NEW YORK (CNNMoney.com) -- The rivalry between two particularly litigious billionaires has turned the 33rd Americas Cup yacht race into a personal grudge match -- and driven millions of dollars in sponsorship money away from one of the world's premier sporting events.
Larry Ellison, chief executive of Oracle Corp (ORCL, Fortune 500)., and his maritime arch-rival Ernesto Bertarelli, the Swiss-Italian heir to a pharmaceutical fortune, launched two of the most expensive boats in the history of sport sailing when the America's Cup got underway Friday in Valencia, Spain.
The race, which had been delayed for several days because of bad weather, pits the Ellison-backed BMW Oracle team, sailing under the flag of the Golden Gate Yacht Club, against Bertarelli's Alinghi team, the defending champion.
But the rivalry between Ellison and Bertarelli has its roots in a protracted court battle over the terms of the race. Both teams alleged that the other side was attempting to slant the parameters to gain advantage.
The bad blood has cast a pall over the 159-year old race and drastically reduced sponsorship revenue at what was once a magnet for high-budget corporate sponsors such as Louis Vuitton and UBS.
The organizing budget for this year's event has reportedly fallen to $11 million from a record $278 million in 2007, when the last America's Cup was held.
"Sponsorship is way down," said Gary Jobson, president of U.S. Sailing and a member of the team that won the America's Cup in 1977.
The drop in sponsorship is partly due to the fact that there will be, at most, three days of racing this year between just two contenders, Jobson said. The Americas Cup is normally a week-long regatta that, since 1970, has been preceded by a month of qualifying races between teams from around the globe.
The truncated schedule comes after a court in New York ordered the race to proceed according to the Deed of Gift, an 1852 document that governs the race, following two years of litigation between Ellison and Bertarelli.
Under the Deed, the defending champion and the challenger must agree to certain terms of the race. If they can't, the Deed requires that the teams face off in a best-of-three competition, as opposed to a more conventional best-of-seven or a best-of-nine series.
"These guys were unable to agree on any item," Jobson said.
In addition to having fewer days of sailing, sponsorship has been hurt by the lack of qualifying races this year, which reduced the international scope of the America's Cup, said Tom Cannon, a professor of sports business at Liverpool University.
"That combination has drastically reduced sponsorship income," he said. "Before this year, the America's Cup was a global event. But at the moment it seems to be more about the litigation than actual performance."
Cannon, who studied the economic impact of the 32nd America's Cup for financial services firm Allianz, estimated that the 2007 event generated a total of $7 billion, making it the third largest global sporting event after Olympics and the World Cup soccer championship.
But he expects this year's America's Cup to have less than 10% of the total economic impact it had just three years ago.
"There's not the same buildup," he said. The last America's Cup involved a series of qualifying races between 12 teams representing cities and nations from around the globe, which attracted a wider array of sponsors, Cannon said.
"This time, you only have two," he said. "The litigation between the two billionaires in question became so intense that there wasn't any space for anyone else."
Cannon said reduced investments in infrastructure and the fallout from the global economic downturn also contributed to the smaller overall financial impact of this year's race.
Despite the sharp drop in sponsorship revenue, Ellison and Bertarelli have spared no expense in developing their highly experimental crafts.
"It's fair to say that these are probably the most expensive America's Cup boats ever built," Jobson said.
Team Ellison has produced a 90 foot trimaran, or three-hulled boat, with a rigid "wing sail" that stands twice as tall as the wing of a Boeing 747 airplane.
Bertarelli's Alinghi 5 is equally massive. The 90 foot catamaran has a beam the width of two tennis courts and mast 17 stories tall.
Jobson said it's difficult to know exactly how much Ellison and Bertarelli have invested in the race, but he estimated that each probably spent $25 million on the boats alone.
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