Editor’s note: You may want to read Long live the two-stroke: Part 1 and FIM to put 2-strokes on even footing in 2010 for more background.

Recently a vintage racing/CZ friend posted the following query here:

Hey Terry, Correct me if I’m wrong because I’m not totally sure, but hasn’t Calif banned 2 stroke sales there or Continue reading

cobrajumpTo my knowledge only one (1) company has successfully entered the motocross market since 1985 – the small Hillsdale, MI firm of Cobra Motorcycle Mfg. What did Cobra do? They brought innovation to a market the Big Four were ignoring. They met a need. They built good products – right here in the USA.

Once – in almost 30 years – has new blood successfully entered the motocross market. And they only did it in minibikes – 50cc-85cc. Ask yourself – is this really the best it can be? It’s difficult to make a credible claim than an industry (any industry) is healthy and competitive when it’s consisted entirely of the same five (really four) suppliers for more than 25 years. Are we really that naive? Or, like the Soma pills in Orwell’s 1984, have we swallowed the company marketing sedative so long we no longer care to see reality?

A little background

Back in December I wrote an article about how production-based racing has affected the motocross world. The article got quite a few readers (it was first featured over at McCookRacing.com) and drew fire on some of the discussion groups. People came away from reading it with a lot of different opinions, but it was clear that almost no one got my main points, which are these – the single-minded, all-encompassing “production bike” mentality that has consumed two-wheel racing has had a lot of negative consequences. And we have all been so totally brainwashed with it that most of these consequences are completely invisible to us.

Production-based racing is a great thing when it is provided as an alternative to hand-crafted racing machines. But take away the incentive and motivation to build handcrafted racing machines and you have an anti-competitive, controlled marketplace that ultimately provides less choice, less innovation, and higher costs. Think about it – motocross racing is now so thoroughly dominated by four global corporations (KTM is a bit player that exists solely at the behest of the Big Four to “prove” they are not anti-competitive. Ducati remains in road racing for the same reason.) that sanctioning bodies and promoters will do almost anything to keep them happy. Does that sound like a healthy environment to you?

But it’s not just that. Production-based racing stacks the deck for the factories – in an obvious, definable way. Here’s a quote from Cycle News journalist Henny Ray Abrams talking about the proposed 2009 AMA road racing rules in Cycle News issue 23, June 11, 2008:

The closer racing is to production, the greater the advantage to the factories. Power isn’t the issue – it’s torque. The factories can produce parts that aren’t available to privateers. They can also produce parts that appear similar in every way to the production unit, but are about as related as Ben Spies is to Ben & Jerry’s

Road racing isn’t motocross, but the parallels are clear. Setup your racing rules for the factories and pretty soon you have a self-reinforcing loop that guarantees no one new ever disrupts the big corporations’ neat little world. Factories love production racing because it controls competition, not because it benefits the racers.

We are now on our fourth full generation of motocross racers who have no idea that a competitive bike can be fielded by anything less than a global mega-corporation. And they are right. It would probably cost $50-$100 million dollars to enter the market with a competitive dirt bike that could sell enough copies to meet homologation requirements and pay for its development and manufacturing costs. Even the venerable Harley-Davidson (via its Buell subsidiary) gave up after a brief flirtation with the idea.

What is reality?

Reality is that very few successful forms of motorsport are restricted solely and completely to production-based racing. Here’s a quiz for you. Name a successful, well-known motorsports franchise with the following characteristics:

  • Requires every racer, every championship, and every discipline to race vehicles based solely on what a major manufacturer produces
  • Restricts their entire racing field, in every class, to the homologated machines of a handful of multi-national corporations.
  • Has achieved success and popularity without a single new manufacturer or constructor entering its ranks in the past 30 years.

Championship Off Road Racing (CORR)? Nope. IndyCar? Nope. F1? Nope. American LeMans? Nope. Rolex Sports Car Series? Nope. How about dirt track racing? Sprint cars? Midget cars? Nope, nope, and nope. Not even NASCAR, arguably the most successful motorsports franchise in the world – one that even has Stock Car in its name – doesn’t require production racing in any of its championship classes.

