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Armstrong Scandal Sullies Cycling For Many Sponsors

Ad Age, October 22, 2012

By Michael McCarthy

Cycling's ruling body on Monday backed a decision by the U.S. Anti-Doping Agency to strip Lance Armstrong of his seven Tour de France titles and banned the American from the sport.

"Lance Armstrong has no place in cycling," Pat McQuaid, president of the Union Cycliste Internationale, said at a news conference in Geneva. "He deserves to be forgotten in cycling."

The end of Mr. Armstrong's endorsement career came as abruptly as a bloody pileup in the Tour de France. He leaves pro-cycling a scandal-tainted sport that will be hard-pressed to find corporate sponsors for years. And he leaves the open question of what, if anything, the 41-year-old cancer survivor can do to resuscitate his reputation.

The carnage that will reshape pro-cycling sponsorships – which industry estimates put at between $300 million and $400 million a year – began last Wednesday morning. Citing "seemingly insurmountable evidence that Mr. Armstrong participated in doping and misled Nike for more than a decade," the Swoosh fired the native Texan, who'd been an endorser since 1996. The same morning, Mr. Armstrong announced he was stepping down as chairman of his Livestrong charity.

The fallout is already beginning. Late last week, Dutch bank Rabobank said it would cease its sponsorship of professional men's and women's teams after 17 years because "the trust in the cycling world has gone."

Rabobank spent an estimated $20 million annually sponsoring the sport. But the U.S. Anti-Doping Agency's explosive report detailing Mr. Armstrong's involvement in "the most sophisticated, professionalized and successful doping program that sport has ever seen" was the last straw, said board member Bert Bruggink. The fact that the International Cycling Union has also launched a doping investigation of one of Rabobank's sponsored riders, Carlos Barredo, may also have had something to do with it.

After years of doping charges, countercharges, lawsuits and lies, most U.S. sponsors already avoided cycling. Now, the one-two punch of Mr. Armstrong's fall from grace, and the lack of new American stars, will make potential sponsors even more leery. "Many companies look at cycling and say, "There's just too much controversy, too much risk of scandal,'" said Jim Andrews, senior VP of sponsorship constancy IEG. "There's still lots of suggestions that doping is going on."

This year's Tour de France, for example, did not have any U.S. marketers listed among its sponsorship partners. The biggest U.S. cycling race is the Tour of California, which is title-sponsored by biotechnology company Amgen and was created by AEG. Amgen could not be reached for comment. AEG spokesman Michael Roth said the race had just started sponsor "renewals" but declined to comment further. Event sponsors include two of Mr. Armstrong's former sponsors – Michelob Ultra and RadioShack – as well as Coca-Cola.

Mr. Armstrong stands to lose $15 million to $20 million a year in endorsement earnings and speaking fees, and the total damage may be $150 million in lost future earnings, estimates Forbes writer Michael Ozanian.

Mr. Armstrong maintains his innocence and has hired former White House adviser Mark Fabiani for crisis PR. But one way he might salvage his reputation is by admitting to performance-enhancing drug use and holding a televised mea culpa, similar to Alex Rodriguez of the New York Yankees after he was revealed as a steroid user.