According to Forbes Magazine’s list of the 50 richest Australians, Bob Oatley is sitting in 33rd place with an estimated fortune of US$830 million, as of January 2014, which at the current exchange rate is approximately €615 million.
No matter what currency you express it in, for the average person, that is a boatload of money and thousands of times what most of us would ever earn in our entire lifetime. Nevertheless, there is a tremendous difference between being very rich and being able to finance an America’s Cup campaign, and this is something that, apparently, Bob Oatley and his son Sandy, misjudged when they filed their challenge for the 35th America’s Cup last September.
It’s difficult to conceive how such an accomplished businessman wouldn’t see nearly a year ago that with an estimated cost of more than €100 million to run a competitive campaign and have a serious chance at beating Larry Ellison, it is financially a no-brainer. One cannot spend a sixth of one’s fortune on a yacht race, regardless of its appeal and the resulting status achieved, as well as the bragging rights. In fact, there were a number of knowledgeable people that, off the record, would also express their bewilderment during the 2013 Sydney Hobart race.
There will not be any Team Australia taking part in the 35th America’s Cup. Photo copyright Andrea Francollini
Most probably, the Oatleys thought they would be able to gather around them more wealthy Australian businessmen and corporate groups that would fund a national drive to take back the America’s Cup to Sydney. The final match in San Francisco might have been one of the most exciting and thrilling races but the entire event was a commercial disaster. None of the sponsorship and funding goals were achieved and a mere three challengers competed. We have commented on this many times and we will not go over that issue again. Still, it is interesting to remind ourselves of the budgets the four teams had last time, according to Bruno Troublé: Oracle Team USA spent €250 million to successfully defend the America’s Cup. Artemis Racing had a budget of €160 million, Luna Rossa had at its disposal €100 million while Emirates Team New Zealand reached the finals with €80 million.
As a result, the Oatleys started their negotiations with Russell Coutts and Larry Ellison at the €100-million barrier and unless they were able to negotiate a protocol that would substantially reduce costs compared to the 34th America’s Cup they had embarked on a mission impossible. After, allegedly, tough negotiations that went on for months, the result was quite surprising, to say the least. Not only did the Australian challenger agree to hand the Defender unprecedented rights, they put on additional burdens on the challengers that made the, already scant, commercial appeal even smaller.
Just the fact the challengers will have to compete in two different parts of the planet makes the logistics and finances prohibitive. In addition, marketing departments will have to make their pitch in the corporate boardrooms without even guaranteeing that their team will make it to the top four! Let alone the fact that before the end of 2014 they will not know the venue of the next event and the venue of the Challenger Selection round robin will not be announced before February 2015!
It seems that reality settled in on Saturday when Team Australia announced their withdrawal from the America’s Cup, stating, among others that “ultimately our estimate of the costs of competing were well beyond our initial expectation and our ability to make the formula of our investment and other commercial support add up.”
As of today, there are four potential and credible challengers that are, or could be, able to provide the initial US$3 million required for the entry. They are Luna Rossa, Artemis, Ben Ainslie Racing and Emirates Team New Zealand. There is talk of the possibility of a French or Chinese entry but we doubt they will be able to get the necessary funding.
The case of Ben Ainslie is an example of the impossibility of getting off the ground without the strong support of either a government or a group of wealthy financial backers. The world’s most successful and most accomplished sailor, a living sports legend in his own country couldn’t have started his campaign without £7.5 million of government funding and the contribution of seven founding shareholders. We aren’t saying that this is negative, it’s simply a fact.
We were criticized in the past for pointing out this but when the team that wrote the rules of a competition bows out because they consider it to be extremely expensive what should the rest think? It appears Russell Coutts is doing an excellent job though. Despite the PR to the contrary, the only task he has is to retain the America’s Cup, nothing more. So, with one of the five potential challengers out, achieving that goal became a bit easier.