But motocross (and nearly all motorcycle racing) is quite literally defined by these characteristics. Every so often an economics genius with a degree from Obvious State pipes up in a newsgroup with a comment like “Motorcycle companies are in business to make money. There’s nothing new about that.” I’m always amused by the attitude of such people. Defense contractors, cell phone companies, mortgage bankers, and stock brokers are also in business to make money. I wonder if they have the same laissez-faire attitude toward them? Do they blithely accept that whatever such companies do is acceptable and provides the best options for customers? Or do they think these companies do whatever they can to stave off competition and manipulate markets in their favor? So why are motorcycle companies exempt from this same healthy skepticism?

What does this mean?

I’m not arguing that big motorcycle companies are bad. They aren’t. I am arguing that blindly accepting the Big 4 view of the world, and quietly rolling over for whatever they do has taken a toll. The bountiful cottage industry that existed in motorcycle racing from the 1920s through the 1970s is dead. The talented framemakers of the past have been relegated to building replicas of (production) vintage bikes (because even in vintage we can only race production bikes). Even in flat track – which is the last remaining outpost of the custom frame – the AMA tried to kill custom frames as one of its last official acts. There is no room for innovation or the small startup company that wants to do things its own way. There is only one way, the way of the Big Four. All the business, all the sales, all the development must be an offshoot of what the Big Four want to sell.

None of this is suggesting that we don’t have good bikes available to us. We do. We also have lots of beer available to us on the store shelves. But did you know they are nearly all produced by the same five companies? And that soon it may be the same three companies? Yes, your local grocery’s refrigerator case is filled with dozens and dozens of different, brightly-colored cans and boxes, but there are not dozens and dozens of different beers. There are a handful, with minor variations supported by different packaging and advertising campaigns. Thankfully, the beer industry doesn’t have a big governing body that makes it illegal for small brewers to come up with new ideas and (eventually) get them to market. And the micro-brewery industry is pretty healthy. So why is it so hard to imagine a smaller, more creative subset of the motorcycle industry?

What can be done?

Perhaps it’s time to rethink the production rule in motorcycle racing, time to let a different drummer set the beat. Not in professional racing, certainly. That horse is long gone and nothing is going to wrest professional motorcycle racing out of the hands of the Big Four anytime soon – too many people have built their empires sucking the Big Four teat while we, the motorcycle racers pay the price of extremely limited choice.

But maybe there is opportunity at a different level. Maybe there is a place – somewhere between vintage and the 450f – that a different type of motocross bike can exist. Maybe there is a market for a sport that is competitive on bikes that are lighter and less optimized for Supercross-style racing, racing that is fast and fun but a little less demanding in the death-defying category.

I have no idea, but I do know that you can have a lot of fun, and really good racing, on different technology platforms than what the multinational corporations provide. Car racers of all kinds prove it every weekend. I have some thoughts on what such a platform should strive to achieve. More on that in Part II.

I just saw a boisterous rebuttal of an earlier article – The Long-term Effects of Production-based Racing – over on the TMSuzuki Yahoo! group. I can’t post it here because I don’t have permission but I hope the author will stop by and do it himself. The author takes great exception to my assertion that a current race-tuned 4-stroke is more complex and costly to maintain than a comparable two-stroke, and my assertion that the complexity and ongoing cost of the modern 4-stroke is not appealing to a significant portion of 30+, 40+, and 50+ riders.

He also takes exception to the tone of my article, which is fair criticism as I close it by saying, more or less, that people who ride modern bikes are clueless. That’s not fair and it’s not what I think – well, not completely. I think many of them are but not in the sense that they are stupid. They are simply doing what 20 years of mind share management by the motorcycle oligopoly has trained them to do. They are clueless by design because the small handful of global corporations that control every aspect of our motorcycling world have rigged the game in such a way as to deprive us of choice and convince us that whatever they offer is the best we could hope for.

