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Gladwell's Line: America's Cup - what happens next?

by Richard Gladwell, 30 Nov 2018 05:35 PST 1 December 2018

News that there have been a further eight Notices of Challenge for the 36th America's Cup, has left most pundits gobsmacked.

After months of explaining away just three Challengers, even though they are so-called "Super-Teams", there is now an avalanche of entries, which potentially could see 12 teams competing in Auckland.

In their media release, Emirates Team New Zealand and Royal New Zealand Yacht Squadron made mention that only one of the eight Challenges was unconditional. A specific example of an entry condition was that a team might want to host a round of the America's Cup World Series in the Challenger's country.

Most pundits were under the impression that the America's Cup World Series events would not be that easy to place in venues, given that the ACWS is also competing with the newly launched SailGP, which are running five regattas in 2019 and ten in 2020.

Hosting these pop-up regattas requires a Hosting Fee and commitment on infrastructure. Although there may be ticket sales revenue, they aren't reckoned to be cashflow positive for the host authority, but do produce the good vibes at home and abroad for the City/Port. They have proven to be more of a localised derby, attracting hundreds of thousands of fans eager for a day at the races.

The wording in the Protocol makes it clear that late Challenges were expected to dribble in over the five months after the regular entry period closed at the end of June. Instead there has been a tsunami of late entries, apparently in the final week.

Reading between the lines in the media release issued after the Late Entry period closed it is reasonably clear that none of the eight has yet been put through the vetting process, such as it is.

The five requirements for a bona fide yacht club in the Protocol would be satisfied by 85% of the yacht clubs in the world. There is nothing particularly onerous, aside from the financial responsibility the club takes - which is usually contracted back onto the team.

The requirements of the Deed of Gift are well known, and the only additional point of difference with the five criteria of a yacht club in the Protocol is that the Challenging Club must have its annual regatta on the ocean or an arm of the sea.

That rules out clubs in places like Chicago or those on a Lake.

Auckland now compares well

Many will be quick to look to the Cups of the past which also had high entry numbers and draw comparisons between those and the present circumstance.

Fremantle for example, reckoned to be the best America's Cup of all time, before vetting, attracted 24 paid up challenges from 10 countries. The entry fee was just AUD12,000. The Challenger numbers dropped by two for the first Challenger meeting in Bermuda in February 1985.

The Performance Bond was just AUD20,000 with an AUD100,000 payment to the Western Australian Government for the provision of syndicate bases.

For the next multi Challenger Cup in 1992, the Performance Bond was US$100,000 and the entry fee $US20,000. San Diego Yacht Club received 12 Challenges from 10 countries, and eight made it to the Louis Vuitton Cup.

For the 1995 America's Cup, again in San Diego, the entry fee climbed to $75,000, with a USD$250,000 Performance Bond. There were eight Challenges of whom seven made it to the Louis Vuitton Cup.*

The 2000 America's Cup in Auckland attracted 12 teams including the Defender. Ten teams including the Defender competed in the 2003 regatta, in Auckland, while the 2007 America's Cup in Valencia attracted 12 teams, including the Defender.

Fast forward to the present day, and the first tranche of the Entry fee is US US$1million. The accepted entries have already paid, the Late Entries have to pay this by 31 December 2018.

The second tranche of the Entry fee is a further US$1million, which is due now, November 30, 2018, for the three Challengers who have already been accepted. Or they can opt to pay it off over nine months on a time payment plan.

For late entries, there is a further $1million Late Entry Fee again payable by December 31, 2018.

Of course, there is the usual Performance bond of U$1million - which is a documentary bond or cash.

When comparing Challenges between the 1987-1995 era, the entry fees were between $12,000-$75,000 and attracted a peak of 24 entries in 1987 dropping to eight in 1995.

Against that detailed backdrop, 11 challengers paying US$2-3million each in Entry Fees by the end of December 2018, doesn't look too bad - and looks even better with the knowledge that the US$1million Performance Bond is paid by December 31, 2018. Why would anyone pay US$4million in just four weeks if they weren't serious?

It is hard to believe that any of the Challenges lodged are snowflake challenges - which if accepted will pay their $4million of entry fees and performance bonds, and then pull out a few months later.

Protocol adjustments warranted

The Protocol Articles that are likely to be negotiated for exceptions are expected to relate to an easing of the entry and performance payment dates - almost purely for administrative reasons - and they could be stretched for a month or two, but no more.

It is unlikely that the late Entry Fee would be dropped as has happened in previous Cups. However only one team is believed to have asked for this requirement.

However the new Challengers are going to be very hard pressed to make the first America's Cup World Series scheduled for Cagliari sometime in October 2019 - given that most are expected to be single AC75 and a 38ft foiling prototype campaigns, rather than the two AC75 campaigns of the so-called "Super Teams" who filed their entry prior to the first deadline on June 30, 2018.

