SBD/July 11, 2013/Marketing and Sponsorship

Louis Vuitton Wants $3M Refund From America's Cup In Wake Of Withdrawals

Louis Vuitton's contract was based on at least eight teams competing
Longtime America's Cup sponsor Louis Vuitton, the "posh French retailer that has been a primary financial backer of the competition," wants $3M of its spend refunded "because so few teams have entered," according to Eric Young of the S.F. BUSINESS TIMES. A source said that the company's "initial sponsorship" was for $10M. Its contract was "based on at least eight teams taking part in the Louis Vuitton Cup, a round-robin playoff to determine which team will ultimately sail against Oracle Team USA in the America’s Cup championship." There currently are "three teams entered into the Louis Vuitton Cup." The source said that Louis Vuitton can get a $1M rebate "for each team less than six that participate." The company has "been a Cup sponsor for 30 years." Louis Vuitton "briefly dropped its sponsorship of the Cup in 2007, saying that commercialism had overtaken the competition." The company then "renewed its sponsorship of the Cup" in '10 after Oracle Racing won the event (BIZJOURNALS.com, 7/10). Louis Vuitton Cup Founder Bruno Trouble said of the brand's sponsorship deal, "There were no provisions for anything less than five because we did not expect that would happen. It is worse than we thought." America's Cup Event Authority CEO Stephen Barclay said that the "bickering and brinkmanship was hurting the sponsors." In New Zealand, Dana Johannsen noted sponsors have "already had to scale back their hospitality plans after America's Cup officials were forced to revise the racing schedule as part of the list of safety recommendations put forward in the wake of the death of Artemis sailor Andrew Simpson" (NEW ZEALAND HERALD, 7/9).

CITY ON THE HOOK? In S.F., Matier & Ross note the city could "be on the hook" for at least $8M million in losses from hosting America's Cup. Mayor Ed Lee was asked about the "private fundraising meant to defray the city's costs for hosting the event." He responded, "It's a challenge -- I have to admit it." It "hasn't helped that the Italian entry sat out the first race of the preliminary competition in a protest over safety rules -- leaving New Zealand's entry as the lone boat racing in the opening round." Private fundraising even before the "latest PR snafu" had "fallen well short" of the $22M pledged by the city. The Mayor's OneSF Committee since taking over the stalled fundraising has "raised about $600,000." However, half of that "went to race organizers and doesn't count against the city's pledged contribution." Lee's office said that if the fundraising "comes up short, the city will probably make up its losses from the extra hotel and other tax revenue generated from hosting the races" (S.F. CHRONICLE, 7/11).
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