Production-based racing as an anti-competitive move

When the AMA went to production-based racing in 1985 it was hailed as a landmark by all parties. The factories claimed they would save money, and hence save racing. Because, they said, they couldn’t afford to race if changes weren’t made. We, the riders, hailed it because finally we would have the “same” bikes as the big boys. And we all like to imagine that we could be just as fast as Hannah, McGrath, Carmichael, or Stewart if we just had the same bike.

But in reality the shift to production-based racing was a highly strategic, and perfectly legal, anti-competitive move by the motorcycle oligopoly. With this one change the Big Four Japanese conglomerates took complete control over the off road motorcycle universe. They could now become friendly enemies, rather than having to fear one another. By deciding what they would produce, and when, they became the defacto guardians of innovation, progress, and development. And they insulated themselves against disruption. Innovation, such as it is, became incremental rather than revolutionary – with new developments being rolled out at a pace that made the most sense for the oligopoly’s bottom line.

Controlling markets, controlling minds

They had already been working, since the mid-1970s, on mastering the three basic forces of mass markets – shelf life, shelf space, and mind space – but now they had substantially raised the bar for anyone who wanted to come in and change the rules. 20-plus years later the off road motorcycle market is a prime example of pseudo-variety – the ability to convince us we have choice when we really don’t.

The side effects of this have been profound. Many, if not most, of the motorcycle buying public has lost the capacity to even conceive of life outside the oligopoly’s rule. The chopper and custom motorcycle guys are the lone throwback. But in the dirt bike world it’s almost laughable to suggest that anything other than what the oligopoly offers should exist. Motocross has been turned into Supercross, severe injuries are far more frequent. But we accept this as if there could not possibly be an alternative. And maybe there can’t. Maybe we no longer have the capacity to drive change. Maybe we are so fat and happy with our video games and our extreme sports that we’ll just accept whatever the oligopoly wants us to have. Except for those who don’t. And they go somewhere else – to some other sport or hobby. Which is too bad, because there is an opportunity there for someone, but not as long as the game is rigged.

The AMA is looking for help in getting Congressional support for H.R. 1076, the HIPAA Recreational Injury Technical Correction Act. According to this AMA press release:

The AMA is calling on motorcyclists and others who face health insurance discrimination to urge their U.S. Representatives to support H.R. 1076, known as the HIPAA Recreational Injury Technical Correction Act,” said Moreland. “Time is short. The bill has broad bi-partisan support but we need 218 votes for passage. If we don’t act by April, we will likely miss our chance for legislative action in 2008.

The problem is that employers, and some other health insurance providers, are beginning to discriminate against motorcyclists and others who engage in legal recreational activities that the employers don’t like. Often they won’t disclose this little tidbit, they just won’t pay if you run up a bill for a motorcycle (or horseback, or climbing, etc.) accident. If we had anything resembling an open market for health insurance this wouldn’t be an issue. But we don’t have a market – we have a government subsidized, bureaucratically-managed fiasco that has evolved to limit our coverage options to either what our employer provides, or nothing. So we pay out the ass for healthcare premiums (because the government has mandated that employers must provide coverage for all employees if they provide for any) but the government doesn’t require that employer to actually pay claims for that coverage if it’s an activity the employer doesn’t like. Great idea.

Apparently this brilliant little loophole is a result of the jackasses in Congress passing a bill – the Health Information Privacy Privacy Protection Act – back in 1996 but abdicating the writing of the actual rules of the bill to the Dept. of Health and Human Services. This stellar bureaucracy screwed up the rules, creating this money-saving opportunity for employers. H.R. 1076 is a corrective bill to fix their screw up. I don’t know the history behind it. I don’t know if the AMA played an active and important role or if someone else did all the work and the AMA is just taking credit. I hope this is something the AMA really pushed for and made an impact. This is the sort of thing they ought to be doing instead of running around organizing races.

