Even rich say America's Cup costs too much
By Rick Westhead
Bloomberg News Service
AUCKLAND — Oracle Corp. Chairman Lawrence Ellison is spending $95 million trying to win a 16-pound silver pitcher that's worth about $250,000.
Bloomberg News Service
Competing for the America's Cup, sailing's most prestigious prize, isn't cheap. Ellison is paying for two carbon-fiber racing yachts and a 150-person staff that includes 40 sailors, nine meteorologists and two chefs. And that doesn't include the four-story, 240-foot recreational yacht that he relaxes on after races.
Larry Ellison, chairman of Oracle Corp., sits next to a model of the America's Cup trophy that he'd like to walk away with. He's spending $95 million in hopes of winning the prize. Such big-money investments are forcing other competitors to bow out.
"It's a big business," Ellison said. "It takes a lot of money to own and run an America's Cup racing team. And unlike baseball, you can't get your money back by selling the team to someone else."
Some in yacht racing say billionaires such as Ellison are making it tough for mere millionaires to keep up, forcing out some teams. Organizers, competitors and even other billionaires like cellular-telephone pioneer Craig McCaw, sponsor of an America's Cup entry with Microsoft Corp. co-founder Paul Allen, say costs need to be capped.
"The sport is at a crossroads," McCaw said. "There has to be a balance between having an open competition and not simply letting the checkbook win every time."
Eight teams are attempting to qualify for February's America's Cup race, which matches two boats in a best-of-nine contest. Team New Zealand won the Cup in 2000, and the winner of the Louis Vuitton Cup this month in New Zealand will challenge.
The America's Cup has been a pastime for the rich since its beginnings in 1851, and attracted such turn-of-the-century luminaries as Sir Thomas Lipton, Harold Vanderbilt and J. P. Morgan.
Teams have always underscored investing in technology — Morgan spent $175,000 on "Reliance" in 1903 ($3.6 million in today's money), a boat that had a telescoping mast that rose 200 feet above the water.
As much as 60 percent of the $75 million budget for OneWorld Challenge, McCaw and Allen's entry, is spent on technology, said Bob Ratliffe, the team's executive director. The boat's keel was designed by aerospace engineers at Boeing Co. and built by Ford Motor Co. The team, which will enter a quarterfinal after losing to Ellison's syndicate last week, rented wind tunnels from the National Aeronautics and Space Administration to test the hull.
As spending has shot up, more people want it contained. Bruno Trouble, the skipper of France's 1980 America's Cup team and founder of the Louis Vuitton Cup, said the event may become so exclusive that it will squeeze out almost all competition except for the billionaires.
"We need to keep this affordable for small teams from small countries," Trouble said.
Outspending competition
Ellison — who split the $95 million cost this year with Bayerische Motoren Werke AG and isn't using Oracle money for the event — is spending the most of the eight contestants. Included in his budget was about $10 million for each of the team's two 70-foot racing boats.
Italian entry Prada Challenge is spending $90 million. The thriftiest is Le Defi Areva, whose $20 million budget is backed by Areva SA, the French state-controlled nuclear industry holding company.
Some teams have already given up trying to keep pace with Prada and Ellison.
After three successive entries, Tatsumitsu Yamazaki, chairman of Tokyo-based S&B Food Inc., pulled his team out this year because he couldn't come up with enough sponsorship money. Australia, the first country to wrest the Cup from the United States in 1983, doesn't have an entry because of a lack of money.
Money concerns
Last month, over a dinner of crayfish and filet mignon at the governor general's residence in Auckland, New York City Yacht Club Commodore Charlie Dana said he sat with New Zealand Prime Minister Helen Clark and listened to her concerns about the sport. New Zealand's team is spending $40 million.
"She's really worried about whether New Zealand can afford to keep competing," said Dana, whose club partly financed Team Dennis Conner's $45 million entry.
Any push to pare costs may rest with the next winner, Dana said. The defending yacht club manages the event, and may be able to introduce spending limits.
Outspending the competition doesn't always lead to a victory. Since 1987, the biggest-budget team in each competition has watched a rival capture the Cup, said Gary Jobson, a professional sailor and analyst for the sport-television channel ESPN.
Oracle's Ellison said making teams limit spending will diminish the event.
"If you want to put people in the same boat, say eight fast dinghies, then it's not the America's Cup," he said.
Teams from Germany, Holland, China and Japan competing in the Louis Vuitton Cup have said they will enter again if costs are reduced, Jobson said.
Cutting costs
Ways to cut expenses may include a salary cap — Jobson said some top sailors are paid as much as $30,000 a month plus bonuses over the two years leading to the America's Cup — or sharing weather information. Ellison's team has seven weather boats patrolling the fringe of the race zone to detect shifting breezes.
Trouble said teams also might limit the number of foreign sailors and masts, which cost $500,000 each and are matched to various wind conditions.
Lowering costs may attract entries from more countries, spurring wider international interest and increasing television revenue, said a member of Canada's 1983 America's Cup team.
"The only reasons Canada got out were strictly financial," said Evert Bastet, vice president of the Canadian Yachting Association. "They're just spending too much money. No one can compete against the billionaires."
