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MEMORANDUM ON THE COMMERCIALISATION OF FIDE
In 1997 at the 68th FIDE Congress, I came forward with a proposal to sponsor the next series of 10 World Championships for men and women as part of my efforts to give financial stability to FIDE -- The General Assembly then gave the rights to the World Chess Foundation to organise the next 10 World Championships.
For the last two World Championships, the World Chess Foundation has covered all the costs and I in turn have funded the World Chess Foundation. To date there has been no income from these events and our experience since Las Vegas has clearly brought home the point that we must seriously address the problem associated with the commercial sponsorship of FIDE.
As you were advised in my circular letter of 4 June 1999, I started to implement a structured programme to address funding in the long term for chess and the World Championships. FIDE Commerce PLC was thus put in place to exploit chess on a commercial basis.
Since its creation in May 1999, FIDE Commerce PLC under Artiom Tarasov has clearly shown its capabilities and commitment. Through the initiative of this company, it has developed a business and marketing plan, for the commercial activities of FIDE, the FIDE web site for the Internet, live coverage on the Internet of the World Chess Championship, and provided the opening and closing ceremonies for the event in Las Vegas. In addition, FIDE Commerce has successfully provided on-line services for the European Team Championship in Batumi and organised the 75th Anniversary in Paris. It is also developing a number of projects including the FIDE Club International cards presented together with Visa as a future partner, during the Presidential Board meeting in Paris. Another project is FIDE Inform (a computerised linking system for all national federations). This will make it possible for Internet services to be provided to connect all of us as one union of organisations. It will certainly bring us necessary benefits such as daily exchange of information, creating an efficient and speedy system of collecting tournament results and data for purposes of rating and many other facilities, such as conference facilities and use of cheaper telephone communications. Arrangements have almost been concluded for an international chess magazine for FIDE and for TV programmes on chess. I am aware that more than USD 500,000 has been spent on developing these projects.
These projects are exciting and will in the future create income for chess, but in order to achieve all these goals, there is an urgent need for us all to create an enabling environment for the projects to materialise.
I now need your approval to take matters forward generally, formalise the structure, commence activities, sign documents and authorities and generally implement this strategy solely along the principles contained in this memo.
I therefore propose the following resolutions:
1. That, subject to the rights granted to the World Chess Foundation, all chess rights belonging to FIDE be assigned to FIDE Commerce PLC for the purpose of commercial exploitation on the following basis:
a) FIDE Commerce PLC will become an affiliated member of FIDE;
b) FIDE Commerce PLC will report regularly to a special Committee of FIDE to be created by the Presidential Board on its financial results;
c) The World Chess Foundation shall use its income generated from projects introduced by FIDE Commerce PLC to cover the costs of the World Championships and any surplus will be split between the World Chess Foundation and FIDE.
d) Net profit (after tax) of FIDE Commerce PLC itself will be distributed as follows:
70% to the World Chess Foundation;
30% to FIDE Commerce PLC
2. That each National Federation and each Continental Federation assist FIDE Commerce PLC and its corporate branches in its activities as required by FIDE Commerce PLC. This co-operation will be realised purely on commercial contractual basis and FIDE Commerce PLC will pay each National Federation and each Continental Federation for assistance provided at its request, on a reasonable commercial basis.
3. That the President on behalf of FIDE be and is hereby authorised to carry on the activities, referred to in the resolutions, do any act and sign any documents in the name of FIDE in connection therewith and to implement the structure proposed and to assist FIDE Commerce PLC in its commercial activities in relation to chess and the World Chess Foundation in relation to the World Championships.
When FIDE Commerce eventually goes public, it is proposed that some of the shares of the company should be made available to officials of FIDE, national federations and individual members of the FIDE Club International.
The second reason is borne out by the fact that we have competitors, who are actively taking steps to erode the financial and economic benefits that should accrue to FIDE and its affiliate organs/members. These people in concert with some organisations are prepared to continue weakening us as an organisation, until it could be said that FIDE is no longer viable and that would indeed be a sad day for chess.
Experience in our approaches to potential big corporate sponsors of FIDE, who are interested in investing millions of dollars into Chess on a global scale each year, has made it more desirable that we take urgent steps in this direction. They have emphasised that they would not be ready to go with us unless we as FIDE, put in place and meticulously execute with the help of our Continental and National bodies a program, where FIDE has total management and control of all activities related to chess. It is absolutely clear that to find the big corporate sponsor, which we all badly need we must be seen in the world as a cohesive unit; a united, strong and viable international organisation with 159 member countries and over half a billion devotees with the same aim, goals and vision.
