Managing the costs of the America’s Cup

During the 34th America’s Cup held in 2013, beyond the competition, there were two other events that defender Oracle Team USA sought to win: the Spectator Cup and the Commercial Cup.

Defense CEO Russell Coutts initiated drastic format changes in hopes of winning all three mugs. While he definitely won the Auld Mug, the other two prizes where not fully claimed. The event certainly had spectator appeal, but ticket sales and television viewership were underwhelming. And the commercial benefits were clearly mixed.

The importance of winning the Spectator Cup and the Commercial Cup is a result of the biggest issue plaguing the America’s Cup: cost.

“The America’s Cup involves a staggering waste of money that would be much better spent on world health or world peace or something,” noted Team New Zealand meteorologist Roger Badham in Afloat.com.au, who has had a long and intimate involvement in all the America’s Cup campaigns over the past 30 years. “Oracle last time supposedly spent about $300 million US. I call that obscene. It’s totally obscene.

“For a truly wealthy person like (Oracle boss) Larry Ellison who is supposedly worth 50 or 60 billion, then spending $300 million on an America’s Cup campaign is neither here nor there, really. It’s like some ordinary person spending a thousand dollars.

“There is no benefit to him whatsoever apart from bragging rights and more importantly, running the next Cup. He is able to say I own the America’s Cup, the world’s greatest sporting trophy. He can drink out of it or piss in it. He can do whatever he likes with it. It’s his Cup. And that is the ultimate ego trip.”

But Coutts feels they are on the right track.

“We can’t take a step backwards,” Coutts reported after the event to SportsProMedia.com. “The racing was so spectacular that we’ve got to keep the same concept. If you look at the America’s Cup brand, that is where the brand needs to be in the future, in my view. It was spectacular racing, it captured the non-sailors’ interest and we have many, many examples of media interest that is unprecedented in our sport. We’ve finally got a product that is user-friendly on television and compelling.

“We can’t take a step back but we’ve got, simultaneously, to address the cost issues because the cost of these teams is completely out of line with commercial sustainability. The main thing to address is the number of personnel on each of these teams. The personnel is somewhere between 50 and 60 per cent of the running costs of the teams, so we simply have to find ways to reduce the number of people on-site in these teams. We can do that in a variety of ways.”

For the 35th America’s Cup, reducing team size by reducing boat size is one of the prominent ways. But despite the boat being changed from the IACC yachts in 2007 to the AC72 in 2013, and the crew size reduced from 17 to 11 sailors, Coutts still sees personnel costs as the dominant problem. Will the introduction of the AC62, and its reduction of crew to 8 sailors, tip the scale enough?

One of the ways yet to be discussed is player salary. Standing by…