Update (9.3.13): Another dubious development in Larry Ellison's troubled quest to mainstream the America's Cup: The Cup jury penalized Larry Ellison's Team Oracle USA after the team was accused of deliberately violating race rules during the preliminary races that precede the official America's Cup races. Four members of Team Oracle were banned from participating in part or all of the Cup—the first time sailors have ever been banned for what the San Francisco Business Times called "cheating." Team Oracle has been docked points and fined $250,000 that will go to charity. Now, in order to retain the Cup, Ellison's team will have to win 11 of the 17 races in the series, which starts on Saturday, September 7.
The scandal first came to light in early August, when the America's Cup was gearing up for youth teams to race the AC45 catamarans Team Oracle and competitors had raced in the preliminary series. Regulators found that Oracle's boats were heavier than allowed by the racing rules, which gave the team a competitive edge in the races; they found bags full of resin or lead in two boats inside a part known as the king post, according to the jury's report, which you can read here (PDF).
"…and the crowd goes wild!!!" an announcer enthuses over the loudspeakers at an America's Cup viewing area on the San Francisco waterfront. The crowd, realizing that this is the point where it is supposed to be going wild, lets out some perfunctory cheers. Some onlookers take an anticipatory gulp of a beer, which is selling for $8 to $12 a pop. The New Zealand boat rounds the final mark and crosses the finish line minutes in front of its competitor, owned by Prada CEO Patrizio Bertelli, and swings down by the waterfront so fans can catch a better look.
Up close, the boat is an immaculate carbon-fiber spectacle, a marvel of engineering. Even while doing its victory lap past the spectators, it's impossibly fast. The waving crew is tiny compared to the "Fly Emirates" ad prominently displayed on the boat's 130-foot-tall sail—since each team spent around $8 million to build its boat, it's financially necessary to deck them out like NASCAR racers. The sailors wear body armor and carry ropes, knives, a water-activated strobe light, and small bottles of air good for a few breaths in case a boat capsizes and they are trapped underneath.
Such was the scene at a trial run for the America's Cup, the international sailing event that San Francisco never asked for, and by which its habitants have alternately been thrilled, horrified, and baffled since the hoopla began in early July. The Cup was brought to San Francisco by the billionaire tech prince Larry Ellison, who managed to sell City Hall on the notion that it would bring glory, and more than $1 billion in economic activity, to the Bay Area. (Click the box at right to see the numbers.)
But ever since Ellison and the city cut their deal in late 2010, the Cup has been plagued by skepticism over what San Francisco would actually gain as its host. At one point, it appeared that city taxpayers would have to shell out as much as $32 million, although San Francisco would reclaim some of that through higher tax revenues. Current cost estimates are significantly lower because the event will be smaller than projected: Only 4 boats ended up in the competition, not the 10 to 15 organizers had expected. That meant significantly smaller crowds, thus less police overtime and so forth—the city, its rep on the line alongside Ellison's, has attempted to spin this as good news. Read on for the lowdown on the cash and the characters and the inevitable lawsuits and political skirmishes that make the America's Cup sailing's biggest circus act.
Welcome to the Larry Ellison Cup
As the 2010 winner, Larry Ellison got to choose the location of the next race. Ellison, an avid sailor who currently holds the Cup—like the Stanley Cup, it is a physical trophy—is the swashbuckling cofounder of Oracle, the Bay Area database-software maker. According to Forbes, Ellison is the world's fifth-richest man, not to mention the owner of 98 percent of the Hawaiian island Lanai. He once offered his neighbors $15 million for their $7 million San Francisco home because their redwood trees were blocking his views, and then took them to court when they refused the offer.
Historically, the Cup is a rarified event that takes place far from shore. Ellison dreams of turning it into a spectator sport the public can watch from land and view live on network television. That's a tall order. "San Francisco is a notoriously prickly place to hold an event like this," says Julian Guthrie, who wrote a book about Ellison's crusade to bring the Cup to San Francisco. Consider the struggles of basketball's Golden State Warriors, who have been working for years to move from Oakland to a waterfront stadium in the city. "This is a NIMBY town," Guthrie explains.
Ellison no doubt knew this, but he's not the type to give in easily. Indeed, look around these days, and you'll see the America's Cup and Ellison on display all around the city. Witness…
The massive event space: The city of San Francisco spent $22 million to help Ellison develop two San Francisco piers and a waterfront park, the Marina Green, as public viewing areas. Since much of the racing happens out of sight, the piers are equipped with giant screens—there are also exhibits, concessions, and other trappings you might find at any stadium. You can reserve semi-private tables in a "VIP section" above the public area for $35,000 for the three days of Cup finals. Private waterfront "chalets" will run you $400,000. If you're looking to tie up your yacht, you'll pay anywhere from $36,000 to $160,000 for a three-week mooring. Ellison's Event Authority (the group running the event) gets to keep all the revenue from all of these rentals.
The 9,000 seat concert venue: Sting, Sammy Hagar, and the Jonas Brothers were among the host of acts booked at an outdoor venue Ellison's people built on land supplied by the city. Next Wednesday, for instance, you can catch Heart with Jason Bonham's Led Zeppelin Experience (tickets: $26-$100.50). The concerts are promoted by LiveNation, which leases the venue from Ellison. Under normal circumstances, the city would demand a cut of the revenue from other concerts on city-owned property. In this case, San Francisco won't see a dime in ticket revenue.
Exhibits at two major art museums: The Asian Art Museum is exhibiting Larry Ellison's Japanese art collection, which the San Francisco Chronicle called one of the museum's "finest exhibition projects"—possibly because Ellison hired the museum's former art director to build his collection. The America's Cup trophy—definitely not art and definitely not Asian—was on display during the opening days of the exhibit.
San Francisco's natural history museum, the California Academy of Sciences, is hosting a "Built for Speed" exhibit sponsored by Oracle and by Google Executive Chairman Eric Schmidt and his wife. Museum-goers get to learn about fast things like fish and orcas, and can "examine" up close a boat similar to Team Oracle's.
A documentary, produced by Ellison's son and narrated by Jeremy Irons: Ellison commissioned his son David, a film producer, to make a movie titled The Wind Gods telling the story of his father's victory in the 2010 Cup. The film, which later aired on PBS, screened at the America's Cup event space last spring. Guests received books about Ellison's America's Cup career in their goodie bags.
The 16-hour NBC America's Cup infomercial: The idea to make the America's Cup into a grand, televised event was at the heart of Ellison's plan for a reinvented America's Cup. If Ellison succeeds both in winning the Cup and selling it to the public as a spectacle, then the TV deal could prove lucrative for him down the road. To make sure it succeeds, Ellison has employed helicopters with military-grade GPS and wired the boats with sophisticated tracking systems and more than a dozen microphones to make the broadcast more thrilling.
The equipment is rumored to have cost a fortune, and so will all that air time: NBC isn't buying the rights to the America's Cup. Rather, Ellison's Event Authority purchased air time from the network. Yep, Ellison is paying NBC, not unlike an infomercial, to air 16 hours of national regatta coverage this month and next.