CARS Official Response
INFORMATION BULLETIN #1
November 18, 2004
Subject: Termination of the CARS-RDG Marketing and Broadcast Rights Agreement and plans for the 2005 Canadian Rally Championship
A year ago, CARS entered into a five year marketing and broadcast rights agreement with Rally Development Group (RDG). Included in the wording of the agreement was a one time option to terminate the agreement at the end of the first year. The primary aim of the agreement was to secure long term commercial sponsorship stability for the Canadian Rally Championship. In addition, RDG had presented a very desirable program for both the development of the sport and its promotion.
During the first ten months of the agreement, three shortcomings in the agreement became more acute and a unanimous CARS Board decision was made to present to RDG with a request for changes to the agreement. The three changes CARS asked for concerned respectively, a shortcoming of the agreement, a means of improving the working relationship between RDG and CARS and, lastly, the financial stability of CARS. The rationale for the changes was as follows:
1. In the agreement, there was no protection for either CARS or RDG in case of failure of either party. CARS was exposed to possible legal difficulties if RDG were to fail or get in difficulty during the life of the contract and the assigned rights given to RDG could pass to others or be held beyond the reach of CARS. As well, RDG was exposed to fulfilling all financial commitments even if an event in the championship did not run. The wording of the first change was an attempt to address CARS?s issues and would have been expanded to address RDG exposure.
2. The second change was designed to relieve some of the strain that existed between CARS and RDG in the first year of the agreement. The change asked for increased communication, on a confidential and timely basis, on matters relating to sponsor negotiations and media campaigns.
3. The third change was an attempt to help put CARS on a secure financial path. During the first year of the agreement, CARS received approximately 2% of the total budget to which RDG was committed. CARS did not ask for new money to be added to the budget, but that already existing funds be reallocated from other aspects. The amount being asked for would bring the total payable to CARS to less than 5% of the total budget. CARS is currently operating in a very serious deficit position and to continue the agreement without a financial solution would result in the financial collapse of CARS before the end of the agreement.
The decision to exercise the option was made by majority vote when efforts to negotiate three changes to the agreement were rejected by RDG, at 7:15 pm. The rejection was without explanation and came twenty-four hours after RDG first received them. This was less than five hours before the option to terminate would expire and the agreement would have become binding on both parties for four years. Friday evening contact attempts by the CARS president went unanswered.
At 11:00 pm on Friday, November 12, 2004, CARS, with great reluctance, informed RDG that CARS wished to exercise its option to terminate the CARS-RDG Marketing and Broadcast Rights Agreement. Included in the notification of exercising the option to terminate was an offer to rescind the notification if a settlement of the three requested changes could be negotiated. All attempts on the morning of Saturday, November 13 to contact either principle of RDG were unsuccessful. Messages were left inviting RDG to contact the president. No response was received at any time over the weekend. Further attempts, including intercession by ASN Canada FIA and the chairman of the national organizers? committee on Sunday, November 14 similarly failed. Attempts to establish dialogue continued throughout both Monday and Tuesday, but RDG indicated, through others, they did not wish to reinstate the old agreement or become involved in a new agreement or anyone else concerning the 2005 CRC.
The decision to terminate the CARS-RDG Marketing and Broadcast Rights Agreement was a difficult one to make because of the desire of the entire CARS board to continue with the agreement to allow the good work started by RDG to continue to prosper in the four remaining years of the agreement. However, sometimes difficult decisions have to be made to protect the best interests of the sport.
Current Situation:
Even at this late hour, CARS is prepared to work with RDG if there were any possibility they wished to continue on the path they had started in 2004, but the way forward should reflect the best interests of all parties involved.
Plans for 2005:
CARS wishes to assure its member clubs and their members, organizers and competitors as well as its present sponsors that there will be a Canadian Rally Championship in 2005 and beyond. While we are still hopeful that the present situation can be rectified, the CARS board is committed to press forward to retain the present sponsorship of Subaru and seek other sponsor partners. One of the first acts in the coming days will be to establish a relationship with a marketing company with an eye to improving the commercial side of the sport. However, CARS will pursue all sponsor possibilities that present themselves in the immediate future.
(Because of the urgency of time, this document is being released in English. The French language document will follow as quickly as possible.)