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  • rmacculloch

Legal Threats over the Americas Cup and some Sports Economics

It has been reported that, "A retired appellate judge .. has put Royal NZ Yacht Squadron on notice that he will sue it if it allows the America's Cup defence to be taken offshore. Sir Edmund Thomas, who briefly served as a judge on the Supreme Court, also indicated he could use the discovery process to examine the relationship between the squadron, Team New Zealand and its chief executive, Grant Dalton".


The Herald reports that "While the next venue for the America's Cup is yet to be determined, both the squadron and Team NZ have made a series of claims that they are unlikely to be able to fund a credible defence in NZ. The retired eminent judge, however, says, 'I believe that the defence of the Cup should take place in NZ. The public interest is involved, and I would wish to promote the public interest'.


However, on economic grounds, I'd tend to disagree with Sir Edmund about where the public interest lies in this case. Why? Sports economics has long debated whether hosting events, like the Olympic Games, leads to net economic benefits for countries. One of many articles on this question (see below) concludes, "The Bottom Line" is "Hosting the Olympics tends to result in severe economic deficiencies for cities". The author says "Beijing generated $3.6 billion and spent more than $40 billion for the Summer Olympics in 2008". So why do nations like to host the Games? It seems more for political reasons than economic ones. The Kiwi taxpayer, likewise, heavily subsidized the recent Americas Cup races in Auckland. The Council states, "The combined government & council group funding commitment to the 36th America’s Cup [held in Auckland in 2021] totals $249.5m with the government contributing $136.5m for construction, the event fee, and commercial & base related costs". What? Quarter of a billion dollars!? And in the middle of a pandemic with closed borders and barely a SINGLE foreign tourist in attendance!?


So is there a better alternative? Yes, and I would tend to side with the Yacht Squadron and Grant Dalton in terms of what is that better alternative. The model follows more the one which Bernie Eccleston, the former Formula One "Supremo", used to help revitalize those car races. Glamorous new venues and host cities were established around the world, from the likes of Miami to Abu Dhabi. Huge public and media interest followed. The publicity which Mercedes, Red Bull, as well as the team founded by Kiwi Bruce McLaren, got out of the Formula One global "circus" exploded.


In terms of the Americas Cup, having races in exotic new venues would probably do wonders for the sport. Whilst NZ remains the Cup holder, we have great influence over the types of boats & rules, which are important factors in helping us to retain the Cup. To the extent the Cup becomes a far bigger world event, Kiwi sailors, boat building expertise and national prestige maybe hugely enhanced. People living everywhere could start attending the races, like in Formula 1, and far more so than the relatively tiny number who fly all the way out to NZ to see the races in Auckland. Besides, the foreigners who come out here tend to be more of the super-rich variety who don't even stay in hotels, but instead on their own superyachts with foreign crews.


So in terms of economic costs & benefits, I see our "public interest", at least in terms of putting NZ on the global map and promoting us as a place of extraordinary yachting expertise, to be incomparably enhanced by turning the Americas Cup into a world series, along the lines of Formula One. Imagine if those car races were held in Auckland, time after time. No-one would be interested. Same track. Same views. The Americas Cup, like F1, needs different courses, different views, different weather. Winning F1 greatly helps Mercedes sell its production cars. It showcases German engineering, and German drivers, on the world stage. It doesn't matter where the races are physically held for the country associated with the winners to benefit greatly. So I'd argue that legal attempts to bog the Cup down in Auckland on the pre-text of defending the Kiwi "public interest" are seriously counter-productive.


Sources:

https://www.nzherald.co.nz/business/retired-senior-judge-warns-squadron-hell-sue-if-it-takes-americas-cup-offshore/SVPBLL3A6SCR7WT4KGQWJHEGA4/


https://ourauckland.aucklandcouncil.govt.nz/news/2020/07/auckland-council-s-contribution-to-the-america-s-cup/


https://www.investopedia.com/articles/markets-economy/092416/what-economic-impact-hosting-olympics.asp