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.

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.

Comments

doesn't get any easier

You would think Dorna would be doing more to help teams stay on the grid. With the loss of Kawasaki and Suzuki in the past, surely Dorna realise it would be harder for them to make a come back? With a ban on private testing and price of licenses, not making it easy for them.

Total votes: 33

fascinating...

In truth, I never even considered the issues just moaned about the private test and Honda's comparitive budget further tipping the balance in their favour. I should've known better. Thank you for, again, genuinely opening my eyes to the greater detail involved in all forms of the modern commercial world.

Total votes: 29

Dorna "amazes" me with their policies.....

Dorna is like the republican's (GOP) in the U.S they insist that ALL of their problems are in the cost to run the series.... Instead of focusing on how they might grow revenues...

They should do a bit of market research here in the states - at Least 75% of people have absolutely no knowledge of what MOTOGP is. Yet they continue to restrict content.... They could really grow their audience in the U.S, at least, if they let their hands off their precious content... really Myopic.

Further, I get sooo tired of Dorna posting things on Twitter only get the "embedding disabled" sign... Man..

I just don't understand how they hope to promote their series? Oh, I guess, spend Money instead of letting the internet do its thing....

Total votes: 41

Even if you can grow tons

Even if you can grow tons revenue, MotoGP (like the U.S.) still has a spending problem and it needs to be addressed. Hence the article and potential future ban on private testing. You did see DE's estimation of costs for the test??? "Astronomical" is right!!!

Moral Hazard....

Total votes: 35

Sparky, Your post makes zero sense

It is illogical and, worse yet, a misplaced comment. If you didn't notice, this is a motogp blog. Don't poison this well.

Total votes: 31

sooo -----

you think Dorna's does a good job of promoting motogp via social media?

I am well aware This is a motogp blog / site - check the rest of my posts... sometimes if you don't have anything nice to say - it's better not to say anything...

Total votes: 29

Sparky

Not a good comparison there sparky. The MotoGP teams can, wait for it...CHOOSE to do exactly what HRC did and go their own route to maximize their exposure or follow Dorna's outdated business practices.

When governments want to grow revenues, that means they have to take more money out of the pockets of the people and businesses (governments produce nothing in and of themselves). Those people/businesses have NO choice, they have to obey or they go to jail. Big difference.

I do wish the teams in all classes would come together and organize all their own testing (only in Europe if needed to save money) and thus reward their sponsors with cheaper and more advertising opportunities.

Total votes: 25

I guess my point was trying to be...

that dorna could do a far better job of promoting itself, especially in the U>S - where the vast majority of people have a no clue what MotoGP is (ask rossi how freely he can move about here in the states - virtually no one even knows who he is).

With the quality of the series - if they'd stop spending so many of their resources hindering the promotion of MoTO via disabling embedded links on Twitter for instance, and taking down Utube links they could significantly grow ad revenue, sponsorship and viewership - Precisely what the internet does the best for free. Dorna continues to say we have an expense problem without worrying how to grow the series - the actual revenue side of the series.

My analogies may have been a bit weak - but my point stands. If they worried about growing viewership and sponsorship especially in the U.S where no-one knows much about the series the costs would be much less important.

I agree the costs are out of hand (300k a season for carbon brakes for instance) but they pay no attention to growth - all attention goes to cost cutting.. a one dimensional answer to a complex problem.

BTW - find me one writer, rider or mechanic that can say cost cutting has worked... it hasn't

Total votes: 24

any info on whether yamaha

any info on whether yamaha also did something clever like this to help cover their costs for the private test ?

Total votes: 31

it must all be Bush's fault

C'mon. We can do better than this. Let's leave the US social tribalism out of our MotoGP. Some of us come here to escape that crap.

Good article. I do love how Motomatters' articles bring more depth and perspective on what makes our sport tick. Keep it up. I'll have to re-up my contribution. Following GP's would be a flatter world without Motomatters.

Total votes: 50

Please...

a weak analogy it was - but the point was good one.

further cost cutting hasn't work at all.... they need to grow the series especially in the U>S

Total votes: 24

Amazing stuff DE! Where/how

Amazing stuff DE! Where/how do you get all this info? Good job!

I saw that remote-controlled helicopter camera around turn 11 a few times....cool stuff!

Total votes: 27

Dornas blanket ban on

Dornas blanket ban on anything worth seeing in motogp just gets more baffling with every article.. Haven't they seen what the whole planet is up to..?? The Rossi and Marquez test laps where they took turns following each should be marketing gold instead it's not been seen and has been all too quickly forgotten and that's only one short video.. The fact that at huge expense the teams can circumnavigate Dornas draconian marketing bylaws makes a mockery of the whole shebang.. We live in hope..

Total votes: 31

Hurting themselves too

I can't believe the price of 'off season' video subscriptions from Dorna. I can't imagine they sell very many of those. I'm not a marketing guy, but I'm pretty sure that if they gave subscriptions to off season footage away in exchange for registration, they would be able to earn more from the user data that would harvest. They'd have details of a group who would be very likely to subscribe to paid for video coverage, team clothing, Motogp ticket etc. I'm sure they could probably convert this into more hard cash than they get from the off season subscriptions.

