I have written about America’s Cup matters four times on this Blog, beginning on 1 July 2013 shortly before the Challenge racing in San Francisco and ending on 14 September 2020 with the prescient title “Whatever the result, is this the last time the America’s Cup event is held in New Zealand?” And so here we are today following the end of the exclusive negotiating period between Team New Zealand and the New Zealand Government and Auckland Council with a “no deal” outcome. That is accompanied by a seeming acceptance that the Cup is destined to go off-shore (probably forever) because of a perceived lack of money in New Zealand or otherwise able to be raised by TNZ to meet its needs for its team to defend the Cup next time successfully (said to be in excess of $200 million).
As has been much publicized Grant Dalton, accompanied by COO Kevin Shoebridge and inhouse lawyer Russell Green, addressed over 400 members of the Royal New Zealand Yacht Squadron last Tuesday evening on where matters stand at present. Dalton’s message comprised the following propositions:
1. TNZ’s mission is to hold on to the America’s Cup.
2. If we take the Event off-shore, “the Cup hasn’t left town” – it’s still sitting in the glass case in the Squadron. And we might have a World Series regatta here, even though the Challenger Series and Defence will not be.
3. TNZ will spend half of what other teams spend but without the money that we need we will lose the Cup: as he put it, “if it’s here, a weakened TNZ will lose, there’s no doubt about that”.
4. The choice therefore is hold the Cup here and lose it; or go offshore and win it.
A side issue raised by Dalton was that foreign competitors would target our sailors, as he said happened in 2000. Presumably however TNZ’s intention of strengthening the nationality rule is to stop that happening.
Dalton also made reference to the New York Yacht Club’s proposal of a US$75 million team expenditure limit (not one that quite squares with TNZ’s claim that it needs NZ$200 million and that the Challengers spend twice what TNZ spends). He dismissed this on the basis that, as he put it, “people will cheat”. Acknowledgment was also made that the Government’s offer “has been quite reasonable, given other things in the world”.
So how is it that our only choice is hold the Cup here, and lose it, or condone the Event going off-shore, where we will win it because we will have the money that we need to maintain our present technological superiority with the chosen 75 foot foiling monohull?
In answering that question, let’s look at recent Cup history relating to the type of boat. In my first AC blog in July 2013, I referred to the statement by Russell Coutts, then CEO for Larry Ellison’s Oracle team who held the Cup, that the choice of a multihull in place of the traditional monohulls was “a boat for the Facebook rather than the Flintstone Age, for the young and not for the old and for the age of television”. Facebook has since then fallen into disrepute somewhat of course.
At that time, Grant Dalton said (and repeated many times before TNZ re-won the Cup in Bermuda in 2017) that the America’s Cup needs to meet budget constraints to attract a good number of challengers and to take the Event out of billionaire domination.
As I said in my blog last year, the decision by TNZ to switch from the 48 foot catamarans that had been raced at Bermuda and which had had the benefit of huge sunk costs development to a new, unknown, 75 foot foiling monohull which would re-launch the design and development cost cycle to unprecedented heights was inexplicable. My comment and prediction was that the effect of that decision was in all probability to exclude new teams from entering the Event given the significant head-start that TNZ had as the originators of the foiling monohull concept.
And then, in looking ahead beyond a successful defence at the beginning of this year, I said:
“The choice for a successful TNZ will be either to sell hosting rights around the world to the highest bidder or to trim the scale and scope of the Cup back to a much more modest, self-funding level, making use of existing Event facilities in Auckland and choosing a conventional monohull boat similar to [an inshore] Volvo 70. Selling the Event to the highest bidder would constitute monetary self-interest driving the decision. Reforming the Event and reducing the costs of participants and of staging the Event to a level that matches New Zealand reality would restore respect for the Event and for TNZ in particular.”
And so here we are. After winning the Cup in Bermuda, TNZ turned its back on its previous plea to make the Cup cheaper. With the aid of New Zealand Government and Auckland Council money, it did the reverse.
The choice of making the Event cheaper by adopting conventional monohulls (or, alternatively, continuing with the known 48 foot foiling multihulls) and of removing the technological barrier that the 75 foot foiling monohull – still in its development infancy – represents to new entrants was not a choice that Grant Dalton offered the Squadron membership last Tuesday evening.
He did touch on a further alternative that would see the Event stay in Auckland and enable the Government and the Council recoup its previous investment as well as repay the New Zealand public for its support and enthusiasm for a team that goes back to Fremantle in 1987. This was that of supplementing the public money on offer with private investment, perhaps as equity investment in TNZ itself. As to this, he said that “the phone isn’t ringing off the hook”. One might of course ask who is it who should be doing the ringing?
Returning to the thought of private equity investment, an investor would normally be looking for an economic return. Does that exist in the case of TNZ? Maybe (in terms of merchandising, brand exploitation). Maybe not. But the “friends of Team NZ” (individuals who over many years have donated not inconsiderable large sums in return for being part of a team and recognised as such) were not looking for economic return. Shareholder-investors would of course be entitled to improved corporate governance through the board in particular but any self-respecting company will welcome internal and external governance review. A question though: who owns TNZ? Its original charitable status was rejected several years ago by the Charities Commission.
At this point, a Protocol and Mutual Consent document is not due until September and so the choice of venue and of boats presumably remains open. It would be a dereliction of duty by TNZ, the Squadron, the Government and New Zealand as a whole not to continue to explore with vigour options that would see the next Event held here and not simply allow it to go offshore by default. As Pattrick Smellie put it in Business Desk on Wednesday:
“When the event is sailed here, it puts NZ’s name in lights internationally in ways that associate the country with all the best attributes of its global ‘brand’: youth, cleverness, sporting competitiveness, technical capability and the physical beauty of the country itself” (As TNZ itself said in relation to the course off North Head, the television coverage of the racing with the harbour and City skyline prominent was a major feature of the courses that were chosen). As Smellie continued:
“For all the naysaying, the America’s Cup maintains its appeal as a brand-building opportunity of rare power for NZ in a world that will hopefully be re-opening post-covid in the two or three years it will take before the contest is held again.”
A final point, on a sporting note. Why would you ever give up a home advantage? If they had a choice when playing England, would the All Blacks choose Twickenham ahead of Eden Park or if playing Australia choose Suncorp Stadium as a preference?
18 June 2021
Jim Farmer