Crikey handed out flyers outside the men’s final of the Australian Open calling for it’s privatisation, but the rapid development of tennis is something to behold.
But little is known about the way private business and government funding is so interwoven on the international tennis circuit.
Firstly, this is the flyer that was distributed to 50 people at Melbourne Park but some lanky bloke wearing a 7-foot foam Crikey suit.
Privatise the Aussie Open
Dear Tennis Fan,
I am the Crikey Man, representing Australia’s best known independent website, www.crikey.com.au, and we are calling on your support to privatise the Australian Open.
The French Open, US Open and Wimbledon are run by private tennis clubs whilst the Australian Open is run in a government-owned stadium and under-written by the Victorian taxpayer.
Constructing Cain’s Cathedral in the 1980s cost $93 million against an original budget of $58 million but after enhancements during the Kennett government the complex could fetch more than $200 million if sold on the open market. These proceeds could be used to improve Victoria’s social infrastructure.
Crikey has also expressed some concern that a Bermuda resident can be Australian of the Year and also calls for the likes of Mark Phillippoussis and Todd Woodbridge to return the taxpayer funds invested in them through scholarships at the Australian Institute of Sport. Given that they now pay taxes to the US government as Florida residents, shouldn’t we have some form of HECS scheme for millionaire AIS graduates.
Finally, isn’t it time we get over our obsession with sport? Australia’s pathetic corporate performance is exemplified by the lack of Australian corporate sponsors. Here we have a government underwritten national championship sponsored by Kia, Heinekin, Rado Watches, Nike and the like.
For further information email us at [email protected]
Now, it is well worth your while familiarising yourself with the scale of global tennis by reading this article that appeared in Eurobusiness magazine in 2000.
The two men who control global tennis
By Mike Yuille
The commercial future of the tennis industry is in the hands of two men – Daniel Beauvois and Larry Scott.
Tennis was one of the first big money sports alongside golf and both were made rich by the work of promoter Mark McCormack. But commercially tennis has not moved on in the last 15 years, unlike sports such as Formula One and soccer, which have made major advancements. Although sport earns millions – and tennis players even more – it has become disorganized and fragmented. This has caused erosion against other sports and meant tennis has lost audience share.
It’s surprising because until recently the structure of tennis has actually been very simple. As well as a host of international tournaments, there were four Grand Slam events – the British, French, US and Australian Opens. The Grand Slams were organized by individual country tennis organizations. The rest were organized by the Association of Tennis Professionals (ATP), the industry’s main governing body, and managed by individual country promoters. Everyone made money but Grand Slam events creamed fortunes whilst other tournaments picked up the crumbs. To this day no one knows how profitable the Wimbledon, Flushing Meadows, Melbourne and Paris opens are except that they are very profitable. The rest of the tournaments are worth far less but are still notable events, especially the top 10. Although the ATP organized the vast majority of tournaments, it did not control the commercial rights. Most tournaments were sold to television separately – and every organizer did a different deal with sponsors. Whilst the big events did well, the smaller ones were being squeezed. It was a fragmented situation that no one was happy with.
Then came along 35-year-old Larry Scott, a former tennis player, unused to playing by the rules. He was made chief operating officer and effective commercial head of the ATP. His brief was to reorganize the commercial affairs of tennis. And not before time. Scott was uniquely qualified. The tall, highly articulate Harvard graduate had represented players in a few confrontations with authority over the years.
He has ushered in a new era that has seen 70-plus organizers surrender the commercial rights of their events to the ATP in exchange for a cash sum according to the status of their event. Gone is the old fragmented country-by-country, rather amateurish approach of running the commercial side of tennis.
Scott’s entrepreneurial revamp has not stopped at money – he has also introduced a streamlined points and rules system, a new tournament structure, and a programme of international marketing.
To fund the payment to organizers Scott has signed a US$1.2 billion deal with sports marketing company ISL, owned by the Dassler family. ISL, run by Daniel Beauvois, guarantees that the ATP will have at least US$120 million a year to distribute to its tournaments. In reality it should be a lot more, as after that US$120 million is generated there is a 50/50 split between ISL and the ATP. The basic scheme guarantees the event organizers their previous income and anything ISL brings to the party is gravy. What it does is allow common sponsorship deals to be negotiated across tennis to obvious benefit.
