March 16, 2012 17:28

Some thoughts on Keene's interview with Andrew Paulson

Some thoughts on Ray Keene's interview with Andrew Paulson

Last week an interview appeared online with Andrew Paulson, the American businessman who signed a contract with FIDE to organize the next two World Championship cycles. The interview was conducted by English GM Raymond Keene and although many critical questions were asked, somehow many important aspects still remained unclear.

Andrew Paulson | Photo © Ester Dyson, New York

The name of Andrew Paulson first appeared here at ChessVibes on February 10th, when we did a first story on the Candidates Tournament being set for London in October-November, 2012. Almost a month later FIDE confirmed everything and the tournament will be held October 24-November 12 in Britain's capital. This was the result of an agreement between FIDE and Agon, a company recently founded by Andrew Paulson.

Paulson is a 53-year-old, successful American entrepreneur working in Russia. He founded several magazines, such as Afisha, an entertainment and listings magazine which became the cultural touchstone of Moscow and St. Petersburg, Bolshoi Gorod, a free bi-weekly lifestyle magazine and Afisha MIR, a monthly glossy travel and lifestyle magazine. He also co-founded the online media company SUP which now consists of huge websites such as LiveJournal, Championat and Gazeta.

In recent weeks we exchanged several emails with Mr Paulson but eventually he declined a Skype interview. There was, however, a conversation between him and GM Raymond Keene, who published the interview at his personal website. It will also be excerpted and spread over three parts in Keene's column in the Times, and on March 12th it could be read at Chessbase as well.

Although Keene asks a number of critical questions, somehow many important aspects still remained unclear. For example, asked about the nature of his agreement with FIDE, Paulson replied:

The €10-12 million that Mr. Ilyumzhinov was referring to is the approximate total production cost, including prize funds, for one two-year cycle. For this I have to provide a rolling Letter of Credit plus $500,000 in cash to FIDE. We need a little bit of seed money that I will provide to handle cash flow; beyond that, I assume we will be profitable.

Especially this answer was screaming for a follow-up question, don't you think? 

Paulson has a lot of experience, and is not scared of "thinking big". In talking about potential numbers that can be reached by chess, he says:

But, if you have those 300 live, plus 2,000,000 online, and soon another 10,000,000 on TV, with over 500,000,000 people playing chess at least from time to time, and another billion who generally regard chess as the epitome of intelligence, complexity and challenge, you can decouple the sponsorship from the finite audience of one event and offer a relationship with World Chess itself. Once again, we are not inventing anything new: simply looking at it from a different point of view, rigorously.

Two million online and, wait, ten million on TV? Ehm, haven't we failed for years to get chess on TV, for the simple reason that the general audience does not understand chess? We'd be happy to be proven wrong, but we remain sceptical about especially this part.

The 4-year schedule as presented by FIDE looks impressive. However, to make all this a success, they need sponsors, and good ones. Think Microsoft, think Coca-Cola. But these are exactly the brands who are reluctant to do anything with FIDE, as long as Mr Ilyumzhinov is in the saddle. We must admit that Mr Paulson's view on Ilyumzhinov (and his famous dwellings on aliens) is, in fact, quite brilliant:

I think that the idea that chess was brought to earth by aliens is a fascinating metaphor that bears deconstruction, and I think that Ilyumzhinov’s claim that he was actually taken into an alien spaceship to play chess with aliens is a grand fairy tale that has stimulated everyone’s imagination. Further, the episode created a remarkable amount of controversy and agitation which must demonstrate Ilyumzhinov’s special genius.

We really hope that Andrew Paulson's plans will be a success, and with someone with that much experience in business and online media, why not? The Keene interview wasn't really offering any insight in how exactly he will do it, but let's wait and see how things will be London, in seven months from now.

Peter Doggers's picture
Author: Peter Doggers


rajeshv's picture

Absolutely agreed!

I don't quite understand what the "rolling letter of credit" entails. If I understand this correctly, the seed money is the amount that he is providing in hard cash. It is not clear what happens if sponsors are not found consistently to buy the "package" on offer. I guess the rolling letter of credit may have some details in this regard. Not sure when they are planning to release those details.

