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Volume 20 No. 42

In Depth

On a Friday in late August, a group of eight representatives from four America’s Cup sailing teams gathered at San Francisco’s Embarcadero at the request of organizers of the 2013 America’s Cup. The organizers introduced three members of their advisory board — Harvey Schiller, Jay Cross and Geoff Mason — and ceded the floor to them.

Schiller, the former president of Turner Sports and executive director of the U.S. Olympic Committee, spoke first. He ran through a series of slides that showed the rights fees and sponsorship revenue generated by sports ranging from golf to tennis to mixed martial arts. He said that sailing had fallen behind sports that it once had been more popular than.

The new AC72 catamaran allows racing close to shore, like in San Francisco last month, making the sport more appealing to fans, networks and sponsors.
“You have the long tradition of the Cup, great athletes and significant interest in what you’re doing, but we can’t wait until 2013 until there’s the same or a new defender to plan 2013 and beyond,” Schiller said. “We have to do it now. If we work on [creating a series of events] now, we can return America’s Cup to a tier one sport.”

Schiller’s words addressed the challenge that has limited the potential of the America’s Cup and the sport of sailing for decades. The competition is one of the most respected and recognizable properties in the world, but its structure — which gives the winner of the quadrennial event the right to pick the next location and organize the competition — means that it’s struggled to develop a predictable schedule, sell TV rights and land sponsorship.

It’s something that organizers of the 2013 America’s Cup want to change. They’re working with an advisory board, which also includes Peter Ueberroth and Casey Wasserman, to develop a case for creating an international sailing league with 12 to 14 annual events, an array of corporate sponsors and TV partners around the world.

The meeting that Schiller led was one of the organizers’ early efforts to get existing America’s Cup teams to buy into the idea.

“There aren’t many sports properties in the world that have a real chance to be a global sports property,” said Stephen Barclay, CEO of the America’s Cup Event Authority, which is managing the 34th America’s Cup that will be held in San Francisco in September 2013. “We have the resources here backing us. The next six months will determine if we deliver on the vision, and that’s exciting to be a part of.”

The resources and the vision come from billionaire Larry Ellison, who won the 33rd America’s Cup in 2010. The victory gave him control over the event the last two years, and he’s used that period to re-evaluate professional sailing and alter the America’s Cup rules and structure, and to create a popular, less expensive and more commercially viable property.

During the last three years, his Oracle Racing team has created the America’s Cup Event Authority to sell and promote the event, and America’s Cup Race Management to oversee the competition. The organizations are independent, and the hope is that the winner of the 34th America’s Cup hires them to run the next competition, which Barclay said would give the sailing championship the type of organizational stability it has lacked.

Oracle Racing, owned by billionaire Larry Ellison, hosts the next America’s Cup.
The team developed a standard boat (the AC72 catamaran) with a winged sail that can maneuver at top speeds of 50 mph and sail in a variety of weather conditions, making it possible for networks to commit to showing races live without having to worry about postponements for weather. Perhaps, most importantly, the boats can race just off the shoreline within view of spectators rather than 20 miles from shore where past races were held.

Finally, it created a series of lead-in races called the America’s Cup Series. Races have been held during the last year in Cascais, Portugal; Plymouth, England; San Diego; Naples, Italy; Venice, Italy; Newport, R.I.; and San Francisco.

The collective changes are expected to increase the size of the audience watching the America’s Cup in person and on TV in 2013, which Barclay said will make it easier for teams to deliver a return on investment to sponsors that range from Emirates to JPMorgan. But more changes are needed if America’s Cup teams want to maintain the interest of those viewers and continue to deliver a return on sponsors’ investments.

“For us to be a global sport, we have to have a calendar that represents a global sport,” Barclay said. “We need a dozen or 14 events a year. That’s the next nut we need to crack.”

Ellison and the America’s Cup Event Authority are trying to get teams to buy into a professional league of sorts. The idea would be for the America’s Cup Event Authority to create a series of a dozen annual races between the 34th America’s Cup and the 35th America’s Cup. It would sell TV rights and sponsorship worldwide to those events. Then it would share the revenue with teams, which spend $30 million to $100 million to compete in the America’s Cup, and use it to cover the cost of organizing the 35th America’s Cup, which is expected to cost more than $100 million.

It’s a radical idea in the world of sailing. The America’s Cup competition is governed by a single piece of paper called the Deed of Gift that was written in 1852, the year after the first race was held around the Isle of Wight.

Historically, the event has functioned on the old cliché: To the victors go the spoils. If teams agree to create a league, though, the victor no longer would control the entire America’s Cup. It would only determine the location of the next competition.

