Andrew Paulson wrote to me earlier today : ”I prepared this analysis to disprove Nigel Short’s continuing insinuations that Kirsan was a hidden partner: it demonstrates that FIDE negotiated very aggressively with AGON and that there was no influence from above or sign of conflict of interest.”
This had already been presented to the ECF emergency board meeting last weekend, and has since been reproduced on ChessDom as well as Susan Polgar’s popular blog. I have decided to also do so, to keep my readers informed and help them keep from drowning in the ongoing dis-information war that has been developed as part of Kasparov’s presidential election campaign.
Allegations have been made that Kirsan Ilyumzhinov or some other FIDE official(s) representing a conflict of interest are behind AGON. Allegations state that they stand to reap huge profits or that they seek to control the World Championship Cycle for some other nefarious reason, you’d assume that you’d see some evidence of this. None has been offered and there’s only one place to look:
Under the AGON/FIDE Contract (unanimously approved by the Presidential Board; ratified by the General Assembly; publicly available since February 2012), the first four years (two World Championship Cycles, not including the World Cup — 2012-2015) cost AGON over €20m, of which FIDE receives €1.75m (prize fund commissions, the rest being overhead, product development, event costs and prize funds). The ambitious assumption that sponsorship revenue will grow from zero to €5m/year by year four, this implies a loss of about €10m before break-even.
Starting in 2016, AGON starts paying to FIDE 30% royalties on any sponsorship revenues (over agreed-upon base costs) up to $5m, with percentages growing on a sliding scale to 55%. Therefore, in addition to €436k/year in prize fund commissions, assuming AGON was by then breaking even (now requiring about €7m/year), AGON would be paying FIDE an additional €2m/year. As soon as AGON makes a profit, even more goes to FIDE.
The owner(s) of AGON would therefore receive no dividends unless AGON grew sponsorship revenue from zero to €5m/year by year four and continued to grow it to over €10m/year by year eight to pay back the €10m start-up deficit; at which moment, AGON would have only 3 years left to earn money on what would generally be considered a crazy high-risk, capital-intensive investment … before the Agreement was up for renewal with FIDE in year eleven. By which time, AGON would have paid to FIDE €35m. (To put this in perspective, currently FIDE’s budget is about €3m/year.)
FIDE removed from the Agreement any intellectual property, digital rights or broadcast rights — the World Championship Cycle’s principle source of revenue. A sponsor willing to pay millions of dollars for sponsorship of a chess event probably would be interested in communicating the fact of their sponsorship beyond the audience in the playing hall.
Several members of the FIDE Presidential Board commented that the contract was heavily weighted in favour of FIDE! Clearly an understatement.
Having conclusively established that I own 100% of AGON, I hope that this analysis now shows that even were there a side agreement (impossible to disprove), it would reap so little benefit compared to the enormous benefit to FIDE and the chess world that it is immaterial.
[This is an unaudited rough summary with no caveats for innumerable contingent details. It is a ‘best efforts’ attempt to summarise a complicated contract as it is realised in a complicated business model.–AP]