Tuesday, May 04, 2010

Knut Frostad, CEO of the Volvo Ocean Race, talks to Valencia Sailing

There are exactly 18 months left until the start of the 2011-12 Volvo Ocean Race in Alicante, so it was a good opportunity to have an update from Knut Frostad, CEO of the Volvo Ocean Race, on the current status of the race. Despite the tough economic climate, there are 7 boats that are either in the race or just about to enter and according to Frostad having ten VOR70's on the starting line in Alicante is tough yet feasible.

Valencia Sailing: Let's start with an update on the current state of affairs of the Volvo Ocean Race, 18 months before its start.
Knut Frostad: As you know, we just have announced the route of the race and this was the big focus for us. Having done that, our main objective right now is to work with the teams. We have been doing that since the beginning of the previous race and we started the process right here in Alicante with a meeting we had with 105 people that weren't part of the 2008-9 VOR. We have been following this group since then and our ambition is to build the biggest sailing event in the world with the all the best sailors in it.

Valencia Sailing: When you say you had 105 people in that meeting do you mean there were 105 potential teams interested in the race?
Knut Frostad: No, it was 105 individuals that corresponded to 30-40 potential teams. Let me give you an example. It is very important for me to bring the French sailing world into the Volvo Ocean Race...

Valencia Sailing: Why?
Knut Frostad: Because we want to be the world's number one offshore sailing event and France is the world's biggest country in offshore sailing, so if they are missing from our event, there is something wrong in my view. You can argue that the French have focused a lot on single-handed sailing, which is a different discipline, but still, France used to be one of the biggest countries in this race. The fact they left was due to a lack of communication and a lack of working together. As a result, in the meeting I mentioned earlier, I had invited Michel Desjoyeaux, Franck Cammas, and a lot of other French sailors.

This process has been going on since then and each time we visited a stopover of this race (the Americas, France, New Zealand, etc) we invited sailors to come and talk to us about what we need to do about the event, in order to make it attractive to them. We talked about reducing costs, helping them with sponsorship, the commercial aspects and so forth.

On the other hand, it's no secret that 2009 has been a very difficult year for the whole world and in some countries, take Spain for example, it's difficult this year as well. So, this is a challenge, but unrelated to the race itself, it's related to the world economy. As a result, anything that is expensive as a professional sport is difficult. This is the general framework. More specifically, we currently have 5 officially entered teams.

Valencia Sailing: How does this compare to the period 18 months prior to the previous edition?
Knut Frostad: Well, I wasn't in this job at that time but all that I can say is that today we know we have 7 boats. We have the 5 boats I mentioned and another 2 that are not in officially yet but that are definitely joining the race. When I came into the race in March 2008 the Spanish teams weren't official, Delta Lloyd didn't exist and Green Dragon didn't have any funding. So, we actually had just 4 boats, one year later than now. In that respect, we are doing much better now.

Valencia Sailing: Will the seven boats be the final number at the starting line?
Knut Frostad: Absolutely not, we are aiming at having 10 boats.

Valencia Sailing: You mentioned the world financial crisis. Do you think that 10 boats is feasible under the current conditions?
Knut Frostad: It is a difficult target but it is feasible. I can guarantee it's not easy. Are we going to be hugely disappointed if at the end we have 8 or 9? I think the fact we have 7 today is fantastic. Don't forget that in the sports of sailing we are the competition that most relies on sponsorship.

In fact, we have much more sponsorship in the Volvo Ocean Race than there is in the America's Cup. Much more!! You can't say that Larry Ellison's money is sponsorship. It's his own private money. At the moment, the Ellisons and Bertarellis of the world are not in the Volvo Ocean Race, although there is speculation about Alinghi entering the race.

Valencia Sailing: Is Alinghi going to enter the Volvo Ocean Race?
Knut Frostad: We'll see but I don't know right now. I know they are looking at it but we don't know yet. In the 2008-9 Volvo Ocean Race and in this one, at the moment, we have teams that are 100% funded by commercial sponsorship. That means we have to deliver a return on the sponsor investment but that's also the reason they come to this event and the reason they stay in this event. This is completely different from a lot of other sailing events where there is a big portion of private money. The America's Cup has a lot of private money, the TP52's do as well and the private money takes decisions for other reasons, not necessarily based on return on investment. It can be your personal value, your ego or your personal pleasure. If you have a lot of money you can do that.

As far as I'm concerned, I'm very pleased even if our ambitions have been very high. You have to keep in mind that when the previous edition started in 2008 the financial crisis was just starting. We then had the big crash but it's still very, very hard. Some countries are looking better right now and 2010 could be better than 2009 but in Spain, Portugal or Italy it's still difficult. It's going to take some time for us but that means we have to do a better job, be very good at what we do and also keep focusing on keeping the costs down.

