News that Team Australia has pulled out of the running for the next America’s Cup will have come as a blow to the organisers but the decision will have implications for the remaining teams as well.

Losing a team, (technically Hamilton Island Yacht Club, represented by Team Australia), at such an early stage doesn’t bode well however you dress it up. And when it’s the Challenger of Record that that makes an exit the alarm bells really start to ring. In their position as chief negotiators on behalf of the other challengers, if this team of all teams sees a reason not to continue, shockwaves are bound to spread through the broader Cup camp.

Add to this the fact that the team’s key player and former Cup regatta director CEO Iain Murray, who is also a previous competitor, is someone who knows the modern Cup and its characters inside out and you can’t help wondering if there is a serious issue brewing behind the scenes. I for one saw Murray’s appointment as a big advantage when it came to negotiating the balance of power between the Defender and Challengers – a means of providing stability to a notoriously volatile event.

So given this, and that the Australians are out at such an early stage, there is little surprise that speculation has been rife since the announcement over the weekend.

So why has Team Australia pulled out?

“The challenge was initiated with a view to negotiating a format for the 35th America’s Cup that was affordable and put the emphasis back on sailing skills,” said team owner Bob Oatley as he explained the reasons behind the decision.

“Ultimately, our estimate of the costs of competing were well beyond our initial expectation and our ability to make the formula of our investment and other commercial support add up.

“We are bitterly disappointed that this emerging team of fine young Australian sailors will not be able to compete at the next America’s Cup under our banner.”

So in short, money.

His comments confirm the recent chatter that in being first out of the blocks to challenge for the Cup they had underestimated the true costs and over estimated the possible revenues that might be generated.

Murray believes that the timeline is also an issue according to an interview with Sail-World.

“The timeline is the killer in this Cup,” he was quoted as saying. “Sponsors want to know where the venues are, and the dates. The gap gets pretty wide trying to get the sponsors to commit against the timeline of the expenditure,”

On the other hand the withdrawal of the team was perhaps not that surprising. Earlier in the year we were hearing of serious tensions and frustrations between the Challenger of Record and the Defenders as the Protocol was thrashed out.

To add an interesting twist, it is believed that the Australian Challenger of Record deal was set up by Oracle boss Larry Ellison, much to the surprise and frustration of Russell Coutts who had planned for Artemis to take this role on. The talk is that Coutts only discovered this on the final day of racing last year. If this is indeed the case, perhaps there was less incentive to make the Australian deal work.

But the timing of the Australian announcement is also surprising and causes difficulty for the organisers in announcing what happens next.

Technically the Challenger of Record duty passes to the next team to have entered, which is understood to have been Luna Rossa. But the problem is that under the Protocol entries cannot be accepted until there are three teams, at present there are just two, Luna Rossa and Artemis. While Ben Ainslie Racing and Team New Zealand intend to be there, they have as yet to enter. The entry deadline is 8 August.

The process going forwards is that teams must submit $1.025 million to enter by 8 August even though competition dates for 2015 might not be known until November, and details regarding the Finals for 2017 will possibly not be released until the end of this year.

Secondary entry fees of $1 million cash and $1 million performance bond must be submitted by December 1, 2014.

But the biggest issue and current unknown is that of the venue. How can you plan and budget for an event when you don’t know where it is? At present the two venues under consideration for the Cup itself are Bermuda and San Diego. The preliminary stages could see teams having to travel to other additional locations. Just planning for this is expensive let alone executing the plan.

The bottom line is that all the players know how fragile this stage of the process is, hence the carefully chosen language in the teams’ responses.

“We remain supportive of the Defender’s continued drive towards a more commercial event format, along with a more sustainable future for this historic trophy,” said Ben Ainslie. “Ben Ainslie Racing will be bidding to host two America’s Cup World Series events in 2015/16 at our new home in Portsmouth; as a key part of the road to the 35th America’s Cup. While the withdrawal of the Challenger of Record is regrettable, it is also not unusual and we will continue our own preparations for the 35th America’s Cup and look forward to an exciting future.”

Max Sirena of Luna Rossa said, “We had the meeting in Los Angeles with the other teams last week and I think it went very well. It was a positive meeting with all of the teams discussing the issues. It went really smoothly actually. So it was a surprise to hear about the Australians, but our plan doesn’t change because of this news. I think we’ll meet with the other teams again over the next few days and we’ll keep moving forward. It’s a shame, but nothing changes for us. Our aim is to win the America’s Cup.”

Such comments from the teams paint a different picture of the recent meetings than some online commentators have suggested. Despite the recent blow and the usual disagreements that are inevitable along the way, even Grant Dalton, who has previously been critical of some of the plans for the next event, is sounding positive.

“We have the class rule and the design team is well into its programme; the sailing team continues to compete successfully overseas, with great recent results by Dean Barker and Glenn Ashby in the A class cats worlds and Peter Burling and Blair Tuke still dominating the 49er scene,” he said. “In addition, we have never been in better shape with potential sponsors.”

If nothing else, there is even more reason for the current Challengers to agree than before. Without a collective agreement their own Cup campaigns will be in jeopardy.