America’s Cup: The rising cost of sailing’s ultimate prize

The America’s Cup is a peculiarly ugly trophy — and it lacks a bottom, so you can’t even drink from it — yet some of the richest men in history have spent hundreds of millions of dollars in an attempt to own it.

Spending oodles on the Cup is a tradition that goes right back to its beginning. John Cox Stevens, commodore of the New York Yacht Club, led a six-man syndicate that brought a 31 metre schooner called America across the Atlantic Ocean in 1851 to make money. They began by placing adverts challenging all-comers (with no age, ability or experience restrictions) to race for a wager of £10,000 (the equivalent of about $1.5 million today), but got no takers.

America made its name later that summer when it joined 15 yachts for the Royal Yacht Squadron’s race around the Isle of Wight. The prize was a trophy costing just £100, but such was America’s reputation after its convincing win that the syndicate sold the boat for $25,000 — about $5,000 more than they’d paid for it.

Since then, countless sums have been spent on attempts to win the America's Cup. The most persistent challenger was Thomas Lipton. Born in Glasgow, where his family owned a grocery store, he left for the US aged 14 with just $8 in his pocket and returned a millionaire. By the time he launched the first of his five challenges for the America’s Cup in 1899, he controlled 10 per cent of the world’s tea supply, yet he won only two of the 16 races he competed in for the trophy.

In nine contests between 1937 and 1983, the challenger won only three races. Two were by Australian media mogul Frank Packer, who spent more than $700,000 to win one race in 1962.

Eight years later, he had to dig deeper to come through the competition’s first qualification regatta, in which he faced Baron Marcel Bich, founder of Bic pens, who led four unsuccessful Cup campaigns. In the final, Packer won two races, but one was stripped after an acrimonious protest by the host club. His effort did at least show the world that Australians, who were dominant in tennis at the time, could be competitive in another sport.

The breakthrough came in 1983 when Australia II became the first foreign winner. It was owned by Alan Bond, who made his money in property, brewing and broadcasting, and reportedly spent $5 million on his successful America’s Cup campaign — after three failed attempts. He arrived in Rhode Island for the decisive contest with an innovative winged keel and a golden wrench with which he said he would remove the trophy from its plinth.

Perhaps this pursuit of sailing’s Everest took Bond’s attention away from his business empire. Within a decade, he was declared bankrupt, his company owing more than $6 billion. Five years after that he began a four-year spell in prison for fraud – yet most people will remember him for what he did on the water.

The Aussie's supremacy was short lived, with the USA winning the trophy back in 1987. In 1992, US oilman Bill Koch spent $65 million on defending the America’s Cup. Ten years later, the qualification series featured five billionaires, including Larry Ellison, co-founder of Oracle, and Patrizio Bertelli, CEO of Prada. In all, $500 million was spent by the challengers. “It’s so cheap, I’m surprised more people don’t do this,” Ellison quipped at the time.

There is a greater reason than financial gain, though. The America’s Cup is the last billionaires’ plaything where those with money can join in. Newspaper owners don’t get their fingers inky; football club owners never strap on their boots. An America’s Cup backer gets to sail with his staff, even if the speed of modern boats makes it unwise to do so in competition. “I want to be driving the winning boat,” Ellison said in 2002.

Few enter the Cup to make money, but it has commercial benefits. Auckland did very well out of hosting the America’s Cup in 2000 and 2003. It created 1,000 jobs and brought $75 million into the local economy, which explains why the New Zealand government supports its country’s bids.

Hosting the Cup does not always pay out in the long run, though. The Spanish port of Valencia, which staged the 2007 event, received $500 million of investment for regeneration and supposedly brought $3 billion in benefit to the city. It even helped to attract a Formula One race to Valencia.

Yet it was all built on sand. Cheap credit and corrupt politicians turned a boom town into a ghost town. Today, many of the America’s Cup buildings lie empty.

When you are worth more than $40 billion, as Ellison is, losing battles matters more than losing money. Some say that he spent more than $300 million on Oracle Team USA's successful defence of the trophy in September 2013 in what turned out to be one of the greatest sporting stories, with the Oracle racing team beating Emirates Team New Zealand 9-8 after trailing 8-1.

Building two massive catamarans — a racer and a spare — and running a 130-strong team of sailors, designers and so on, does not come cheap, especially with the leading staff on salaries of at least $20,000 a month, often a lot more.

Meanwhile, Land Rover BAR's bid for the 2017 America’s Cup is expected to cost at least $100 million. One thing is for certain ahead of next summer’s Bermuda showdown — whoever wins will have seriously deep pockets.