“It’s a really tricky [proposal] given that there’s a 160-year-old sheet of paper 1 1/2 pages long that governs America’s Cup,” Barclay said. “That [piece of paper] is what we’re all about. Otherwise, we’d lose the mystique. But bringing it into the 21st century, keeping the best things of the past, the challenges from countries, creates opportunities to solve the challenges we’re trying to solve, which is putting teams on sound financial footing.”

Several of the teams have been supportive of that idea.

Kim Dong-Young, CEO of Team Korea, said that the team has struggled to get sponsorship since it decided to challenge for the Cup earlier this year. Kim said that the team has met with several sponsors who want to cut a multiyear deal and want to know how many races the team will sail after the 34th America’s Cup is held next year.

“As a small and new team, the idea [of a league] is great,” Kim said. “With the America’s Cup, there isn’t any certainty. For a new country and people without any background, it’s hard to understand. This is a good idea.”

Ben Ainslie, the British Olympic gold medalist, agreed. He recently launched an America’s Cup Series team and plans to challenge for the 35th America’s Cup.

“It’s right the holder [of the Cup] should be able to decide the venue,” Ainslie said, “but if you have an annual circuit, that gives teams the continuity they’re searching for from a commercial standpoint and can give the holder of the America’s Cup the right to hold the event in the venue of their choosing. It becomes much better for everybody.”

Of the three other challengers for the 34th America’s Cup, Patrizio Bertelli, CEO of the Italian team Luna Rossa, declined to comment, saying the team was still learning about the America’s Cup Event Authority’s idea; Paul Cayard, CEO of the Swedish team Artemis Racing, was traveling and unavailable but has supported the idea; and Grant Dalton, CEO of Emirates Team New Zealand, declined comment.

Barclay said that organizers will meet with teams again in San Francisco this October. It’s unclear how many of the five America’s Cup teams and eight America’s Cup Series teams would need to support the idea for the America’s Cup Event Authority to move forward with it. If it wanted, the event authority could move forward with plans without team support and teams could challenge them in New York court, which has jurisdiction over the Deed of Gift.

For now, though, Barclay is intent on building support. In the interim, his team will begin gauging TV networks’ interest in buying rights to future events, sponsor interest in supporting the future “league,” and developing a tentative schedule and finding venues for future America’s Cup Series races.

It already has met with NBC and Mason, who is on its advisory board, and is a producer at ESPN, and it has held conversations with existing sponsors about its plans. But drafting a schedule may be the biggest challenge.

Unlike Formula One, which flies cars from race to race, America’s Cup teams have to spend time sailing from race to race. That creates major logistical issues, Barclay said.

“We’ll have to go to four, possibly five regions of the world and stay there for a period of time and have three or four events there,” he said.

Barclay said that the series has a finite timeline for creating a league — by the America’s Cup next September.

“The worst case for us is we reach the end of the 34th America’s Cup and we do not have sponsors locked in, we do not have venues come in and we do not have a television deal,” Barclay said. “History will repeat itself. The important thing is that the [America’s Cup] winner has in place world series venues, sponsorship deals and television deals. In all of those cases, we can manage those contracts. The trick is how we share the revenues.”

For the first time at an America’s Cup, spectators will be able to watch the sailing action from the shore, and that opportunity has allowed organizers to reinvent the hospitality offered at the 2013 event.

At the last America’s Cup, which was held off the coast of Spain in 2010, VIP guests were put on yachts and taken nearly an hour offshore to watch the action. The setup limited the type of hospitality packages offered at the event.

This time, corporations and individuals can choose from an array of options ranging from private viewing chalets near the Golden Gate Bridge, to a club viewing area at Pier 29 near the start-finish line, to private boats that take people closer to the action offshore.

“We’re going to be able to offer a little of everything,” said Keith Bruce, president of SportsMark, the San Francisco area agency that is the official corporate hospitality management partner of America’s Cup. “We’ve never had this type of opportunity before. That’s what makes this program really exciting.”

America’s Cup organizers have said they expect a total of 7 million to 15 million spectators for the four events in San Francisco. Two of those events last five days. The other two competitions, which will take place next year, will last three months.

Hospitality for America’s Cup sponsors is included in their deals and provided by event organizers. Sponsors will get access to Club 72, which will cater to 600 people and be located at the finish line. The packages include the opportunity for some partners to go out on the boats being raced in the events.

SportsMark will sell hospitality packages to non-event sponsors. Bruce said that current hospitality plans call for up to 20 private hospitality chalets that accommodate 40 to 50 people apiece. It is expected to be 100 percent corporate. The club viewing area at the start-finish line will accommodate 1,000 people. It is expected to be a mix of corporate clients and individual buyers. People who buy into the club can add on an offshore trip on a boat if they want.

Final pricing for the packages hasn’t been determined. SportsMark is selling club VIP packages for the Oct. 4-7 America’s Cup Series race in San Francisco for $2,700 per person.