Also, I agree, based on known trends, the 2M/10M numbers appear to be way too much of an over-estimation. Aren't the current numbers for world championship match viewership online range in the 10's of 1000s? If you put all viewership across all sites, I would guess the max might be 100K. 2M is order of magnitude higher. I would be delighted to be proven wrong as well. :)

mishanp's picture

There were other odd details in the interview:

"The theme of the first year is a European Tour: Moscow, London, Lisbon, Madrid, Paris and Berlin."

It would have been more reassuring if Paulson had said something about Tashkent and Chelyabinsk, which are supposed to be the only two venues for the Grand Prix this year (if they don't materialise the whole schedule needs to be scrapped again). Ilyumzhinov did mention Paris, Madrid and Lisbon for next year, though he said Vienna instead of Berlin (the logical inference is that nothing's yet been decided).

It was also interesting to see Paulson say that "the Azerbaijan and Bulgaria bids were rejected", while a previous version of events was that Azerbaijan won. Probably the details don't matter (unless Danailov follows through and takes FIDE to court), though it seems things are also a little vague concerning Azerbaijan's support for the London venue: "Nothing is final on that score."

Of course the positive general words aren't a problem as long as they're subsequently backed up by concrete action. It'd be nice if that happened for a change! :)

redivivo's picture

It's funny that they keep making things up as they go in such an obvious way, just say Berlin or Vienna, that sounds nice and hopefully nobody will notice that they have no idea what will happen or that they said the same thing the previous time, with all Grand Prix events in "leading World cities" that turned out to translate to ex-Soviet cities only, for example Jermuk with 5000 inhabitants. Also funny that Paulson states that both Azerbaijan's and Bulgaria's bids were rejected and that he won with a bid that didn't even exist. Danailov stated that Azerbaijan and Bulgaria were the only bids, so how come someone else got the Candidates and who picked Radjabov and why?

Thomas's picture

In a way, Azerbaijan both won and lost the bid. According to themselves they won because Radjabov gets the wildcard (which may have been the main objective or motivation); according to Paulson they lost because the event will not be held in Baku. Paulson didn't submit a 'proper' bid but came in as a sort of joker when both formal bids were problematic: Aronian clearly said that he won't play in Azerbaijan, Kramnik at least wouldn't like to play in Bulgaria.

On Peter's article or opinion piece: How did Paulson's other projects start? I guess, or it wouldn't surprise me if "many important aspects ... [were] unclear" at their onset. How detailed were his initial plans about "the online media company SUP which now [sic] consists of huge websites"?
Yes he thinks big, probably too big regarding size of the potential audience - but something like "currently 1000 people are watching on the Internet, let's make this 1200" wouldn't exactly be a marketing statement that attracts sponsors. There are three possibilities, the future will tell: success, failure or somewhere in between i.e. roughly maintaining the current status quo. Would the last be a glass half full or half empty?

Surrealism's picture

All these inflated numbers for potential online/TV viewers just show how detached from reality people at FIDE are.

Here is a simple proof: scroll up and record how many people like chessvibes (a major chess news site) on facebook. Less than 3000 right? Now do the same for a major European football site (hint: around 1 million). That's not an accident.

Face it. Its depressing of course, but the crowd just doesn't care about chess.

Joe's picture

Don't see what is so depressing about that to be honest. Does everything HAVE to be popular nowadays? :)

Niima's picture

My bet is that this guy is a shady character. He looks after number one and would not invest in something unless he is sure to make a profit. There are things that he and Ilyumzhinov are not telling us.

Bobby Fiske's picture

Despite Kirsan’s flirt with sheiks and despots, he never found someone willing to hand the chess world a cheque of $10.000.000,-. In lack of a sugar daddy, we have to look for a regular profitable business model. Kirsan administration has proven to be rather amateurish in this field, so appointing an outside professional and successful businessman is for the better.

I am slightly optimistic about Andrew Paulson. He gave FIDE $500.000 up front + the rolling Letter of Credit (L/C), which works like an irrevocable bank guarantee. He didn’t mention the amount or the terms of it, but I guess it’s a financial commitment for minimum, let’s say, another $500.000,-.