Valencia Sailing: You say that sponsors stay in the event because of the return you deliver on their investment. Why did Ericsson drop out then?
Knut Frostad: You have to ask them, not me. It was an internal decision but I can guarantee you it has nothing to do with us. Every corporation takes its own decisions but we know for fact that it has nothing to with what we did or didn't do.

Valencia Sailing: Since you mentioned the world's rich millionaires why do you think the Volvo Ocean Race doesn't appeal to the Ellisons or Bertarellis of the world? Because they can't sail on the boats?
Knut Frostad: Let me make one thing very clear on that. If Mr Ellison or Mr Bertarelli wanted to race in the Volvo Ocean Race I would obviously welcome them. The point you mention is a very important factor. Our race is very hard and that can be a reason. There is also another reason, we have a very controlled cost regime. In fact, you'll find that in the next race most teams will have quite similar budgets because there isn't so much more you can do. You can't build two boats, you can't build three boats, you can't do any 2-boat testing, you can't build more sails because we control exactly how many sails you build.

As a result, there is no interest in spending 100 million euros. The only thing you can spend money on is pay your sailors an enormous amount of money. Of course, you can do it if you feel like but in the America's Cup you can spend 200 million euros on technology and that's what they do. In the Volvo Ocean Race this will not give you an advantage because you're not allowed to do it. Let me give you an example. For the 2011-12 race you can only build one set of rudders. You can't change your rudders.

Valencia Sailing: But you can also pay Juan Kouyoumdjian many more millions and have him design exclusively for your team.
Knut Frostad: Yes, that's true and you could do that, but Kouyoumdjian will not be able to do any R&D with the boat. You will not be able to do what Ericsson did last time, build one boat, develop it and then design and build a second one. You will not be able to build 10 different rudders and daggerboards or build 5 different masts; you won't be able to do all this any longer.

Regarding the designers, it's impossible to control them. If we prohibit the designers making exclusive arrangements, which we actually looked at, what we are saying is that we force them to sign with two people. What if the designer doesn't work with those two? It's like forcing you to write articles for Valencia Sailing and another media. We don't have the right to do that because they don't work for us, they work for themselves, let alone the fact we can't really control it. To be honest, there is no need to do such a thing because what we actually see is designers offering to work for more teams.

Valencia Sailing: Doesn't Botín have an exclusive deal with Team New Zealand?
Knut Frostad: Not at all. If you want, you can buy the boat design tomorrow. In fact, his project is to design for two or three teams but at the time it's only Camper / Team New Zealand using his services.

Valencia Sailing: Do you see this Volvo Ocean Race becoming a "Juan K one-design round the world race"?
Knut Frostad: No, as I said you already have Botín and there is at least one new designer coming and probably teams that will use boats from the last race.

Valencia Sailing: Let's now talk about the race itself and the route you have just announced. What were your main criteria for choosing a stopover? Is it a purely financial decision? If City A offers 5 million and City B 6 million then it's City B that wins the bidding?
Knut Frostad: No, it's a much more complicated process. First of all let me state that despite the tough financial situation we have received bids from 80 cities, 34 of which in Europe. The stopover ports have to meet a large number of criteria in order to be accepted, such as the space we need, the technical requirements we need, access to frequencies for TV production, just to name a few. In fact, there is a whole book, called the "Bidding Guide". Then they can also differentiate themselves, obviously, financially, in the way they support the team. There are many ways a port can support the team. They can either pay for it, or provide technical assistance or even help them find sponsors. Two things are important to us. Firstly, to have new teams at the start line and secondly to have really good events. So, is money important? Of course money has an impact but at the end when we have two competing cities we always ask the question which city will bring us the best stopover and the answer is a combination of many things.

In many places we had 2-3 options of really great cities. For example, in South America we had 4 cities that all had very close proposals, with very good ideas on things they wanted to do, what they were going to do in the port to bring people. For us, it's not necessary that it looks like the most expensive thing in the world. It's more about how you get a lot of people to have a good time, bring them at the race and this is what we want sailing to be. A public sport. You don't have to sit on a very expensive sofa to be comfortable and have a good time.

Valencia Sailing: Regarding the race route, why did you scrap the scoring gates this time?
Knut Frostad: First of all, we think they were confusing for the public and from the feedback we received we realized that the only thing that mattered in a leg was the finish line. The non-sailing audience in particular really struggled to understand the concept. The scoring gates would be meaningful only if they created a strategic challenge so that you have to choose between scoring or winning the leg. That happened only once in the previous race, from Cape Town to India. If you went furthest to the east you scored at the gate but maybe it was better to go northeast directly to India. So there was a strategic play in that leg. The remaining 90% of the scoring gates were in places that didn't matter in the finishing order of the fleet. So, why keep them? They only add more points and they are very difficult to explain.