In any case, this is an important bill. The AMA has a simple, online tool to help you contact your elected representative and tell them to actually do something useful and sign onto this bill. Click the link and do it now. If we don’t act together we may not have the chance to act at all.

news2price_fixingOligopoly Watch reported yesterday on recent price fixing scandals in the rubber industry. Why does this matter to the motorcycle community? Because we use a lot of rubber products and our suppliers are just as likely to be involved in this stuff as not. Just one cartel identified by US regulators for fixing the price of marine hoses has implicated Japan’s Bridgestone and Yokohama, France’s Trelleborg, UK-based Dunlop, and Italy’s Parker ITR and Manuli among others. That’s the ones they know about. This is just the most recent in a long list of price fixing scandals among rubber companies. EU regulators have been on an anti-trust rampage of late, with 2007 showing the largest number of fines ever.

The motorcycle industry isn’t very big and therefore doesn’t get much attention from regulators. But in the world of multi-national corporations price fixing is a common and natural consequence of having only a few large suppliers. The motorcycle industry is dominated by just six companies. Ever wonder why your Honda is always priced within a few dollars of a comparable Yamaha, which is just a few dollars more than a comparable Suzuki or Kawasaki? It’s called “signaling”, and it’s the way oligopolies control prices – and protect profits – without outright collusion. Again, from Oligopoly Watch:

Signaling is a way for members of an oligopoly to coordinate prices without having to actually talk to each other about it. It’s all about setting points of equilibrium in a market by setting your own prices in keeping with those of others. In a tight oligopoly, there is less likely to be a rogue seller who will not participate in the “gentlemen’s agreement” to maintain steady price ranges. Signaling is a favorite subject of role-playing experiments in economy classes, and based on game theory, mutual cooperation is the best solution for all the participants. But trusting other participants is never easy.

Price fixing isn’t the only consequence of industry consolidation. The irresistible drive for corporate growth has other effects – such as the steady drive to product sameness. As companies grow they become more and more alike, and their products become ever more similar until, one day, you can’t tell them apart anymore. But that’s a topic for another time.

This article originally appeared at McCookRacing.com — twf
spiraling_up_graphIn 1985 the AMA mandated production-based race bikes for all MX/SX National competition. This well-intentioned rule change was supposed to level the playing field between the factory race teams and the privateers, and reduce the overall cost of racing. But like so many such changes, this one had unintended consequences.

Skyrocketing Complexity and Cost

The most noticeable consequence has been the skyrocketing complexity of race bikes which has, in turn, created a steep upward spiral in the total cost of racing. When the change was made it seemed like a god-send. Suddenly any of us could walk into the nearest Japanese bike dealer and buy, more or less, the same technology that national championship riders used. And we could buy it for a few thousand dollars.

Today we have high-strung, leading-edge 4-stroke race engines with lifespans often counted in weeks. We have aluminum perimeter frames that look like bridge girders, are just as stiff, and weigh very nearly as much. We have fuel injection, hydraulic-assist clutches, and disc brakes so powerful we can do stoppies in the dirt. We have radiators, water pumps, and hoses everywhere. All the stuff that makes a world-class GP bike.

The trouble is most of us – indeed the vast majority of us – cannot begin to ride a modern world-class GP-level race bike with any efficiency. Nor can we work on them. The modern 4-stroke race bike is so high-strung, maintenance intensive, and costly to operate over a season that very few amateur/hobbyist racers can run a cost-effective racing program. Certainly not in the same way that we could 25 years ago – even accounting for inflation. (A stock, air-cooled Maico 490 two-stroke from 25 years ago put out about 50 bhp at the rear wheel and would do so for an entire season. This is within about 10% of what a top-flight, race-prepped, factory 450F puts out today. But that factory 450F has to be rebuilt every week.)

