How the Tour de France was designed to be ‘THE’ tour: Its surprising competitive advantage
Right now, millions of people all over the globe are tuning into the world’s biggest bicycle race, the Tour de France.
Since 1903, the ‘La Grand Boucle’ has captivated audiences with its fierce competition, spectacular routes, and compelling storytelling. There’s a reason it’s the world’s most popular sporting event for people who don’t like sports. With its mass appeal, there’s just something about this three-week race that gets people talking.
This has been true since the very beginning — in fact, the Tour de France was created by French newsletter L’Auto, as a way to set them apart from their competition, Vélo. The strategy worked, with their circulation increasing six-fold during and after the race.
L’Auto wasn’t actually trying to create the biggest bike race in the world — it kind of happened by accident. But hey, it was an instant smash hit and as they say, the rest is history!
Now, you don’t need to be a financial expert to know that the Tour de France is a major money-maker for its owners, sponsors, and winners alike. But, what might surprise you is the business model behind the race — and just how strongly its owners have monopolized the sport of bicycle racing.
How does the Tour De France make money?
For the last 58 years, the Tour de France has been owned by the Amaury Sports Organisation (ASO). While the company is notoriously tightlipped about its numbers: this should put things in perspective. It’s rumored the ASO generates somewhere between $60 million and $150 million per year.
This is because they’ve got their fingers in every possible financial pie you can imagine (and to help illustrate this, here’s an actual pie chart showing some of their income streams).
Via The Hustle
Firstly, the event has an advertising partner for everything — from the water bottles they provide to riders, to the logos featured on the iconic yellow shirts. Major partners such as Skoda, who provide cars for the events, pay around five million Euros a year to be involved.
Think that Tour de France would have to pay cities to literally rebuild their road so they can host the race? Think again. It actually works the other way around, with European towns paying hundreds of thousands to be a ‘stage city.’ On top of that, they also have to provide their own police and roadblocks and pay money to the ASO for advertising costs.
Television stations also have to pay for the rights to broadcast the race. Meanwhile, the only real costs for ASO are the prize money and personnel. They also have to pay French regions 300,000 Euros in return for using their roads for advertising. But in the grand scheme of things, that’s nothing.
The fact that the Tour de France can convince all these parties to shell out millions while keeping their operating costs so low is a testament to their major competitive advantage.
What is the Tour de France’s competitive advantage?
Competitive advantage is when a company can produce goods and services more efficiently than its competitors, allowing them to generate higher profits.
There are a few different ways companies achieve competitive advantage. There’s a cost-based advantage, where organizations can make their product at a lower cost than their competitors. There’s also differentiation, which is when a company can distinguish itself from others with its unique and superior offering. Finally, there’s the first mover advantage, where you’re able to grab a larger share of the available market simply because you were first.
The Tour de France has all of the above. Because they’re the OG, they’ve had ample time to develop solid supplier relationships and find ways to drive operating costs down. They also have strong network effects in place, wherein everyone wants to watch the Tour De France so that they can talk to all their friends about it. Plus, the Tour de France ‘owns’ the best time in the race calendar (summer), when visitors can climb mountains during their trip.
These factors create what Warren Buffet calls an economic moat (a sustainable competitive advantage that’s hard to infiltrate) and make it impossible for other races like Giro d'Italia or Vuelta d'Espana to compete.
Why this matters for designers
Maybe this has inspired you to turn on your TV and watch this incredible spectacle for yourself! But, the iconic race also has plenty of learnings you can apply to your everyday work as a designer or entrepreneur.
Continually innovate: The Tour de France doesn’t rely on its legacy to draw in viewers year after year. They continuously add new elements to make things novel and exciting. The races have got longer, while the stages have got shorter. They’ve also expanded to different cities and added tougher mountains. When building or designing products, think about how you can double down on what’s working, while also keeping customers on their toes.
Create win-win situations: The reason towns will happily hand over millions to be a ‘stage city? Because it’s great for the economy. The race brings thousands of tourists to its host cities, who spend big on hotels, food, and more. Whether it’s balancing the wants of your clients with the needs of your users, or building two-sided marketplaces, consider how you can create mutually advantageous relationships where everyone wins.
If you can’t be first, be the best: Unfortunately, it’s not always possible to be the first to market. Sometimes, competitors will beat you to the punch. In this scenario, choose the competitive advantage that makes the most sense for your business (differentiation, cost, network effects, etc) and leverage it to its full extent.