Scott’s US$1.2 billion, 10 year deal has the whole of the tennis world gasping. It is unprecedented and a bonanza for organizers used to one-sided negotiations with TV companies and sponsors which have in the past picked up major events cheaply.
ISL, based in Lucerne, Switzerland, has the huge financial resources of the Dassler family behind it. The late Horst Dassler founded the company in 1982, and both ISL and the Dassler family fortunes are now run by his son Horst Junior. ISL is one of the market leaders in sports management and works mainly for sports governing bodies. It works for FIFA in the World Cup and for the Olympic Games committee. It is also working with European soccer body, UEFA on the Euro 2000 championship.
The deal between Scott and Beauvois, signed in November 1999, gives ISL the exclusive marketing, broadcast and licensing rights to the ATP’s international tournaments across 30 countries. From 2000 onwards these will be rebranded as International Series, the Tennis Masters Series and the Tennis Masters Cup.
Most observers in the tennis world think that ISL has overpaid. It bid for the rights in competitive auctions and the next closest bidder was Octagon, which dropped out at US$1 billion. Even Beauvois has admitted publicly that ISL could drop US$50 million on the deal this year alone.
But although it will be on the hook in the early years, the later years should generate substantial profits for ISL and the ATP. Scott believes the ATP has pitched the guarantee precisely right: “This is a true partnership. We were looking for an agency to help us. We wanted a strategic partner with the experience of a centralized approach to TV and marketing rights packages,” he says.
Beauvois has plenty of clout to make things happen. He has marketing people in 14 offices around the world, a personal contacts book second to none from selling soccer and athletics. Scott agrees: “with ISL we knew we were getting a partner that had been there, done that, and had the right TV and marketing knowhow.”
The deal has generated a huge amount of jealousy amongst rival sporting agencies. They dislike the instant clout it has given ISL. Beauvois has devised a package based around the nine-event Tennis Masters Series. Surprisingly the numbers appear to be in the public domain and , unlike others sports, not a closely guarded secret.
There are nine slots for title sponsors for the nine-event Tennis masters Series, who will pay US$8 million each. The series will also have four second-tier supplier sponsors who will pay US$4 million each. These sponsorship deals will be supplemented by a series of small deals. In all, sponsorship will generate around US$90 million providing it is all sold. Deals have already been signed – with top names such as Ericsson, champagne house Lansons, Newsweek magazine, Fila, Waterford Crystal, and Mercedes Benz.
But TV is the key and the revenues generated are still small. TV companies know they are essential to the events and can sometimes negotiate their own terms, which may or may not include payment. Centralised handling of television rights, could change that rapidly but certainly not immediately. Tennis does have something to sell and TV rights for the Grand Slams, especially Wimbledon, if put up for tender could be worth US$100 million a year each worldwide.
Scott says: “We are in the entertainment business. And tennis is one of the top three sports in Europe, and among the world’s top five. In recent years the presentation of the game has lagged behind the developments taking place in other sports such as Formula One racing. But when the biggest matches are on, tennis can do little wrong. When Brazilian star Gustavo Kuerten slugged it out against Pete Sampras in Miami back in march, the match got the second-biggest global satellite audience rating ever, only to be topped by the movie Titanic. The trouble is, when lesser-known players hit the screen, it’s as if the TV ratings hit an iceberg.”
That is the problem Scott and Beauvois must solve but at least they can now take a central view and control television across the whole sport. The changes have been a long time coming. Scott’s ATP is a unique body. It is both a player’s association and a governing body, and has presided over the game since it was set up in 1972. In the past it liased with tournaments but each event in every country was entirely independent, and run by different organizers who handled their own local television broadcast deals and marketing promotion. But this fragmented approach could not last forever. The first upheaval came in 1989 when the players protested against an out-of-date and badly-run system. Among the leaders were Scott and John McEnroe. Scott was a formidable player in his day, ranked among the world’s top 200 singles players during his brief three year career. When he stopped playing in 1989, he was elected vice-president of the ATP board by the players.