Yet there is no alternative. While almost every other form of motorsport racing has classes or groups or genres with varying levels of technology, MX/SX has but one – the latest, greatest, most advanced product the motorcycle oligopoly can deliver. Sure, there is the vintage movement. But guys racing 30-year-old bikes and reliving the past is not the same thing as racing new equipment built to a lower technology level. Vintage racing is a great time and great experience, but it’s not an alternate technology platform.

By contrast stock car racers can start out on local 1/4-mile and 5/8-mile dirt ovals, running inexpensive stock-bodied cars, move up to modifieds, super-modifieds, the ARCA series, the Busch Series, the Craftsman Truck Series, and finally Nextel Cup. At every step there is an increase in technology, sophistication, and cost. But the lower levels remain for those who want to pay less for their play.

There is no such progression in MX/SX (actually this pretty much holds for AMA road racing, too.) We have displacement classes and skill level classes, but at every level competitors pretty much have to run the latest, greatest technology offering from Japan to be competitive. That’s the way the racing programs are designed – to align with the bikes that manufacturers want to sell.

What purpose does this serve? It serves to help the motorcycle oligopoly sell new, high-tech race bikes every year. It serves to spur market demand for the latest, greatest all-new race bike. And it serves to ostracize thousands, maybe tens of thousands, of 30-something, 40-something, and 50-something motoheads who just don’t want the hassle. There is a definite and important place for the high-tech, high-dollar, all-out approach to MX/SX racing. But we have lost a great opportunity to embrace and retain a significant number of past racers who have abandoned the sport over just this issue.

The SX-ification of Race Bikes

Another consequence has been the domination of SX technology in bike design. The extreme-sports, aerobatic, obstacle-littered nature of SX places specialized demands on a bike. Because manufacturers know they cannot likely sell two different types of race bikes to a racer (at least not to the mass-market racer) the special purpose SX technology has gradually come to dominate the production racer spectrum even though much of the technology is unnecessary – and some of it may even be counterproductive – for outdoor MX.

The massive aluminum perimeter frames designed for SX obstacles have actually proven to be too stiff for many riders, and certainly too stiff for the average MX racer on a non-SX outdoor track. Suspension designed for tracking straight over long stretches of 3-foot deep man-made whoops don’t work so well in tight off-cambers and technical outdoor sections. Nevertheless, you can ride a SX-style bike on an outdoor track with more success than you can do the opposite.

The SX-ification of Race Tracks

But this morphing of race bikes into SX bikes has had a third, and perhaps most disturbing, consequence – the SX-ification of race tracks. There are numerous reasons for the complete assimilation of MX by SX but certainly the domination of SX bike technology has played a big role. As bikes designed for obstacle course runs have become the norm, it has led to more and more obstacle course tracks. Let’s face it – it’s not a lot of fun to ride a bike designed to absorb 100-ft triples and long stretches of bulldozer whoops separated by bowl turns if you don’t have any 100-ft triples, bulldozer whoops, or bowl turns.

The Aftermath

So today, 22 years after the AMA mandated production bikes for MX/SX racing we have a single technology platform dominated by SX, a technical complexity level that is spiraling well beyond the capabilities of a typical hobby racer, obstacle-littered race tracks with skyrocketing injury rates, an unconscionable  number of teenage quadriplegics each year, and tens of thousands of 30+, 40+ and 50+ riders who have abandoned a sport that has lost its way.

I’m not condemning SX. It’s a great spectacle. I go to one or two SX races each year. They’re a great sideshow and a lot of fun. SX has brought mainstream exposure, sponsorship, and media to motorcycle racing. These are good things. But they have come at the cost of abandoning a huge segment of the old MX community that still has time, money, and energy to invest if only the sport were still recognizable to them.

