What Virgin Group Figured Out About Races That The Rest Of Us Did Not
Road and adventure races have become a serious business. I can barely walk around my neighborhood without seeing at least one person in a race day t-shirt. The adventure race series, Tough Mudder, did more $70 million in revenue during its second year of operations in 2012. In the United States, there are over 19 million people participating each year in running races. A survey of more than 30,000 active runners found 76% of respondents reporting household income of $75,000 or more. Despite the active and attractive user base within road races, anyone looking to acquire race and race day service providers, face the following hurdles:
- ·Road races while incredibly popular are becoming increasingly more expensive to put on.
- Road race entry fees are beginning to test the price sensitivity of its racers.
- Road races increasingly rely on alternative revenue sources, such as sponsorships, after parties, and expos to maintain profitability.
- Road races are incredibly localized events where even the vendors (timing companies, race management companies, etc.) are city specific or regional operators limiting the economies of scale and purchasing power achieved through acquisition.
- Security for large road races is an increasing concern and often requires coordination and relationships within a local community to ensure a smooth, secure, and affordable race day.
With such hurdles, what did Virgin Group figure out when they announced that they were creating Virgin Sport, an entity focused on acquiring recreational-athletic events? They figured out that profitable acquisitions within a fracture, localized, often relationship driven industry required a leader that:
Splash 4 Principals after the 2015 Monument Ave. 10K.
- Has intimate operating knowledge of large road races;
- Is recognized throughout the industry; and
- Maintains relationships with vendors, and sponsors, and can easily forge new ones.
Virgin Group simplified what others saw as a complex problem by hiring an industry leader with the exact skills needed to overcome inherent industry obstacles. In May of this year it was announced that former chief executive of New York Road Races’, Mary Whittenber, is joining Virgin Group Ltd. to spearhead efforts acquisition in the for-profit race market. If they are successful, Virgin Sport will have the potential to:
- Sell direct access to an large and affluent health and wellness consumer base;
- Achieve purchasing power with vendors providing finisher medals, bibs, race shirts;
- Lower acquisition costs for sponsorship/ advertising sales; and
- Achieve meaningful bargaining power with large technology vendors, like Active.com, which has steadily raised its fees as race popularity has surged.
Virgin Group saw what everyone else did; cost savings coupled with avid affluent consumers. We commend them on building the team to take a run at the race industry and surmount the obstacles that an acquisition strategy in this space presents.