How do we now address this problem: I propose the following steps:
1. All international tournaments must obtain prior approval at the level of National, Continental and FIDE depending on the average category of the event.
2. FIDE will require prior approval for all tournaments with an average elo of 2500 +.
3. FIDE shall in consultation with representatives of Continental Assemblies and Federations, revise the fees payable for each level of tournament.
4. An annual meeting of top level tournament organisers and representatives of FIDE, Continental and National Federations shall be held each year with a view to stabilising the calendar at least 1 year in advance and bearing in mind the need to give priority to the World Chess Championships, top level tournaments and those tournaments that bring prestige to FIDE in terms of high prize monies, TV and Internet coverage etc.
The procedure for obtaining the necessary prior approvals shall be as follows:
1. The organiser must forward a written application to the National Federation, who shall in turn forward same to the Continental Secretariat or to FIDE, depending on the category or type of tournament.
2. Approval shall automatically be granted if the following conditions are met:
a) The tournament will not be in conflict with previously approved FIDE events, including continental and regional Championships that have been included in the Calendar of chess events.
b) The decision will also depend on the presentation from the Organiser of the Tournament for certain necessary conditions:
(i) prize fund;
(ii) names and average elo of participants to be invited, none of whom shall be under any form of suspension or ban or censure from FIDE, the Continent or National Federation;
(iii) financial viability of organisers and sponsors;
(iv) relations between the organising body and FIDE;
(v) special budget for implementing publicity through live transmission of the tournament via Internet through the official FIDE web site, using equipment and technology developed by FIDE.
3. The decision of FIDE, the Continental Secretariat or National Federation not to approve and support the tournament can only be based on the following grounds:
a) The Organiser(s) or any of their partner(s) or associate(s) have a bad relationship with FIDE or have a bad reputation in the chess world, the world of sports or in the world in general.
b) That any commercial rights to exploit these tournaments will be taken out without the express approval of FIDE.
Where any member or affiliate of FIDE supports the holding of a non-approved FIDE event, this member or affiliate will be brought before the Ethics Commission to explain the basis of their action, failing which, sanctions could be imposed.
Accordingly, I propose the following regulations for your approval:
1. The World Champion in order to remain the World Champion must defend his title in every World Chess Championship as organised by FIDE.
2. All our World Chess Championships are to be known as The World Chess Championship and not "FIDE World Chess Championship" as the latter title gives the impression that there is another World Championship title recognised by FIDE.
3. If any World Champion declines to defend his title, he will immediately become and be regarded as ex-World Champion, in which case, FIDE and all FIDE members and associates will use their best endeavour to ensure that all media refer to that person in that capacity.
4. FIDE, all National Federations and affiliates of FIDE are under a duty to recognise the World Champion from any World Championship approved by FIDE as the only World Chess Champion. It is prohibited for any National Federation or affiliate of FIDE or any person or body to organise a chess tournament or competition and name it as the World Chess Championship in any other format that is different from the approved format of FIDE.
5. All individual matches, including matches with the participation of active, present and past World Champions cannot qualify as a match or tournament for any struggle for the World Championship.
By enhancing the prestige of these tournaments through improved conditions, bigger prize fund etc, we shall stimulate top level players to participate and this model could be extended to other tournaments down the line with enhanced multiplier effects.
I am therefore, requesting the Board to approve the following:
1. That a Committee be set up immediately to consider applications from Organisers of existing tournaments with a good history, for purposes of upgrading them to be known as White Castle Tournaments that will form part of our Grand Prix. The number of such tournaments should be no more than 10 each year at the level of FIDE, Continental and regional bodies.
2. Such selected White Castle Tournaments should have the possibility of attracting additional weighted points for the rating of the players. At the same time, it is proposed to also have additional weighted points for various levels of Championships, at zonal, continental and global levels to be determined by this Committee, for immediate implementation.
3. On this special technical issue of the weighted rating, I shall welcome suggestions on improving the formula, which is proposed below as follows:
X + (X1 x C) = Y
Where X is the elo rating, X1 is the rating difference at the end of the tournament and C is a notional entry for a coefficient to be decided upon for each level of tournament while Y is the final value, which shall become the player's new rating.
a) The first part shall comprise banks and financial institutions, which will agree to represent the interest of the chess sport in the financial world.
b) The second part will be a system that will allow chess players to receive financial services from these banks, which will consist of their personal accounts as chess players and credit cards that could be serviced through this system.
If we create such a system, there will be several benefits to FIDE. First of all, it will provide a ready source for financing FIDE and its activities because the banks will pay part of their profits generated for servicing this system to FIDE. The selection of the nominated banks will be based on a tender between the various banks applying for them to be nominated as a selected Bank of FIDE.