This makes no sense. There are roughly 33 million males in the 18-34 bracket (that magical demographic group the marketers slavishly pursue in order to sell cell phones, ring tones, sugar-filled energy drinks and all manner of things that we older guys don’t get very excited over) according to the US Census. But there are well over 45 million in the 35-60 bracket. NO, we aren’t going to buy very many Nintendos or cases of Monster, but I’ll bet as a group we buy one hell of a lot more motorcycles – and spend a hell of a lot more money on them – than the younger crowd. So why, when every other motor sport tries to embrace all its fans and offers technology and expense levels to suit different budgets does MX/SX insist on ignoring half or more of its potential audience?

Why not find a way to be more inclusive, not less? F1 car racing has at least a half-dozen different technology platforms, going all the way down to go-karts, where drivers and mechanics can hone their skills. There’s no sanctioning body mandating that only a handful of major manufacturers can make the racing vehicles for any and all levels.

There are tens of thousands of former MX fans who still have health, energy, and money. But we aren’t going to spend it on a sport that’s designed for the video game generation and dominated by an oligopoly that doesn’t recognize our interests. Let the Ricky Carmichaels of the world ride the fuel-injected, 4-stroke, time bomb techno-wonders, risking life and limb over neck-breaking obstacles. We’ll watch. Occasionally. But we want to race on Sunday and go to work on Monday. We want to be able to take our bike apart and put it back together during the week. We want to be able to seize a motor without having to take out a second mortgage.

We don’t want to recapture the old days. We want a viable alternative to the complexity and cost that has taken the fun out of our sport. We want simple and effective to once again be words that can be associated with a race bike. We want motorcycles with character, not the overwhelming sameness that fills the pits today. Most of all we don’t want to be told to “get with the times”.

Because, frankly, the times suck. The homogeneous, uni-brand motorcycles we have today are not an improvement over the choice, variety, and diversity of the 1970s in any way but technology. But there are lots of us out here who don’t think fly-by-wire technology is the be-all end-all. And we have money to spend when someone comes along with the answer.

dollar_roll2In AMA Motocross is Not NASCAR I noted that NASCAR is all business. The AMA is a private, non-profit corporation chartered in Ohio. Think about that.

Professional racing is so named because the racers are professionals – that is, they expect and work to make their living by racing motorcycles. By inference then, racing is approached as a profit-making enterprise by professional racers. This works great in NASCAR, F1, CART, IRL, etc. as all parties have a common understanding and guidepost for judging their progress. Actually, it works pretty well in the stick-and-ball sports too, where team owners, athletes, and fans all understand that the game is the game, but at the end of the day it’s about the money. So the integrity of the game is protected because all parties have a monetary incentive to do so, and that incentive is shared equally and evenly among them. Not to be confused with the money being shared equally. That’s a different thing.

This underlying profit-making motive levels the playing field for all participants. Everyone makes decisions on economic (meaning cost/benefit) parameters and in many cases there is some sort of open-book revenue sharing agreement. Having a common understanding that it’s all about the money makes it easier to compare relative value and get the money split appropriately among the parties. Everything has a market value, with competition and profit setting the boundaries of the playing field. At least that’s how it works most places.

But not at the AMA. As a non-profit the AMA is disconnected from the concept of professional as profit maker. I don’t mean that the AMA’s Director of Competition or various racing officials don’t get the obvious point that racers need to make money. They do. But the AMA’s very structure, as a membership corporation, is anathema to the profit making motive. And this has a profound effect on how the AMA runs its racing programs.

Manufacturers participate in NASCAR, F1, etc. because those organizations offer a marketing outlet they can leverage. NASCAR, F1, etc. have an incentive to build their sport such that it’s a better name recognition opportunity for various manufacturers than the alternatives. Win on Sunday, sell on Monday applies in NASCAR and F1, but no one expects to run out and buy Michael Waltrip’s Toyota or Felipe Masa’s Ferrari.

AMA professional racing is almost diametrically opposed in every way. Yes, AMA professional racing is a lot smaller than auto racing. But we need to honestly ask the question – is the structure of AMA racing the way it is as a response to the small size, or is the small size of AMA racing a result of the structure? Is professional motorcycle racing trapped by a governance model that was designed in the 1920s

If you have a single, successful example of a growing, vibrant, healthy, non-profit professional racing organization in the US (or anywhere else, for that matter) please let me know about it. I’m not aware of any.

