut it out. Note slowing down means from 350km/hr to maybe 200km/hr and telling in that gear on those bikes means gesturing.

This whole exchange resulted in – depending who you believe and what camera angle you watch – Marquez’s head hitting Vale’s knee (or Vale’s knee hitting Marquez’s helmet of course) and Marquez crashing out of the race.

OMG it was edge of seat stuff to watch and I have watched it many many times now, you can make your own call.

So – if you were race director Mike Webb (who is also a Kiwi which is cool aye) what would you do? See this as a challenge or an opportunity perhaps?

Supply and Demand Business Challenge #2 for MotoGP – the Demand

Mike Webb made his call, he has penalised Rossi by making him start at the back of the grid for the final race next weekend. Basically meaning unless Jorge falls off (which he did in Misano) the Championship will be Jorge’s.

MotoGP ultimately is a business. Keeping their star from winning and therefore most probably retiring is the logical economic outcome. I am not saying Mike Webb selected the punishment to achieve this – he could have stripped points to do this more overtly – he is known as a very fair race director. I am however certain the pressure this opportunity afforded MotoGP as a business would have been extraordinary.

The Demand side however has revoltedfans are outraged, swept up in their undying belief that Marquez was impacting Vale’s chances, or the possibility this old guy they have grown to love over a 19 year period, who has his best chance in years of winning a Championship, has been stripped of his chances to win his 10th.

First of all there is this petition – electronically signed by 494,000 people when I last looked – calling for Race Control to “Remove the penalty from Valentino Rossi and bring back integrity to the Championship.”

Then there are the trolls (there is no other word for them) on social media declaring their hatred of Marc Marquez. To be fair Marquez is a cute, always smiling 22 year old boy who hugs his Mum and watches his little brother race in Moto2. This is a screen shot of one tweet I saw, there are soooo many more of these, it is just so sad for the sport and business of MotoGP.

Screen Shot 2015-10-28 at 2.13.52 pm

Supply and Demand Challenge for MotoGP #3 – the Supply

Faced with these challenges from fans you might think protecting that demand to make the fans happy was logical? but in protecting that demand their beloved draw card may be retired by next season and MotoGP will have a long road ahead building the profiles of other riders for fans to coalesce around. Again, I cannot understate how larger than life Rossi is in the context of this sport.

The other side of every thriving economy is supply and in this case supply means sponsors – the businesses paying the big bucks to keep these bikes performing. Repsol, a major sponsor of the sport and primary sponsor of Marc Marquez’s team “Repsol Honda Team” has threatened to withdraw their support for MotoGP if they doesn’t punish riders more “appropriately” than has happened in this case. Understandably they are pissed off about their lead rider coming off during the race, they are also annoyed their other rider who won the race, Dani Pedrosa, didn’t get the attention he deserved due to the controversy. Their anger however is being represented as a Sportsmanship / Fairness / Safety concern.

Oh the PR industry are working for their money this week!

What a position for a business to be in, their customers are pissed off, their suppliers are pissed off, their staff (the riders) are pissed off and at war (I forgot to mention Jorge was basically booed off the podium last week too). Everyone is behaving badly and I can imagine as a business it must be feeling fraught right now for MotoGP – but on the other hand we are talking about their sport too.

The Dichotomy for MotoGP as a Business

Many businesses are facing the challenge of blending or augmenting the Personal Brands of their Staff, with their own Company Brand. Some multinationals like IBM are tackling this challenge with training and “rules” for want of a better description, others are avoiding the blending by asking staff not to mix the two on social media resulting in an individual holding two profiles. The Valentino Rossi personal brand is strong and valuable, the MotoGP brand has leveraged, blended and benefited from that strength to date.

Companies face brand strength challenges when a lead consultant leaves, or a CEO or even a charismatic founder departs. The company brand is occasionally lost behind the strong personal brand of that individual, the difference here is MotoGP don’t own the Valentino Rossi brand so they cannot control the impact of his departure from their brand to the same extent as these other examples. Equally unless they have contractual penalties in place they can’t gag him in the media – that said I imagine they are stoking the rivalry aspect as it’s attracting many more eyeballs right now.

The supply and demand challenges outlined above are the fundamental ingredients for a successful business. Tempering the demand of the customer with the demands of your suppliers in this equation is a fine balancing act and unenviable position for a business to be in. Yes there are other suppliers or in this case sponsors – but from our own business experiences the cost of change can be high to astronomical, new processes, new skills, new contracts, new staff, not to mention the PR, Marketing and community impact challenges.

There will also be more fans and many fans of MotoGP will remain now that Rossi’s brand has drawn them in, I question whether the latter will remain “sticky” or loyal to the sport. The real dichotomy here for MotoGP is how they keep both sides of the Supply and Demand equation happy in the backdrop of losing thier larger than life ambassador.

#ValenciaGP can’t come soon enough in our house! Growing great businesses, Vic.