Harvey Schiller: The challenges and frustrations of selling the America’s Cup
It’s a little over seven months since Harvey Schiller, a veteran of the international sports industry, was named as the commercial commissioner of the 35th America’s Cup.
The role is a new one, designed specifically to better package and sell the series of America’s Cup World Series build-up regattas, beginning this summer, and the next Cup match itself, scheduled for 2017. Since August’s appointment, Schiller has overseen a host venue bidding process, which saw the tiny island of Bermuda selected as the host of 35th Cup in December ahead of San Diego and Chicago. He has begun to work with the defender, Larry Ellison’s Team Oracle USA, and the five confirmed challengers, Emirates Team New Zealand, Prada-owned Luna Rossa, Artemis Racing of Sweden, Ben Ainslie Racing and a new French team, and in February secured a fresh deal with NBC to screen the Cup in the United States.
More broadcast contracts are said to be in the pipeline, hence Schiller’s presence at Sportel in Miami this week where he opened up about the challenges – and frustrations – of selling sailing’s most famous event.
You’ve secured a host venue, Bermuda – at a few months distance, how do you reflect on the selection process?
Clearly, the organisation did a very thorough job of reviewing the potential venues – whether it was Chicago or San Diego; San Francisco at that time was really focusing on their Olympic bid. We looked at every major port in the United States, up and down the east coast and on the west coast. It became clear that in terms of the financial arrangements, it would have been very, very challenging for us to take any of the venues except for Bermuda. When it came to that particular point, it was almost a no-brainer. It’s turned out that they have moved forward to meet every obligation that they said they would. I think everyone has been pleased. There are always arguments on either side. I’ve been in the sports business a long time and I always tell everybody ‘don’t have a contest, pick where you want to go’ because you have one winner and a lot of losers, and no city wants to be in a position where they are considered to have lost something – a political convention, a Super Bowl, whatever. Bermuda prevailed for us.
So, to confirm, Bermuda is providing funding as well as the venue?
They are providing a range of things, a combination of sponsorships, tourism dollars that will be spent for advertising and accomodations, office space, berthing of the teams, logistics – it’s across the board. In the United States, and I think you can say this around the world, cities are being challenged in raising money themselves just for the operation of a city. If you need security, say, from the local authorities, somebody has to reimburse that; in the old days, somebody would provide that for free, but now it’s become a cost to the event. If you have an area where you have a lot of fans and tourists, where you will require parking, most cities have given their parking out to raise revenues back – each one of those things is a challenge, but Bermuda doesn’t have any of those challenges. Next year, we hope to bring an event to Chicago and we’re considering another couple of venues in the United States for the World Series.
There have been question marks over Bermuda, in terms of it being able to fulfil corporate hospitality requirements – how much of a concern is that?
"99 per cent of activation of sponsorships is done through television - that's how you get to the larger fanbase"
In terms of activation of sponsors, 99 per cent of activation of sponsorships is done through television – that’s how you get to the larger fanbase. No matter where you are, that’s the game. We’re lucky to have a good position with NBC domestically in the United States and we’re about to close with another couple of international broadcasters – one of the reasons we’re at Sportel this week is to have around a dozen meetings with broadcasters from around the world, on every continent, and we will close some of those before the end of the week. In terms of hospitality, I think that will be sufficient. We’re making arrangements for accommodation through conversion of some of the facilities they have now; everybody’s right, there’s only a limited number of hotel rooms – you can’t walk away from that. But when the Super Bowl was in New York last year, a number of the sponsors used cruise ships. Bermuda has docking for cruise ships; that’s 6,000 people who can stay overnight. I think everybody will be satisfied.
The Americas Cup World Series events begin this year [with events scheduled for Cagliari, Portsmouth, Gothenberg and Bermuda] – how are preparations going for those and what sort of relationships have you struck with local promoters?
I hate to keep referring back to the Olympic model, but we have certain categories reserved for the America’s Cup Event Authority and the rest the local organiser has the right to use. In some cases, we’re cooperating and doing both. We’ve entered into an agreement with Portsmouth – Sir Keith Mills – to jointly market a number of categories and we’re looking forward to that. There are always some domestic categories that sell better – beer, for example, is something that is typically more domestic than global. Airlines is another one. Sometimes it’s vehicles. I think we’re working very well with everyone, we continue to have meetings with each of the venues and I’m about to travel to Chicago and do the same thing there, talk about categories. We’ve found, as everyone else has, that when you’re dealing domestically people want to partner with their cities.