I also talked to the sailors and for them it doesn't really make any difference. In fact, they make the rich richer. In addition, due to the fact they are positioned early in the long legs, you give more points at the beginning, quite the opposite of what we want to achieve. For example, the previous Volvo Ocean Race was decided before Stockholm but it we had taken the scoring gates out it could have been decided in the last leg. So, they didn't serve their purpose.

Valencia Sailing: Another issue regarding the route is that of safety. Abu Dhabi is seriously positioning itself as a major international sports venue but is it suitable for an offshore sailing race? In the Cape Town to Abu Dhabi leg you first have the piracy issues off the eastern African coast and then in the Gulf, especially on the UAE-Iran border, the potential problems with the Iranian navy.
Knut Frostad: You are absolutely right, we do see the risks but don't forget that the whole Volvo Ocean Race is about risk. In the previous race we had piracy issues to deal with on the way to India, then leaving India, then in Sri Lanka, then in Indonesia but when we did the summary of risk at the end of the race it was much more about weather and storms, losing crew members, crashing with fishing boats or other objects. We have a very long list of potential risks and this is just one of them.

Valencia Sailing: Sure but, unless you have magic powers, the weather is something you can't control. On the other hand, it's entirely up to you to go to one place or not to go.
Knut Frostad: That's right but I can also draw a route around the world to limit the risk of weather if I wanted to. I can avoid the southern oceans and I can avoid windy places by going as close to the equator as possible but that would a be a very boring race. The Volvo Ocean Race is the fastest race around the world.

When we decided to have the stopover in Abu Dhabi we did all the due diligence and worked with two big security agencies just like we did in the previous edition. One of them is specialized on security ashore, dealing with issues such as terrorism, safety, thefts or crime while the other one deals with security offshore. We worked with them in the previous race and if you look at the two routes (this time compared to the previous one) there aren't that many differences. The only difference is that from Cape Town you enter the Gulf.

For sure, Iran might be an issue but we will deal with this. How? By limiting the course the boats can sail. There is really no reason why the boats should even be near the Iranian border. We will only reveal those limits when we are very close to the start. In addition, we know that piracy off Africa takes now place further east, so the exclusion zone can be further east. Again, all those decisions are taken after consulting experienced professionals. Let me tell you that in the previous race we had anticipated much more problems than we actually encountered. For example, both ourselves and the sailors feared the Malacca strait would have been very difficult but it turned out to be much easier.

Valencia Sailing: You also make the stopovers shorter in time.
Knut Frostad: Yes, on average the stopovers are shorter in time but since we have moved the inport race to the final weekend the teams have now more time to work on the boats or take time off. In comparison, in the previous race the boats had to be ready after a week and then you had a week between the inport race and the leg start where practically nothing happened. That was very expensive for the teams because the boats had to be ready and the sailors didn't take holidays. This is another cost-efficiency measure.

Valencia Sailing: Now that you mention the costs again, what is the feedback from the active teams so far? You have at least 3 of them actively designing and training. What are they telling you? Have they seen the promised drop in costs?
Knut Frostad: It depends on who you ask but the cost cuts do work. Take for example the budgets last time. The smallest teams had a budget of 7-8 million euros while I can't tell you about the biggest one because I don't know but it was probably 50-70 million. There was a very big variation between the smallest and the biggest team.

If you now ask Delta Lloyd or Green Dragon, they will tell you that they probably don't think this race is now less expensive. But if you take Ericsson or Telefonica, it's not even possible for them to spend the same money. Last time some of the biggest teams built between 70 and 100 sails. Now, you aren't allowed to build more than 15 sails before the race and another 15 during the race. So, you can argue that the biggest teams have seen a reduction of 60-70% just in their sail budget. What the cost-cutting measures have achieved is substantially reduce the cost of winning the race. The smallest teams haven't seen a budget reduction but on the other hand they are now competitive and this is a very important issue.

Your website covers most of the major classes and you know that there is a general problem in sailing. Whenever someone enters with a lot of money he prevents small teams from coming in and forces small teams already in to leave because they know they will never be able to compete. I'm very convinced that in the Volvo Ocean Race right now that the new teams that come in, even lacking the expertise of Team New Zealand, can be competitive with a modest budget.

Valencia Sailing: What is your definition of modest?
Knut Frostad: I think that if you build a new boat, modest is between 15 and 20 million euros and if you race a boat, actually even the best performing, from last time then it's between 10 and 12 million.

Valencia Sailing: But that's an increase. You just said the smallest teams had budget of around 8 million last time and now they need at least 10.
Knut Frostad: Yes, but Delta Lloyd could never be competitive against Ericsson. It was impossible. The budgets I gave you from last time were the minimums while the ones from this edition are the ones that make you competitive. There is no doubt the cost-cutting measures have an effect.

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At 6:16 PM, Anonymous michele tognozzi said...

great interview for a great race, well done Pierre ciao Michele Tognozzi Farevelanet


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