The Late Entry teams AC75's are unlikely to be ready to race in October 2018, given design and building lead times, which would chew up most of the ten months. In the big picture there is no good reason to compel a team to race in the first round of the America's Cup World Series - they just forfeit points.

Further the current Protocol has already been modified once - with ten pages of changes to the Articles. In the 35th America's Cup the Protocol was modified on 16 occasions between June 2014 and May 2017.

One of those changes was to limit the changes able to be made to a hull to just 12.5% of the hull surface area - where previously it was 25% of one boat. That meant that the two boat teams could modify both their hulls (albeit by a smaller amount). But for a one boat team that wants to, say reduce hull drag to get better lift out in light winds, 12.5% probably isn't going to do the job for them.

The other is the nationality rule and those needing to be in the country of their club for 380 days between December 1, 2018 and November 30, 2020 (or three weeks before the start of the Prada Christmas Cup in December 2020), the time is looking rather tight - given that 45 days will probably be chewed up with America's Cup World Series. If any of the team are doing the 2020 Olympics - then training for Tokyo as well as competing at Enoshima, which is another two or three months, at least.

It is to the advantage of the America's Cup to have current Olympic champions competing as it helps cement the prestige of the event, and adds to the gravitas of those who are sailing in the Cup - as an Olympic medalist or two is a readily recognised currency by sailing and general sports fans and media.

History shows there is no advantage in starting late in a Cup cycle, where in the end time counts for more than money.

It is also to the advantage of the long term health of the Cup for team who are intending to continue for two or three cycles, and given a few allowances for their youth via small Protocol tweaks.

More room for bases required

Clearly, with 11 teams trying to fill a base area designed for six, there is a space issue on Wynyard Point.

A likely solution could be to bring forward the exit date for the remaining Stolthaven tanks on the northern end of Wynyard Point. It is believed that their exit was planned for 2021 and that the fuel base would not be operational during the America's Cup.

That being the case, having that area cleared and rectified by mid-2020, would seem to be a good option.

There is no real downside to this proposal. The work is planned to be done anyway. Choosing to make any new bases available for August 2020 means that the same construction and project teams can be kept on site. If New Zealand conducts a successful Defence, many of the new teams are expected to remain for a second Regatta.

There is a launching issue with the new breakwater being extended only from midway down Wynyard Point, leaving any bases to the north exposed.

The other Protocol Conditions sought to be stretched are likely to be the nationality restrictions - and particularly the time required for a crew to be resident in the country of the challenger. The timing of a Challenge starting now - 11 months after entries first opened - is getting rather tight and some easing of time constraints is likely to be sought.

Given the way the timelines have been drawn out - the late entries are very late. They will be hard pressed to have a boat sailing in the first America's Cup World Series in October 2019, as required by the Protocol. That is another area likely to be the subject of request for an easement in conditions.

The Challengers seem to recognise that the America's Cup statistics are against them - in that only one first time challenger has ever won the America's Cup. On that basis, it seems that most are in for two or three Cup cycles.

That being the case, the Defender and Challenger of Record will hopefully try and accommodate the various changes requested to the conditions of the Protocol. That being so there is a good chance that the America's Cup would be back to full strength in one cycle, where it was previously hoped to be in that position in two or three cycles.

A 10 or 12 team America's Cup in Auckland will be a remarkable situation, and one that was generally believed to be impossible, as little as a day ago.

Of course, back in November 1983, the entry lodged on "behalf" of the current Defender, would have failed the current Protocol criteria for a valid Challenge.

Unbeknown to the Royal New Zealand Yacht Squadron, a Belgian jeweller, Marcel Faschler, decided that New Zealand needed to be in the 1987 America's Cup. He made a secret entry, without sign-off, as is now required from their Club, and shelled out the $16,000 entry fee. The first the RNZYS Commodore and Club knew of their Challenge, was when they received a call from the NZ Herald and other Kiwi media outlets the next morning - after Royal Perth YC published the list of Challengers.

From those humble beginnings and a Challenge that was on paper, of little serious consideration, grew a team from a country of then 3.5million people, that has survived for 30 years in the America's Cup and won the trophy three times.

Is the next team of this ilk sitting in the pile of recently received Challenges in the RNZYS office, awaiting a benevolent acceptance?

Hopefully RNZYS and CVS will treat the new Challengers generously, and build the America's Cup back to be the regatta that it deserves to be.

It would be very regrettable, given all the dark days that the America's Cup has endured over the past decade, if the Challenger of Record and Defender took a hard and inflexible line with any requests for variance of the Protocol conditions.

[* These facts and figures were kindly compiled by the late Ernie Taylor (AUS), received back in 1997 following a query I made to get accurate information on these points. Ernie was involved with the Royal Perth Yacht Club in the 1987 America's Cup and then on the Challenger Committee for the 1992 and 1995 America's Cups.]

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