Are ocean racing budgets of €20 million and more driving ocean racing towards a recessionary crisis?


Are huge budgets driving ocean racing towards a recessionary crisis?

That’s another of the questions raised after I posted on elitism in ocean racing. 

To date I’ve had over 150 emails from readers on this subject, and the topic of money was mentioned in many of them. One common thread was that the sums of money spent on corporate racing campaigns have become unreasonably inflated.

Take this comment from Roger Johnstone on the Volvo Ocean Race and the Vendée Globe:

‘After years of being seemingly sustained by a Nordic ocean racing clique able to defy global business logic, one can’t help but feel that the writing is on the wall for the VOR. Only eight boats started, only three teams seemingly have a serious chance of winning, and two of those (copying “toxic” ABN AMRO) have improved the odds by entering two boats apiece – a serious case of burning cash to get on the podium.’

He adds: ‘These days, the “sailing elite” seem to enjoy patronage rather than sponsorship. Where’s the commercial logic and business case for companies like Pindar and Ecover hurling money into sailing? Answer: there isn’t any.’

It’s always possible to argue/construct/illustrate a case; sponsors can and do, but I have a feeling Roger is pinpointing something very significant here: that what we, as ‘consumers’ of these races, make of those costs and business cases is undergoing a big sea change.

The economic situation has altered our perceptions of value. We are beginning to understand how much wealth – and value – was illusory. In this climate, yacht racing campaigns can look increasingly exorbitant and out of kilter with the times.

Sponsors’ names proudly emblazoning racing yachts can also be a stark reminder that millions of our savings and pension funds have been poured into something that is a moonwalk from core business. And whatever commercial justification is advanced – and there sound ones, especially if jobbing backwards – the simple reason is usually that the chief executive likes sailing.

The cost involved in sailing campaigns can be eye-watering. Budgets easily run into tens of millions. ABN AMRO was said to have spent ?40 million on the last Volvo Ocean Race. Three years on, that sum seems even more absurd, even surreal considering that most of its business has ended up falling on the Dutch and British taxpayers.

Budgets increase, teams expand, the one-boat project turns into what designers lightly term ‘multi-boat campaigns’. Millions are sunk for an extra fraction of speed and a theoretical competitive edge. The boats may be obsolete after one race. Thus the costs ratchet up.

Is it really necessary and, nowadays, appropriate?

Solo round the world project costs have likewise been racking up at a steady rate. Depending on whom you believe, investment management fund Artemis spent £8-9 million on their Vendée Globe campaign but did not finish a single race.

Their new boat must have cost between £1.5 and £2 million to build but is still unproven. What’s it worth now? Half that maybe? You just can’t help questioning how sharp an investment it all was.

Compare that to the acclaim and success of Steve White, mentioned earlier . He had a legion of fans when he finished the Vendée in 8th place out of 30 starters in his tired old fixed keel IMOCA 60, which is for sale (now fully race prepared!) for a hefty £350,000. This shoestring project cost 1/20th of some that didn’t finish.

A race that can accommodate and reward both extremes would seem to me to have a more sustainable future. If the big-rolling sponsors don’t sign up, the market for secondhand yachts falls and campaign costs tumble. Teams shrink; they pay themselves less. Reverse market forces assert themselves and it can all continue.

And right now, salaries too surely must be at a zenith.

A lot of the French solo skippers are on a structured salary based on the managerial scales of the sponsoring small or medium-sized company. I’ve been told the norm is around ?4,000 a month.

But the ‘Anglo-Saxon’ template, where sponsors tend to be multinational corporations, is quite different. A handful of sailing ‘stars’ are being paid hundreds of thousands of pounds a year. Honestly, I’m not making this up.

On top of that there may be a structure of lucrative performance target bonuses. On a three- or four-year campaign, it is possible for some of the more lavishly funded, well-advised and downright lucky sailors to come away with earnings and bonuses knocking on the £1 million mark.

Would we follow these races just as passionately if the yachts were a knot or two slower and if they cost less? Of course, if the story’s a good one. Like I say , people, their characters, struggles and achievements are of wider interest than the hardware they sail.

Would sailors continue to race if they were paid a fraction of these salaries? Of course. What else would they be doing? Working for bonuses in the City?

So here’s the £10 million question (formerly trading at £64,000): why are some races so expensive?

It’s because people said they had to be. It’s another one of those funny capitalist conundrums, like sky-high property prices. It makes perfect sense so long as you keep believing it’s all based on real worth.

Will a different sense of proportionality begin to creep in? Is it time for that, and is it really what we want to happen? Let me know what you think. This seems as good a time as any to express a view on how the money is being spent.

Apologies that we STILL do not have a proper comment function on our blogs. It’s as irritating to us as to you. A new content management system is being rolled out soon which we’re promised will fix this. But please, until then, keep emailing me and hopefully we can migrate comments later. Thanks to everyone who’s taken the time to have their say.