Overview of ILCA Finances – Part 2

As set out in a previous article, the pattern for ILCA’s income and costs has been stable for many years.  But with the policy changes required to comply with World Sailing’s new Olympic Equipment Policy, including the appointment of multiple new builders and the commensurate necessity for increased technical compliance, ILCA’s income and expenditure will also evolve beginning in 2020.

To allow the class to be considered for Olympic re-selection it had to make changes to satisfy World Sailing that the class complied with the FRAND (fair, reasonable and non-discriminatory) builder provisions of the new Olympic Equipment Policy. This required fundamental changes for the class including the appointment of new builders and suppliers and removal of geographic trademark boundaries. These changes inevitably required a loss of trademark and geographical exclusivity for the existing builders and it was recognized that these builders should be compensated for their participation in this changeover and for their legacy position in the ongoing framework.

After extensive discussions and negotiations, complicated considerably by Laser Performance’s non-cooperation and removal as a class builder due to major contractual non-compliance issues, a new builder appointment and licensing process was agreed between ILCA, the legacy builders, PSA and PSJ, and World Sailing. This included agreement to fully comply with World Sailing’s FRAND requirements by allowing open access to qualified new builders and suppliers in return for reasonable royalty payments being introduced on all class equipment. Included in the agreement was an agreed split in royalty income between ILCA, PSA and PSJ.

So what are the new fees?

Every item of proprietary ILCA equipment sold by any licensed builder or supplier will be labeled with a QR coded royalty label, which confirms it is genuine class equipment, allows tracking of parts and for the collection of the agreed royalty fees.

In line with standard licensing fees for consumer products, the agreed royalty fees represent approximately 2.5% of the retail price of equipment. It is important to note that all builders, including the legacy builders, are liable for the same royalty payment amount, thus ensuring an equal cost structure for all builders. The specific fees on each item of equipment are as follows;

Item                                                                            Royalty Fee (US$)

  1. Hulls including all attached fittings                $ 126             
  2. ILCA 7 sail                                                           $ 19    
  3. ILCA 6 sail                                                          $ 15                
  4. ILCA 4 sail                                                          $ 15                
  5. Daggerboard                                                      $ 17                
  6. Rudder stock                                                      $ 5      
  7. Rudder blade                                                     $ 10    
  8. Top section (Aluminium)                                  $ 8                  
  9. Top section (Composite)                                   $ 16                
  10. Bottom Section (ILCA 6 and 7)                        $ 8                  
  11. Bottom section (ILCA 4)                                   $ 7                  
  12. Boom                                                                  $ 7                  
  13. Vang cleating fitting                                          $ 7      

In addition to these fees, all builders will continue the ex gratis designer fee of $US50 per hull historically paid to Bruce Kirby Inc. This fee will now be paid to Global Sailing Ltd, which has purchased the assets of Bruce Kirby Inc.

Who gets the income from the new fees?

The income from the royalty fees will be split 50/50 between ILCA and the original builders, PSA and PSJ. ILCA’s share of the Royalty fees will be used firstly to meet the increased technical compliance costs associated with bringing new builders on board and the management  and administration of the QR code system.

ILCA estimates that, by the time the new system is implemented, it will have spent US$200-300,000 as a consequence of the changes required by World Sailing. After meeting the operational costs of the scheme the class then intends to allocate part of its royalty income to rebuild its equity base and replace the money used for introducing the changes.

As previously described, ILCA is a non-profit entity and seeks to offer the best value for money to its members. Because the new processes are just being introduced and ILCA’s costs and income from them are unclear at this point no definite decisions have been made by the World Council on the use of its additional income.

However there are clearly two overall options for the class to consider for use of any additional income; increase services to members or reduction other costs to members so as to maintain approximately the same level of income after accounting for increased costs. Whichever option or combination of is eventually chosen in the future it is the intention that the broad principal of aligning costs and benefits to members will be maintained, so that in general those groups paying the new royalty fees should see the most benefit from them.