Like I've said before, if they put the monkeys currently hard at work in keeping their content off social media to work at the exact opposite aim, they would increase revenues. Who on earth is steering this ship? Sack them today. They clearly aren't prepared to loose face by admitting their continuing mistake!

Total votes: 36

HRC

Honda want to win and have the Budget to do so..No one told Yamaha they had to attend but if they wanted to be competitive in Austin they had too,Ducati are trying to make a point here But they had nothing to test that was going to change the outcome of this Race.
Pretty Hard for Anyone to Tell Honda they Cant Spend there own money...But if there going to Ban private testing Dorna should also change the Motegi GP to another Track sence this is Honda's test track they no doubt have a huge advantage over the entire Grid.
My guess is nethier will happen

Total votes: 34

Here's what cracks me up.

Here's what cracks me up. Dorna is subsidizing the same teams they hit with restrictive licensing fees. Dorna gives them money on one hand, then tries to take back as much money as it can on the other. It's like the factories and teams and Dorna are fighting financial battles on multiple fronts, with Dorna "winning" some fights and the factories "winning" others.

Just nuts.

This whole situation just needs one really good 1st-grade teacher in charge to take things in hand. I'll donate a ruler for knuckle-whacking.

Total votes: 33

This might explain HRC opposition to a Dorna ECU

This might explain HRC opposition to a Dorna ECU.

Then Dorna would control every move they make.
A bit like BSB and the private testing in Spain.

Total votes: 27

Have the guys running this

Have the guys running this show actually LOOKED at the most successful sports and see how they are run? I'm a big football fan (USA football) and the NFL dominates TV sports here. Their TV contract is bigger then baseball, basketball, hockey, PGA tour, college football, NASCAR, and all the other sports COMBINED!!!! And it wasn't that way 20 years ago, but the 'guys' running the show looked far into the future and figured out a way to make LOTS of $$$$, but they realized they had to make the game game more popular....and they did!! FWIW, when the CBA was being negotiated, it was reported that the NFL is a $9 BILLION a year business!!! The major networks are paying $1-1.5 billion EACH to televise the games. Yes, billion!!! Not a misprint!

And what do the 'guys' at DORNA do? They consistently look about 4 seconds into the future and try to control the here & now. Make the sport more POPULAR, give away video and have anyone/everyone post video clips on any Internet site. If 2% of people viewing these clips get interested......

OK, I'm done.

Total votes: 35

Testing

Wasn't the relaxation of the testing ban mainly aimed at getting Ducati and Rossi competitive? I don't subscribe to any nutjob conspiracy theories but that fact seems pretty clear to me. It's the only reason I can think of that this issue is raised again.

Total votes: 28

Yet again

David gives us something that you cannot seem to find elsewhere.
This insight is both fascinating and appalling. How can Dorna be so dumb as to miss the whole social media thing? (I know sofa racer has ‘done’ this, so will say no more). Not only that, but to make teams pay to advertise their series!
It occurs to me that not only could there be a business opportunity for a track/media service but it could also be a great way for as yet unused tracks in as yet unused markets to promote themselves and the series by hosting test events.
If run outside of Dorna’s straightjacket and the constraints of a formal MGP session they could offer a more affordable (free?), relaxed, and open experience for emerging markets and allow the fans to get closer to the action – pit walks etc etc that could generate enthusiasm in people that have yet to really experience what good top-level racing is all about.
World supers on one or two days, MGP on another couple. It would give the rookies good seat time , expose them to a slightly less glaring media spot light and allow them to generate a new fan base that would help their careers.
If it could be done at a cost that was affordable (nothing’s cheap) to the satellite/private teams, and they could generate good marketing exposure for their teams/sponsors, it could be good for everybody. Maybe even Dorna would see that instead of shutting activity down "to save money" they would do the series good, and attract/help sponsors, by assisting the less-well-financed teams to get there.

Total votes: 26

The testing limits are in

The testing limits are in reference to the use of MotoGP contracted riders participating in any tests other than the official tests, correct? So teams are still able to use non-GP riders at any test they like? Private tests will still take place then, just with the added possibility that whatever the test rider's conclusions are won't be applicable to the lap times the faster GP riders can produce. The lift of the ban on testing in the first place made sense to me; what other sport tells the first string players they can only practice 6-7 times a year? All the ban will do is make private test data more inconclusive and more back-and-forth testing to get everything sorted properly.

The real issue is that Honda and Yamaha tested at a track no one else has been to yet, so they gained an advantage. Simply make a rule that addresses this: if there is a track on the GP calendar that hasn't run it's first GP yet, ban testing at that track until everyone has had their first visit there. Simple solution, no reason to go to the draconian measures that Dorna seems to favor.

The fact that Honda was willing to part with 350k for some marketing footage and a step-up for one race says something about Dorna's policies. Mostly that the policies are antiquated and not reality-based.

Total votes: 23

Rule changed.

Weren't the rules regarding testing changed in the first place to favor one rider in particular?
It seems Ducati didn't care about the cost of private testing last year,
if I recall they did quite a few private tests.

http://superbikeplanet.com/2013/Mar/130326lsx.htm

Total votes: 24

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