He came in on wave of unrest to effect change. As he remembers: “We as players felt we were getting the short end of the stick when it came to negotiating prize money, TV and sponsorship rights, so we walked out.” The players had a point. Very little was earned in prize money and they relied for income on outside sponsorship deals. The best players were earning US$10 million-plus a year, with Boris Becker topping the lot at some US$30 million. The other 190 of the top 200 were on relative peanuts. At the time the management and structure of the ATP was acutely uncommercial, largely failing to exploit the potential of the sport and its stars. Tennis, as typified in the publics eye by the four Grand Slam competitions such as Wimbledon, was increasingly thought of a elitist, with a seemingly narrowing audience appeal. Many players felt that while other sports such as motor racing and golf were growing, tennis was in danger of losing its audience share. And in 1989, there was no central package of TV rights, which was becoming so lucrative for Formula One and soccer.
Scott says: “We wanted a more modern business and marketing approach, so we set up our own circuits. We tendered out for tournaments, and all existing event organizers came to us. So, we established the ATP as a 50/50 partnership between the players and individual tournaments,”
Scott found sponsorship, organized by individual tournaments, in a state of disarray. There were some 212 sponsoring firms. While this included many prestigious names, very few actually sponsored more than one or two tournaments. There was no sense of community beyond geographic boundaries. But with Scott on board and the strong backing of its player members, the ATP began to restructure itself and bring a more centralized focus to the commercial side of the sport. “We realized that we couldn’t just depend on a country-by-country approach. So we brought in IBM as a global sponsor and began structuring TV packages,” says Scott. In 1996 he managed to bring in Mercedes-Benz, which sponsored all nine of the most important ATP tournaments. With these two big multinationals involved, the revamped ATP realized that globalisation was the way forward. The trouble was that its small, overstretched board still had to manage everything itself.
Something more radical was needed. So in 1997 the ATP invited the world’s leading marketing and sports strategists to take a close look at how the game could be improved. The universal message was that the game was indeed seen as elitist. It had to update its image to have more relevance in the modern sports world and to attract new, wider audiences. It also needed a simpler structure and fan-friendly points system to enhance its appeal to both the public and sponsors alike.
As a result, events are being rebranded as a series rather than stand-alone titles. Tournaments will no longer be referred to by sponsor’s names but rebranded at Tennis Masters Series-Rome, for example. Scott has also instigated a new rankings system, unashamedly based on Formula One, now called the ATP champions race. The ATP is also being stricter with players. Each must play the four Grand Slam events and Tennis Master Series. These 13 tournaments will be the core of the tennis year, which will build up to a climax when the top eight players come together for the end-of-season Tennis Masters Cup. “We have certainly learned some lessons from F1,” admits Scott.
He says the main thrust of the new structure is to streamline the professional game, making it more intelligible for fans. By ensuring the top players have to play in key tournaments around the world, the ATP hopes to rekindle the excitements generated by the clashes between the likes of McEnroe, Becker, Borg, Llendl and Edberg. Certainly the tennis fan that warmed to – and understood – that era has been lost.
The players have also had to be educated to the new reality – and made aware of the fact that if nothing was done to improve the situation, their sport would deteriorate.
The ATP’s own research found that while there was a hard core of tennis fans that watched everything they could on TV and attended matches where possible, there was also a far bigger number of floating fans. These people would watch the sport occasionally, particularly when certain major stars were playing.
This was particularly so with a national star. Boris Becker had a phenomenal effect on German TV ratings for instance. And of course the contrary was also true. When Becker retired, ratings slumped. In response, the ATP has created a Stars Programme, which requires players to become more actively involved in promotion – from signing autographs to participating in media interviews. “We advise them on how to reach out more to the public. We give players some basic training, and borrow analogies from other forms of entertainment, such as films and music,” says Scott.
He explains the basic rationale: “We want to grab more market share among the floating audience. There are more sports emerging both globally and in Europe. Some are from the US, such as world league American football, basketball and hockey. They are all raising their profile in Europe – and we have to do the same.”
The players are immediately benefiting from ISL’s new deal. The prize pot is now US$3 million per tournament, compared with last year’s US$2.5 million. The bonus pool has also doubles to US$10 million. If bigger TV audiences emerge so will sponsors’ endorsements.
Everything rests on the commercial skills of ISL managing director Daniel Beauvois. The 45-year-old former journalist spent many years in the computer industry, latterly with Compaq as head of marketing in Europe. He admits that ISL could lose a substantial amount of money if the deal goes wrong. But he says: “We’re about to embark on a series of radical changes, which we feel are absolutely the right direction for tennis.”