Secondly, we will no longer face the same difficulties as we experienced in Las Vegas in transferring prize money to participants as this will now be transferred directly to their accounts and the players will be able to use their money through the benefit of their accounts.
The third benefit is that all members of FIDE will be encouraged to open their accounts in the same financial institution. Monies for the World Championship and other big tournaments will pass through this account and it will no longer be necessary to collect money and then move it around the world. It would also enable easy financial communication or financial payments, including financial capital, which will be created from the commercial activities of FIDE Commerce PLC and World Chess Foundation, which will have their accounts as well in the same financial system.
The foregoing activities will leave no one in any doubt of the financial stability and unity of our organisations. In conclusion, therefore, this system will be absolutely open and transparent to any member of FIDE, who participates in the system. We have concluded arrangements for this financial system to be joined with the communication network of FIDE INFO. Thus, the financial data will be seen on a daily basis through secure lines for any member who has the password. This will dispel all unnecessary rumours of the origin and sources of money as well as the expenditure of our collective financial benefits from chess.
I would therefore request you my dear colleagues to support this structure to enable me finalise the arrangements and present you with the results at the next Board meeting. I am open for full discussions with any member of the Board, who may wish to put forward their proposals and vision along these lines.
The specific advantages, which accrue to the members of the Club, who shall receive the membership card, include the following:
1. Direct access to the FIDE database to obtain information and data on chess events and with the use of own password each member is able to check and correct personal information in the database.
2. Weekly calculation of members' ratings through the upgraded FIDE rating system, which is about to be commissioned to rate submitted tournaments on a weekly basis.
3. With the establishment of a base rating of 1.500 elo points many chess players can join the FIDE Club and be included on the rating list.
4. Subscription to the FIDE Forum magazine.
5. The FIDE Club Card will not only be proof of membership, it will also serve as an instrument to enable members utilise this card as a Visa credit card payment instrument with access to the Visa worldwide payment network.
6. National Federations shall have weighed membership privileges based on the number of Club members from their country.
In view of the urgent need to begin the implementation of this project with Visa International, I propose the following:
1. That FIDE Commerce begins the urgent implementation of this project with Visa.
2. That FIDE requests full support and assistance from all National Federations and individual players in the distribution of the FIDE Club Card among existing members as well as in the attraction of new members through FIDE Commerce PLC, which has been granted the worldwide rights to distribute and co-ordinate the distribution of the cards.
3. That as part of efforts aimed at the popularisation of chess and extending our rating services to the millions of our chess players, the elo rating list should now be extended to include players with a minimum elo of 1,500. The Qualification Commission Chairman shall be required to draw up technical regulations for implementation of this rule.
4.That all players on the elo rating list shall become automatic members of the FIDE Club International.
1. All tournaments with an average elo of 2,500 should be covered on-line on the Internet.
2. FIDE or its agent(s) shall certify that the arrangements made for the Internet live transmission are satisfactory and that the games are transmitted on the official FIDE web site www.fide.org or such site approved by FIDE.
3. The need to embark as a matter of urgency on the staging of FIDE tournaments at global, continental and national levels. A Committee must be set up to work out the modalities for the successful implementation of this project within the next two months.
1. We must embark on the publication of a big international chess review. This magazine must be a prestigious periodical that will cater for all tastes and reach out to the general public, like other periodicals such as Golf etc. Together with FIDE Commerce we have already made concrete steps and the results will be presented to you at the meeting of the Board in London on the 12th of May.
2. We should set up an institution of Press Commissars of FIDE in all member countries. These people must be active journalists for a major local newspaper or magazine, who will publish on a permanent basis information from FIDE, Continents and National Federations.
3. We will try to set up a conducive financial framework for the work of these press Commissars, however, national federations must take advantage of this situation and nominate these people for formal appointment by FIDE and provide them with the initial financial support, where necessary.
In due course, concrete projects on work carried out so far by FIDE Commerce will be brought to your attention. I propose that we review more details of the work of the company during the meeting of the Presidential Board in London and I have also requested Mr. Tarasov meanwhile, to liase with you as well as other interest groups, in order to explore the possibility of moving this project forward. Accordingly, the Board is invited to approve the following:
1. The principles as contained in this memo as the framework for which we can advance our project on the commercialisation of FIDE.
2. To authorise me to settle all outstanding questions in respect of this project within the principles contained in this memo and for a full presentation to be submitted to the Presidential Board meeting in London in May 2000.
3. To support the application of FIDE Commerce PLC as an affiliate member of FIDE with its President as a member of the Executive Board.
Submitted for your kind consideration.
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