SportsMark is in the process of stitching together a collection of support agencies in various regions of the world to help it with 2013 sales. It plans to hire one to two agencies in Europe and will work with Cartan International on sales in Australia and New Zealand.

Bruce said he expects most of the sales to be done in the fourth quarter of this year and first quarter of next year. Spot sales will take place all the way up until the events are held.

SportsMark ran hospitality during the America’s Cup Series races in San Francisco in August. It also is selling hospitality packages for the race in October. Bruce said that’s allowed them to demonstrate what the agency will be offering in 2013.

“We’re not starting from scratch,” he said. “They can get a sneak peek or trial run for the next event. It’s a nice advantage we have.”

At the start of the year, America’s Cup sponsorship sales were stuck in neutral.

The America’s Cup Event Authority had six major sponsors in Louis Vuitton, Puma, Garmin, PricewaterhouseCoopers, Starwood Hotels, and Moët & Chandon, but it hadn’t announced a new deal in more than three months, and it was searching for deals in critical categories like automotive and financial services.

A solid sales year has allowed the newly formed America’s Cup Event Authority to add new sponsorship deals with Lexus, Charles Schwab, Kaiser Permanente and Red Bull.
Over the last nine months, the situation has changed dramatically. The organization has announced deals with Lexus, Charles Schwab, Kaiser Permanente and Red Bull, and it expects to close a few more deals before the end of the year.

It’s a change that, in large part, followed a deal with the city of San Francisco last April that ensured the race would take place there in 2013. There was a chance before that deal was finalized that the America’s Cup Event Authority would have to change its plans for the race.

“We were selling promise. Now we’re selling reality,” said Stephen Barclay, CEO of the America’s Cup Event Authority.
Sponsorship packages range in value from $3 million to $10 million and can be customized to include everything from television spots and on-screen graphics to hospitality and signage. Barclay said the organization is looking for sponsors in the beer and telecommunications categories.

The America’s Cup Event Authority has hired 21 Marketing, which is led by Rob Prazmark; Premier Partnerships, which is led by Randy Bernstein; and BRC Group, which is led by Brad Rothenberg, to assist with sales.

The organization’s agreement with the city of San Francisco calls on it to raise $270 million in sponsorship revenue. Barclay said organizers are close to their goal.

“It’s no secret that we started behind the eight ball,” Barclay said. “Sponsorship sales were slow, but 2012 for us has been a great year, and I would predict by the end of this year that we’ll be on track.”

NBC Universal is looking to bolster its coverage plans for the America’s Cup by putting a reporter on a boat to offer in-race updates and postrace interviews.

NBC hopes to enhance coverage by placing a reporter on one of the boats for in-race updates.
It’s part of NBC’s effort to try new strategies with a new property to see what works and resonates with viewers.
When organizers of the America’s Cup last March bought time on NBC and NBC Sports Network for a series of races leading up to the America’s Cup, NBC planned to take the world feed, air it on both networks and supplement it with an on-air host and commentator. For coverage of the America’s Cup Series next month in San Francisco, the network is considering ways to enhance that coverage, including placing a reporter onboard one of the boats.

“It’s been a learning experience for us,” said Gary Quinn, senior director of programming for NBC Sports. “Each race we’ve added more [on site] because we’re more integrated [with America’s Cup organizers] now.”

Quinn added that NBC has looked to do more with its America’s Cup races because it’s been pleased with the ratings the races have delivered to date. The America’s Cup Series race broadcast on NBC in July delivered a 0.9 Nielsen rating, and the race broadcast in August delivered a 0.6 Nielsen rating.

“Those are good numbers for a sport that doesn’t get a lot of coverage here [in the U.S.],” said Jon Miller, NBC Sports president of programming.

America’s Cup organizers have undertaken a number of measures to make the sport more TV-friendly in 2013. They developed new boats that can race in most weather conditions, which will allow NBC and more than 30 other broadcasters worldwide to show the sport live. They also invested in a new graphics package called LiveLine for the worldwide feed, allowing viewers to identify race leaders and course boundaries more easily because of superimposed lines on the race broadcast.

Those changes helped the property buy time on NBC, which will be the first network to broadcast the America’s Cup live.

“We’ve been very happy with it,” Miller said. “The quality of production has improved. This sport in high definition is really spectacular.”

America’s Cup organizers have retained all the advertising inventory during the race broadcasts, and they’ve been bundling that inventory into their sponsorship packages. They hope to prove through their broadcast next year that the property is worth a rights fee in the future.

America’s Cup Event Authority CEO Stephen Barclay said the organization has held discussions with broadcasters in the U.S. and elsewhere about a long-term TV deal. He expects formal discussions to begin later this year. NBC is among the networks he will meet with about the future.

Miller said that NBC believes America’s Cup is a “good property” and is interested in what organizers “have to say,” but the network hasn’t committed to anything beyond 2013.