As commercial commissioner, how closely are you working with the challenger teams and monitoring their progress?
"As commercial commissioner, I don't care who wins - my job is to enhance everything the teams do"
First of all, as commercial commissioner I don’t care who wins. I told that to the teams – there will always be a winner but I can’t show favouritism to any team, my job is to enhance everything they do. It’s hard to measure the financial abilities of each team right now, but what has really surfaced more than anything since the last Cup is that the sponsors behind the team – not commercial sponsors, but the Larry Ellisons of the world and others – are reluctant to continue to fully-fund these operations. It’s becoming more and more dependent on commercial opportunities and in meeting with the teams across the board, they’re all very, very concerned about the costs associated with it. Our goal is to try and see what things we can do to keep a limit on costs. There’s a certain dynamic that occurs when you do that. There’s a history of a lot of spending, on design, on technical, on the boats. You have to step back and say ‘ok, what do we really need to do – we can’t just keeping throwing money on these things’. Hopefully we’ll all work together.
What can you do to keep a limit on costs?
One of the ideas that I put forward, and it didn’t get any traction last time, is what is the real franchise value of these teams? If they continue to go like they’ve been going, there’s no guarantee of who’s going to compete next time. If we can create something that mimics, not exactly, the franchise operations of professional sports teams around the world, then you can gather something from your investment. Now, you build a boat and the next time the decision is made to use a different boat.
But can that franchise model tally with the traditions and historic rules which govern the America’s Cup?
You certainly want to maintain the traditions of the Cup – that’s the most important thing – but second to that is effectively deciding early on ‘if I win, what will I do going forward’, to get some agreement going into the next one. If you can do that, you really have created something that looks like a franchise. I’m not suggesting that you do it in the traditional Major League Baseball way, but if you’re Team New Zealand and I’m Artemis, beforehand we could agree that if one of us wins, we both agree this is the type of boat we’ll use etc. – now we have some value. The way you can get beyond it is creating a marketing group which looks like what the league’s call their properties division; it can be something as simple as licensing and thinking about how little value there is selling licensed merchandise in Portsmouth compared to taking Ben Ainslie Racing and selling their products in the United States. The leagues started with licensing, with everybody sharing in the revenue. It’s worked everywhere else, it can work here.
What targets have you set in terms of revenues from broadcast rights and commercial rights?
We have a budget and there are numbers for sponsorship, for hospitality, for television broadcasts.
Here at Sportel, you often hear people talk of the balance to be struck between maximising the audience and revenues – how much of a factor is that for you as you begin to sell rights for the next Cup?
"If you don't known when 'next time' is, or where the next venue is, you can't sell those rights"
People that are here, representing different leagues or events, know that there’s going to be an event next time, so for them it’s important to get eyeballs to watch. With the America’s Cup, why does it matter? If you’re not going to have some continuity, why spend all the money on social media, digital offerings and marketing? Yes, you want your sponsors to get full value but television ratings really are an important part of next time. But if you don’t know when next time is, if you don’t know where the next venue is or anything about it you can’t sell those rights. That’s been the challenge. Sponsors themselves want the opportunity, I’m sure, to continue into the future; you can’t sell them anything until the next Cup starts. The race, last time, created the best momentum that any sport could ever ask for – it was on the front page of every newspaper, every digital offering in the world. Then the argument is, didn’t you lose that? Heck, yes we did. We started with a challenger of record, we had to go through the protocol, we had to find out who wanted to participate, then the challenger of record disappeared so we had to find another way of doing it, then we had to bring all the teams round a table – you lose a year.
Bearing in mind all of that and all of those frustrations, what attracted you to the job and this new commercial commissioner role?
I think it’s the unique challenge. Every time it starts out, in spite of the Deed of Gift, it’s a blank sheet of paper. If you go back, this was a tier one event comparable to any other major event and through a lot of changes that some people were responsible for or nobody was responsible for, it lost that footing. To me, it was the ability to work with somebody like Russell Coutts, who I think the world of, and some of the other teams that I’ve got to know – Sir Ben Ainslie, Jimmy Spithill, Iain Percy, Grant Dalton these are real competitors and this is in their bloodstream, their DNA. They are going to be a little suspect about things, but we have to prove to them that everything is fair and even to everybody – that’s our job.