Saturday, November 27, 2010

34th America's Cup team budgets: 20 or 120 million euros?

How much would it cost to have a competitive challenger in the 34th America's Cup? It depends on who you ask. Sir Keith Mills, principal of the now-defunct America's Cup hopeful Team Origin, had stated that he needed 100 million pounds (120 million euros) for the British potential challenger to mount a successful campaign. Russell Coutts stated last September that the "smallest teams could operate on a budget of 40 million euros", which means the big competitive teams should have a considerably bigger budget. Finally, Iain Murray, CEO of America's Cup Race Management, told the media in Dubai on Thursday that approximately 20 million euros could be enough.

Our colleague Michele Tognozzi, editor of FareVela, talked to Silvio Arrivabene and asked him to give his expert opinion on what the costs are in this edition of the world's oldest sports trophy. Arrivabene knows what he's talking about having done two America's Cup campaigns with Mascalzone Latino, the most recent one as the operations manager, while in the 33rd America's Cup he was the construction and planning manager of Alinghi 5. If there's somebody that knows a thing or two about building big catamarans, it's Arrivabene.

Here's what Arrivabene had to say about budgets and the 34th America's Cup:

FareVela: Iain Murray talked about 20 million euros to participate in the 34th America's Cup. Does this figure seem plausible to you?
Silvio Arrivabene: First of all, we need to agree on what "participate" means. If one wants to be there without any ambition to succeed, then it could even be a conceivable figure, for one AC45, one AC72, one wing and a basic group but nothing more. Something similar to China Team in Valencia in 2007. No possibilities at all and a presence that will pass unnoticed. If, on the other hand, as it would seem logical in an event of the significance of the America's Cup, one has the ambition to win, I think it's a figure absolutely undersized and nothing remotely close to what instead we will need to spend.

FareVela: We are obviously interested in the second case, that of a team with the ambition to win. Can we enter into more details?
Silvio Arrivabene: I start by saying that I have carried out a study of the Protocol for some potential projects that had been conceived and as a result I rely on objective data. In summary, a team that wants to try to win must already have a couple of Extreme 40's for training, then a couple of AC45's (US$ 600,000 each just the boat), two AC72's and a development plan that foresees up to 8 wings (the maximum allowed by the rules), about 10 rudders and daggerboards (in a catamaran you always think in pairs) and a development of soft sails. For the aerodynamic research we assume a couple of engineers for the AC45's, a team of 3-4 engineers dedicated to the AC72's and the wings, in addition to the people directly involved in the construction.

FareVela: How much would all that cost?
Silvio Arrivabene: We suppose it's a new team with the maximum ambitions and a tested boat yard, such as Green Marine, with which I collaborated up to a couple of years ago. For the wing on USA17, 64 meters high, BMW Oracle has declared 100,000 hours of work. With a shared knowhow and an AC72 wing, 40 meters high, I think we could envisage 15,000 hours of work at an hourly rate of approximately 50 euros. I'm only referring to the boatyard cost, excluding materials, people and research. As a result, just for the construction of one piece it would be around 750,000 euros. We are talking about just one wing.

A big team needs 8 wings at 15,000 hours each, 4 hulls at 3,000 hours each, 4 rudders and 4 daggerboards. Just the hourly cost, with a calculator in hand, can reach 6 million euros, to which we need to add engineering and development, research and the people to do it. For an AC45 we would need approximately 21,000 hours of work. Just one wing corresponds to two thirds of an ACC Version 5 yacht.

In fact, it seems to me that if you aren't BMW Oracle you will find it difficult to build 8 wings, given the fact they have an advantage of at least two years in the sector in addition to unlimited resources. During AC33 they had no budget limits, now I think they also have prudent people internally, that care about that issue, for example I think of Murray Jones, but undoubtedly they are in an enormously advantageous position.

3D simulation of an AC72. Video copyright America's Cup

FareVela: Any other expenditures?
Silvio Arrivabene: We shouldn't underestimate material costs. There are pieces that need a lot of carbon, for example the daggerboards, the rudders that can cost up to 80,000 euros each. We have to keep in mind that just having the money will not be enough, but specific knowledge is also required that you either have it or you build it. To do that you need time with competent people available for two years and the possibility to test and develop. The America's Cup is not a one-design race, on multihulls speed is everything and the experienced people in that sector count for much. Such specialists are expensive.

FareVela: What about the sailing team?
Silvio Arrivabene: We have been told that the AC45's have a crew of 5 and the AC72's a crew of 11, but in order to have two AC72's you will need 22 sailors and you can't expect having the best without making a "reservation". They are called "retainer" contracts, a basic way to lock on to some sailors while you wait until you can use their services on the water, and have to be added to the 11 monthly salaries you would pay the sailors you hire right away.