After my brief appearance on PitPass Radio I got a nice follow-up e-mail from the crew – Scott Casber, Tony Wenck, and Ed Kuhlenkamp. I forgot to mention Ed in my earlier post about the show. He is president of BUILD-MOMENTUM High-Performance Marketing and serves as a third co-host on the show, usually calling in from his home in North Carolina. Ed’s got a pretty high-powered background in marketing and business development, and his company is doing some very good work helping motorcycle sports companies. Scott is a radio and media guy that likes bikes. And Tony is a racer, race promoter, and race team manager. All three are pretty visionary guys.

We exchanged a few more e-mails regarding my thoughts on the AMA, mostly because Ed and Tony hold different views than I do on the state of the AMA, the source of its trouble, and what needs to happen to fix it. Over the course of our discussions several points came up that I think are likely indicative of the way the motorcycle industry views the AMA and motorcycle riders (who are, in fact, the industry’s customers.) But here’s one that really stuck out:

The lack of support for the AMA is the most glaring issue with the motorcycle community and the problem resides with the riders, not the AMA.

This just can’t be right. The problem cannot be the riders. If a business (and the AMA is a business) is in trouble then there are only two broad reasons (excluding uncontrollables such as natural disaster and government intervention):

  • Mismanagement (corruption, bad product, bad marketing, etc.)
  • Failing to serve customers (which actually rolls back to mismanagement.)

If riders do not support the AMA in sufficient numbers it is because the AMA is not offering a product or products that are sufficient to gain their support. Period. Blaming the customers is dumb.

The Recording Industry Association of America (the association of music companies that want to sell you separate CDs to use in your car, home, iPod, etc) has become infamous for blaming its customers – going so far as to sue huge numbers of them – as it kicks and screams its way to a slow, agonizing, well-deserved, and long overdue death. This has been a remarkably unsuccessful strategy for the music industry. Their sales continue to plummet, their customers continue to disregard their wishes, and now their biggest channel partners are kicking them in the ass telling them it’s time to move on and do what the customers want.

Which brings us back to the AMA. My earlier post Effects of Motorcycle Industry Consolidation on the AMA says:

Like it or not it’s all about the money. The AMA cannot represent the riders and the motorcycle industry at the same time because we, the riders, are not equal to the industry. Our interests and needs are not going to align perfectly with the industry. And we are stupid if we think our paltry membership (250,000 members is about $10 million in dues) is going to get us equal footing in a conflict.

The idea that the riders are somehow at fault for the AMA’s troubles says a lot about how the industry sees us, and how it sees the AMA. In AMA Motocross is Not NASCAR I noted how the AMA History page informs us that the association grew out of the Motorcycle and Allied Trades Association early in the 20th Century and how even today the association’s structure is split between the two groups – riders and industry. Yet the two groups are not equally represented.

In short, if the motorcycle industry views its customers as the problem, and the AMA’s trouble as a sign that the customers are just not cooperating, then we should all run as fast as we can away from the AMA.

I’m excited by Rob Dingman’s big announcement. It represents a possibility for real change. But not nearly enough. From a rider’s perspective the AMA is seriously flawed in both its structure and its approach. I’m not aware of any consumer/customer advocate organization that has half its board made up of the industry that serves those same consumers, nor any that gives every corporate member a vote at meetings while limiting its customer congress to making non-binding recommendations.

In short, the AMA is seriously screwed up as a riders’ organization and a lot will have to change before I can throw my support behind them.

Recently I was on PitPass Radio, a weekly radio show that covers motorcycle racing. The hosts of the show – Scott Casbar, Tony Wenk, and Ed Kuhlenkamp – are really nice guys and do a great job. Their guest list is filled with industry leaders, racers, promoters, and interesting personalities from the world of two-wheeled competition.

