Ignite Asset Management is a new name in the MotoGP paddock’s lexicon, as well as the new sponsor of Ducati’s “junior” team. While each year sponsors come and go, Ignite is a bit different from the usual batch of names plastered on the side of a GP bike, and the investment firm is getting some interesting play in the otherwise unassuming motorcycle world.
If you are not sure what an “alternative asset management” investing firm happens to be, then the American company’s self-description as a “management firm led by a group of hedge fund industry veterans and supported by private investors that are driven by the undiscovered alpha” is going to really leave you really wondering what slicks-back the hair on these Wall Street types.
Boiled down to its essence, an alpha represents the ratio of an investments and measure how sizable a return was in relation to measured risk. A positive alpha coefficient signals that an investment was good not only in its return, but also in its risk management. Investors are always talking about “seeking alpha” and here Ignite is touting its professional ability of finding the diamond in the rough — standard Wall Street Napoleon Complex stuff.
So then, how does a company like Ignite Asset Management enter into a sport where the running joke about how to make $10 million dollars is to start with $100 million?
Talking about the decision on Bloomberg TV, Ignite’s Ryan Bonifacino explains what is the next progression in thinking for sports sponsorship, the relationship-based economy.
Bonifacino drops a familiar phrase in his description, saying that MotoGP is the “Formula One of motorcycle racing,” which is perhaps the easiest way to define the MotoGP Championship to non-racing or non-motorcycle fans, and on the surface that description is accurate.
However with the complexity in which Formula One operates, MotoGP in-turn comes across as rather simple in nature. Most riders in the paddock at this point in time are basically paying to ride, supplementing their income with personal sponsorships, or coming into a team with the expectation that their presence will bring sponsorship money into the team (did you read the story about how Valentino Rossi brought Monster to Yamaha?).
Dollars-per-eyeballs, is the name of the game in the paddock, which makes a rider’s number one job actually serving the sponsors’ whims, not racing the bike.
Purists may argue that point, but pragmatists won’t, and there we have the great battle in MotoGP: to build a sport that is entertaining enough to attract spectators, media-savvy enough to attract the advertisers, and lucrative enough to attract everyone else. I would argue that as of late, MotoGP has failed on all three metrics.
So how has MotoGP failed where Formula One has succeeded? On the surface the two sports seem very similar, but the underpinnings of each of these racing series is very different. For a long time now, Formula One has served as a deal-maker to big business; and for example, companies wishing to do business in São Paulo or Shanghai could leverage their involvement in the series to gain entry into these markets. F1 was the grease for business deals, and its fee for providing the context, introductions, and venue was simply the requirement that a company put money into the show that made everything possible.
With television rights revenues being 101% the only metric concerning MotoGP’s guiding light, Dorna Sports, the idea of providing something more to sponsors fails to exist. If Formula One constitutes the open platform business model, then MotoGP is the proprietary closed-door variant, except for one exception: Ducati Corse.
Ducati Corse is an interesting entity in the MotoGP paddock. The group has by far the only brand in the paddock with any real gravitas, and more interesting is that Ducati foots very little of its own racing bill, with instead Phillip-Morris picking up most of the check at the end of the season. One would think that with the ban on cigarette advertisements, and even the “barcode” paint scheme all but a memory, that Marlboro (the brand in front of Phillip-Morris) would have left long ago as well, but instead the American cancer-stick purveyor remains…and thrives.
If this puzzles you, then you need to realize the drawing power of the Ducati brand, and the opportunities that MotoGP creates for a company like Phillip-Morris. While Marlboro may not reap the same eyeballs-for-dollars that most sponsors concern themselves with, Marlboro realizes that its involvement in MotoGP allows it to conduct its core business more effectively. MotoGP opens up new markets to the Marlboro brand, it creates a venue to conduct and court business for Phillip-Morris, and most importantly, it allows the cigarette manufacturer to maintain its existing business relationships, giving perks to important buyers and vendors.
Think now back to the investment community, and Ignite Asset Management’s self-proclaimed quest to seek alpha — finance firms in general operate in a highly competitive market, where at the top levels the rolodex you bring to a firm is just as important as the numbers you crunch at the end of year. A firm like Ignite operates on the fringes of this delicate bubble, finding the deals that others overlooked, uncovering the stones with treasures hidden underneath, and wadding into waters other firms wouldn’t venture into, like MotoGP.
For Ignite Asset Management, MotoGP is the ultimate expression of seeking alpha: very risky, buy potentially very lucrative. A doorway into new clients with high-wealth, a venue to manage relationships, a leg-up into the high-profile world of motorsport, it is an interesting and bold move. Time will tell if it pays off, and more importantly time will tell if MotoGP can open up its platform for other businesses to thrive.
Photo: Ducati Corse