$1.000.000,- isn’t exactly pocket money. The guy is serious. He has to work hard to succeed. Right now he is probably working his ass to ensure participation from the top players, he is setting up meetings with possible sponsors and he is paying his programmers to develop a new generation kibitzing software with improved computer analyzes, guess-the-move, live video or whatever functionality.

You don’t need a capital base of $10.000.000,-to make a 2-year turnover of €10-12.000.000,-. Usually it’s enough to have a capital base of 1/10th or less. The remaining income is generated from the running business. -If it runs. If it doesn’t, it fails and goes bankrupt. That’s normal. Like I said, stop dreaming about a sugar daddy.

Paulson’s main expense is staging the tournaments. Selling tickets and kibitzers are a small source of income. Advertisements and sponsors are the big ones. Also selling a wild card ticket to the organizer is a well known source of financing a tournament, pioneered by no other than FIDE themselves. We have to accept that Mr Paulson also seeks this kind of funding. This is common practice in other sports too. (The organizer gets an extra team/player seeded in the tournament).

Let’s hope for a successful Candidates in London in October!

Niima's picture

I hope you are right. I am thinking of backroom deals with Russian oligarchs, tax loops, using chess for money laundering schemes etc. And once he has milked the cow in a year or so, he will announce a disagreement with fide/Ilyumzhinov and pull out.

stevefraser's picture

Paulson is a "glass half full" guy. After all, how could he put a positive spin on the apparent statement from the president of the world chess federation that he once played chess with aliens on their flying saucer.

RG's picture

I feel very optimistic about Mr. Paulson, I think he could sell ice water to Eskimos! However I have a disagreement with the author of the article;

"Two million online and, wait, ten million on TV? Ehm, haven't we failed for years to get chess on TV, for the simple reason that the general audience does not understand chess?"

I neither play Poker, understand Poker strategy or care about Poker but when big money Poker events are televised, I find them fun to watch - because the way it is presented!

KL's picture

I don't like the comparison to poker for a lot of reasons. First, you may not play poker or understand strategy, but if you are shown two hands, I suspect you know for certain which one is better. Second, poker is a game of incomplete information for the players, but not for us. When we watch as fans it's interesting (IMO) primarily because of the hole card cameras - we get a sort of voyeuristic power trip out of knowing someone is raising into an opponent holding the nuts for example.

Also, the stakes are much higher in televised poker - nearly all of those guys are playing for prizes around 1M USD or more. This leads into the last thing, which is that we have a much easier time imagining ourselves in the poker player's shoes, because in the short term, poker is still largely a game of luck where anybody can beat anybody else.

I'm a master at chess and a rank beginner at poker, but I guarantee I can finish ahead of Phil Ivey in a poker tournament more often than I finish ahead of Magnus in a chess tournament :)

RG's picture

o.k. perhaps it never will be as exciting as poker tournaments but the World Championship is for a prize fund of a couple of million and for public consumption the highlights can be presented, along with a simplified explanation making it easy to understand for those who know little to nothing about chess. Here is what I consider a step in the right direction in presenting chess to the masses:

Anonymous's picture

Oops, here is the up-to-date link:

Andre From Outkast's picture

'I think that the idea that chess was brought to earth by aliens is a fascinating metaphor that bears deconstruction, and I think that Ilyumzhinov’s claim that he was actually taken into an alien spaceship to play chess with aliens is a grand fairy tale that has stimulated everyone’s imagination. Further, the episode created a remarkable amount of controversy and agitation which must demonstrate Ilyumzhinov’s special genius."

ROFLMFAO. He would have made a good comedian.

Bert de Bruut's picture

Entrepreneurs are never sure of success, but if they see an opportunity, they take the chance. It may all end in an abysmail failure when the cash doesn't start to flow as anticipated, and the entrepreneurs and investors decide to chop the bleeder, leaving the chessworld with the debris and damages. Since FIDE really can't go any lower than it already does, this possibility obviously was of no concern in there decision.

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