I got on the show because I wrote a letter to them a few weeks earlier regarding a topic they had touched on and asking them to talk more about it. Their response was to have me on as part of the debate. The topic? Should the American Motorcyclist Association (AMA) be the only sanctioning body for motocross racing in the US? Phrased a little differently – is it bad for the sport of MX if other groups or organizations try to wrest control of MX racing from the hands of the AMA?

In my letter I raised the issue that when the AMA was formed there were literally dozens of motorcycle manufacturers. But today there are just a handful – mainly the Big Four Jap companies and Harley-Davidson. The point I wanted to make is that as the industry consolidates we cannot afford to assume that what is good for the industry – nee the manufacturers – is good for motorcyclists.

The response I got was that this just isn’t true, that the industry still has many vibrant players – e.g. Ducati, Victory, KTM, etc. – and that consolidation hasn’t had the effect I think it has. Sadly, I just can’t agree.

Ducati is indeed a very active competitor in the industry and kicking butt in the MotoGP scene. Victory is certainly making some waves in the cruiser market. And KTM is having great success in off-road racing. The trouble is that being competitive on the race track, or selling a few bikes in a niche market, in no way correlates to the amount of power these companies have in the industry.

For example, according to BusinessWeek Ducati has $600 million in market cap. By contrast, Honda Motor Company has $59.3 billion in market cap with more than $5 billion in net profit (Forbes). Honda, by itself, could buy the entirety of Ducati with profits from a single month. Do you seriously believe these two are in any way equal politically or at a bargaining table? I looked at this a little further, trying to validate my theory that the Big 4 and HD dominate. Here are the market cap values I found:

I couldn’t find market cap info on KTM, but their sales, at €500 million/year, are about 30% of Piaggio’s so I’d reckon them about the same size as Ducati. (Editor’s note: It’s also nearly impossible to find unit sales or gross sales dollars specific to motorcycles for the larger manufacturers as they do not like to break them out. If you have authoritative numbers for unit sales or dollars by brand I’d like to see them.)There are other bit players in the market – Husqvarna, TM Racing, etc. But none of them matter. This is what the market looks like:

motorcycle_mkt-cap_comp

The Big 4 Japanese have 70% of the capital dollars in the motorcycle industry. BMW and H-D combine for another 26%. Everyone else is pretty much a rounding error. At least by this measure these six companies (the Big 4 Japs, BMW, and H-D) utterly dominate the motorcycle market in every way that really matters (it’s all about the money.) If you want to argue against that I don’t think we can even have a rational debate.

But my main point is that these same companies also dominate the AMA in every way that matters – policy, decisions, rules, etc. – for the simple reason that they have all the money. Now if you want to argue against that please be prepared to answer the following questions:

1) Can ~5% of the financial power of the motorcycle industry exert any meaningful economic influence over the other 95%?

2) Can ~5% of the financial power in the motorcycle industry exert any significant bargaining power politically, economically, or socially?

3) When the AMA must decide whether or not to take an action that will benefit rider-members but will significantly anger the 6-member motorcycle oligopoly – who control $150 billion of capital and 80%-90% of the market –  will the rider-members prevail?

If you answer yes to any of those questions you live in a very different, and vastly more naive, world than I do. Like it or not it’s all about the money. The AMA cannot represent the riders and the motorcycle industry at the same time because we, the riders, are not equal to the industry. Our interests and needs are not going to align perfectly with the industry. And we are stupid if we think our paltry membership (250,000 members is about $10 million in dues) is going to get us equal footing in a conflict.

This doesn’t make the AMA “bad” or inept. The people at the AMA are good, well-intentioned, hard working folks who love motorcycling.  But the AMA has an inherent conflict of interest — no organization can evenly represent two such politically and financially unequal bodies.

In my opinion the AMA should, first and foremost, represent the American motorcycle rider in all his/her permutations and an organization that tries to simultaneously represent the industry, no matter how well intentioned or managed, will not be the quality representative we deserve.