America’s Cup: The Venue Dilemma

Leading up to the 34th America’s Cup in 2013, there were what we will kindly call “pretend” challengers. This was made possible by lenient entry requirements and an affordable AC World Series circuit. Eight teams entered and bought AC45s, which looked good in the build-up. Lots of interest, lots of activity.

However, it was mostly smoke and mirrors, and all the insiders knew it.

When real money was required to build and campaign the AC72, only three teams remained. For the 35th America’s Cup, defense CEO Russell Coutts did not want a repeat of this charade.

“What’s important is that the teams that enter the America’s Cup are teams that are prepared to complete the entire schedule,” explained Coutts. “This is particularly important for event sponsors, in which the terms of the contract are based on a certain size event. When there are teams that drop out, like we had in the 34th America’s Cup, it becomes a problem.”

As a result, the entry requirements for the 35th America’s Cup were stiffened up to insure only legitimate teams get confirmed. Here’s what’s needed from teams after they submit their challenge during the entry period from June 9 through August 8, 2014.

Initial fees when the entry is confirmed…
– US$1,000,000 (first installment of entry fee)
– US$25,000 (contribution to protect the event’s legal interests)
– US$50,000 (website fee)

Secondary fees no later than December 1, 2014…
– US$1,000,000 (final installment of entry fee)
– US$1,000,000 (performance bond)

Real money is now needed to play the game. But where does the money come from? According to Team New Zealand CEO Grant Dalton, teams are going to have a tough time getting it from sponsors.

“It will make it difficult for fully funded commercial teams and I think when this all plays out and we actually dig in to the teams that will be in it, they will be backed by wealthy billionaires.”

Dalton says it’s impossible to get potential investors on board when the venue hasn’t even been decided. While the rules have been laid out, a venue hasn’t, and won’t be until well after the close of entries.

“It is impossible, completely impossible to raise sponsorship money without being able to close the loops with the sponsors and making commercial decisions through a marketing committee. I don’t know how you reconcile those two things. Without a venue you can’t raise real money and that makes it very difficult for commercial teams.”

So when will the venue details be released? Here are the terms in the Protocol…

2015 / 2016 AC World Series – AC45 racing – Defender and All Challengers
2015 – 6 to 8 events; details by November 1, 2014.
2016 – 6 to 8 events; details by August 1, 2015.

2017 AC Qualifiers – AC62 racing – Defender and All Challengers
One venue, details by February 15, 2015.
Event shall be no greater than 30 days and shall commence no earlier than 4 months prior to the AC Challenger Playoffs.
Top 4 challengers advance to AC Challenger Playoffs.

2017 AC Challenger Playoffs – AC62 racing – Top 4 Challengers
Same venue as AC Match, details by February 15, 2015.
To be held between 25 days and 3 days prior to the AC Match.
Top challenger advances to AC Match.

2017 AC Match – AC62 racing – Defender and Top Challenger
One venue, details by December 31, 2014.

Not knowing the venue is a problem for the challengers, while not knowing the number of challengers is a problem for the organizers.

Because of what is being asked of Host Cities, such as facilities, services, and fees (local sponsors or other), will a Host City enter into a venue agreement without knowing the full scope of the event? If the event has no more than four challengers, what becomes of the 2017 schedule?

The commercialization of the America’s Cup adds significantly to the complexity of venue selection. When compounded by the changes to each eddition, it has created a historical event without sufficient history. Welcome to the 35th America’s Cup!