In addition, on multihulls it won't be possible to have muscular neophytes fresh out of the gym or from rowing that accept a minimal 2,500 euros per month because they wish to be there. You will need experienced and skilled sailors with abilities and technical knowhow, unless you want to take some skilled kid out of the 470 and train him, but that will not be the case with our hypothetical team, that has the ambition to succeed. Between the design, sailing and shore teams, costs will rapidly increase for a 2-year campaign, the minimum if you hope to just be close to the Defender's abilities.

FareVela: What about the logistics?
Silvio Arrivabene: As far as transportation in concerned, it seems ACRM will have a ship where all equipment will travel, but every team will have to take care on its own of the international shipments and the construction of new pieces. You shouldn't think that there isn't always a new bow or rudder that has to be shipped to San Francisco or wherever the event or pre-event takes place. With two and a half years until the event, scheduled for September 2013, that's the reality, obviously excluding BMW Oracle.

FareVela: After we do all the calculations what figure do we get?
Silvio Arrivabene: I think that a plausible figure is around 100 million euros, in any case much more than the 60 million Coutts and Onorato were talking about. The 20 million euros conceived by Iain Murray are, I repeat, for a team that is only interested in participating, without any ambition.

FareVela: It goes without saying that in the America's Cup winning is the only thing that counts. Who can spend those figures?
Silvio Arrivabene: I repeat, it's not just an issue of having the money or not, it's also the experience and the people that count in order to achieve it. You may have the budget but still not be able to get through to the real challenge against BMW Oracle.

FareVela: Given the fact the strongest potential challenger, Alinghi, has just announced it won't be taking part in the America's Cup under these conditions, are we already heading towards a final between Coutts' BMW Oracle and Paul Cayard's Artemis?
Silvio Arrivabene: It's too early to say but instead of Artemis I always think it will be the Kiwis. Emirates Team New Zealand, if they ever decide to enter the America's Cup, have the right people even in the design team that has been strengthened with skilled people. Grant Dalton's own statement that ETNZ won't take part in the Cup unless they are able to win it, seems to be addressed at BMW Oracle so that, if within 6 months there are few teams taking part, they facilitate the participation of the kiwis. It counts having Emirates Team New Zealand in the event, there is no doubt.

FareVela: And the so promised show?
Silvio Arrivabene: These days we have seen in Dubai how the close encounters, the fights and the battles are the essence of match racing. We didn't miss the show in the Louis Vuitton Trophy. Speed alone doesn't bring any show, going at 25 knots all alone in the middle of the sea isn't so important, unless you are in the Volvo Ocean Race, I can assure you about that. I'm just back from a season on Esimit Europa 2, a 100-foot supermaxi. We rounded Sicily in the last Rolex Middle Sea Race fighting against the watch and giving our best, but we were all alone out there, that's the truth. If there's no fight, boredom comes quickly, can you tell me what's so spectacular in watching a Formula 1 car going at 300 kph by itself in a straight line? When I think about spectacular sailing, the Volvo Ocean Race and the TP52's come in mind, and for sure not the AC33 last February. You can go as fast as you want, even at 30 knots, but if there's no close fighting there will be no show and anyone that sails knows it.

FareVela: What are your personal plans?
Silvio Arrivabene: As I said, I sailed this season on Esimit Europa 2, as the navigator. It's a very complex boat with lots of technology and many systems so my role implied lots of work. We are now preparing the 2011 season. In addition, I'm involved with engineering consultancy in various fields. I've done three America's Cups, so I'm not interested in doing it just for the sake of it but an interesting project can always be stimulating.

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At 11:26 PM, Anonymous Cristian Alberto Palau Cabrera said...

Bottom of line for Mr. Silvio Arrivabene's comments: Unless you are among Forbes Magazine list of the 10 wealthiest people on the planet , DO NOT ENTER 34th AMERICA'S CUP. Is that understood?

Regards to everyone,
Cristian Palau

At 11:42 PM, Anonymous Anonymous said...

Compared to 2007:

20 million is like China team or +39

60 to 80 is like ETNZ or Desafio

80-100 is like Oracle or Alinghi

At 12:13 AM, Anonymous Anonymous said...

great interview and thank you Silvio for such a detailed and credible explanation about the future campaigns.

At 12:44 AM, Anonymous Anonymous said...

The fact that he worked for alinghi though diminishes his credibility.....the cup has and always will be a costly game and russels estimate is quite on the would be about time to forget about the past and hope for a better future for sailing and the cup........

At 12:55 AM, Anonymous Anonymous said...

toustlThank you Coutts and Ellison for ruining the AC.

After reading this credible words from Mr Arrivabene, one can see that out of BOR spokesmen come nothing but lies.

At 8:15 AM, Anonymous Anonymous said...

On November 24th 2010 a jury in Oakland, California awarded Oracle Corp. $1.3 billion in a copyright infringement suit against SAP A.G. involving business software. The verdict is said to be the largest in history in a copyright suit.

At 11:52 AM, Anonymous Anonymous said...

So we learn that one needs a lot of money to win the AC. But has it EVER been any different??? I would say no and to me this all looks like bussiness as usual.

It is also obvious that a team that has won the previous cup has a technological advantage (that's why they won the previous cup...). This is part of the challenge (and the excitement) of the Cup.

At 12:09 PM, Anonymous JamieF said...

There could be good reasons for a low budget team to participate:

1.)If you have a long term perspective and you want to build up a campaign/team it may make sense to use the first AC to simply gather experience and expertise. This is particularily interesting now, since a new boat is used.
2.)A low budget team gets the same numer of races and hence the same exposure to media then high budget teams. If one looks for example at Shozolooza in AC32, they managed to have achieve a very distinct and overly positive "underdog" image in public. Such a team certainly is attractive in terms of advertising for certain companies that aim to target a specific market. This means that there is certainly also room for smaller, less well funded teams as long as they successfully identify the appropriate niche.
3.)How many peple would show up for a 100 meter springt in the Olymics if only those would participate that have a clear chance of whinning? Perhaps 3 or 4? Obviously many athletes compete although they know they can not win. Why should it be any different in the AC? (it is not: in AC 32 perhaps 3-4 teams had a realistic chance of whinning but the other 8 teams still did participate...)

At 1:08 PM, Anonymous Anonymous said...

One of the best!! Silvio Arrivabenne its great!!

At 2:48 AM, Anonymous Anonymous said...

Excellent and very clear !! for those of you , who said the Cup was always for millionaires , you are in some way right , but it was fun . This time is for millionaires , the advantage from Oracle is much bigger than on the last AC32 , plus it won't be fun to watch
If not , please watch the last AC33 or the little AC races , and tell me if that was fun ...I stop you tube half way every time I see them ..before sleeping

At 2:17 PM, Anonymous Anonymous said...

Nice interveiw Mr arevcockobeano!

At 4:33 PM, Anonymous Anonymous said...

This Cup will ruin the AC if they don't change it soon . Hope TNZ moves away from it soon and focus on the Volvo campaign , so this forces them to change his selfish view on it
Is amazing that after so many long years of waiting after the 32nd , this guys don't realize that if they are not being able to enthusiast more than 4 or 5 Teams , is because they are doing something really very bad

At 4:35 AM, Blogger Twilight said...

this was a really good article, thank you valencia sailing. As a Kiwi and one of Emirates Team NZ's biggest fans, (I maintain a lot of their online media voluntarily) I am quite resigned to the fact that sailing in the 21st century is about sinking or swimming in a money money money world. I am so proud that the ETNZ boys live, eat and sail together, showing the world that true honest grit and determination with a healthy dose of camaraderie can still come together to make a truly brilliant sailing team taking on the world. It will be interesting to observe if we compete in the 34th AC edition but at the end of the day, this team has still made (and continues to make) a tiny nation in the South Pacific punch above its weight on the yachting scene around the world. I'm sure all Europeans will agree with that. All the best from downunder fellow yachties!

At 8:32 AM, Anonymous Anonymous said...

4:33 PM anon,

no need to worry about the AC. It has seen much worse and allways survived.
However, it would be interesting to learn what you think they should change. "Something" seems little descriptive (helpful) to me.

At 8:35 AM, Anonymous Anonymous said...

not only Europeans but also many Americans agree on that. ETNZ rocks!

At 12:46 AM, Anonymous Anonymous said...

Some ideas :

1) change to a Fast mono hull that could give a nice match race to spectators . Even on the old V% dinosaurs , I saw non sailing related people standing up at the AC32 final , but to be honest didn't saw anyone that told me the AC33 was fun to watch

2) The Stupid Wing is a sign question for everyone apart from Oracle . Is makes logistic crazy
Is really very expensive to build

3) Under the current world economics a slightly lower budget would help a lot to raise sponsors and allow to see again a Cup similar to the AC32 in the amount of Teams

4) A clear schedule far we don't know where it will be held ?
Impossible to go to any possible sponsor in the world with the actual standing

I'm not fan of Alinghi , but something like the AC33 or even more extreme with canting keel with a logic protocol would do the right job

My 5 cents

At 7:57 AM, Anonymous Anonymous said...

12:46 AM anon,

1.)the protocol is published and teams already have signed up under that protocol (and likely already invested a fair amount of money). I doubt that BMWOracle could go ahead and switch to a different kind of boat now without getting into legal difficulties.
2.)I agree with you it is difficult to see how logistics with the wings should work in particular should there be stronger winds at a particular venue.
3.)Venue will be announced by the end of the year. That timline is known since quite some time.

At 3:16 PM, Anonymous Anonymous said...

Great interview, thanks to Silvio for providing serious insides in the budgeting needs of potential teams. And special appreciation for your statement about the excitement of sailing!


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