Gone is individual event marketing – all that matters to Beauvois is the series as a whole. He is convinced that the sponsorship deals only make sense globally, especially with the large sums now being discussed. Unlike Formula One and soccer, which sponsors perceive as good value, most now see tennis as expensive. Hence the need to upgrade the sport and get more committed TV viewers on a regular basis.
There are currently 200 sponsors participating and Beauvois wants that down to 15 contributing the same amount of money. Apart from the US$8 million per event put in by sponsors, as much again can be spent on support and corporate hospitality in the same way.
Belgian-born Beauvois has long realised that once a sponsor is signed, tennis benefits from the publicity that sponsor generates As he says, “We thought that by raising the bar and bringing global companies in to tennis, they would promote the sport right through the season from March to September. We’ve been developing marketing packages that we have been putting to the sponsor market since November last year. It’s not a quick sale. You have to identify the right companies and tailor these packages to their needs.”
He adds: “It’s a very difficult exercise. There are a lot of existing contracts that run into 2001, which preclude us from making exclusive deals at the money. But time will help us solve the problem.” The new sponsorship programme will not be completed until 2002.
Scott is looking to evict some of the long-term sponsors who don’t bring enough to the party. “We are looking to phase out the one-off sponsors. We have to go through a difficult transition period as we change over from a fragmented marketing approach to a centralized method,” he says.
Early adopters among the international sponsors are delighted with the new approach. DaimlerChrysler, owner of Mercedes-Benz brand, is trying seriously associate itself with tennis. Graf Burghard Vitzthum, director of sports marketing says: “We’re convinced the new objectives of the ATP and ISL will work.” That is a major endorsement but even so DaimlerChrysler is spending a paltry US$10 million a year on tennis – a fraction of its marketing budget. If it sees the new approach is working, it will pump in much more.
Sports marketing is a major exercise for its Mercedes-Benz brand. Although the main investment is in Formula One, Vitzthum says : “Tennis is our main global sport”. Mercedes-Benz carried out its own research before signing up for the new deal. Vitzthum welcomes the global approach. “We look for the same quality in every tournament, in every country – whether it’s in Mexico, Kuala Lumpur, or the US. If you do it country by country, you cannot guarantee this and it will also cost you more. After doing our won research, we decided that tennis was the sport that fits perfectly with our customers worldwide, and with our Mercedes-Benz image. It was logical for us to go into this,” he says.
At tournaments, DaimlerChrysler shows off next year’s new cars. Orders flood in – the new off-roader M Class, which made its debutin Alabama, was notable success. Apart from the car fleet, the company also uses Mercedes-Benz banners, flags, hospitality and TV advertising in its tennis-related marketing mix.
But both Beauvois and Scott realize that unless they make the television work the sponsors will go away. ISL is involved in both TV production and distribution and will take over the production of the programming. Beauvois says: “Traditionally, each tournament would hire a host broadcaster, leading to variable quality control. France and Germany produced very good coverage, because their broadcasters knew how to do it. But in other countries, including the US, there was a lack of consistency, and the degree of quality varied from excellence to mediocre.”
Beauvois has hired ex-BBC presenter John Davis as head of production, and made a big investment in production equipment. Beauvois says: “ISL has a tennis TV team of some 80 people who have to be flown around the tournaments. It’s like a traveling circus. Yet we produce more and better coverage than would otherwise be the case.”
ISL is using twice the number of TV cameras on each court, giving all the best possible angles for slow motion replay and other TV gimmicks. “This is also important because the face of TV is changing,” says Beauvois. “We have all these digital platforms being developed, which are very well suited to tennis. You can have multi-court coverage on a single TV screen – so the viewer is not bound by the choices of the producer.”
Beauvois is also determined to make more stars, Stars drive the TV ratings and tennis doesn’t have enough. For instance, many casual viewers tuning in to the June finals of the Paris Open had heard of neither player in the Grand Slam final. It is a serious problem that Beauvois is addressing, as he says: “Obviously most sports have cycles of popularity, which are often linked to the nationality of the dominant players. Today, tennis is particularly hot in Latin America because of players like Keurten of Brazil and Nicholas Lapentti of Ecuador. But contrast that with the difficulty in Germany, which has just lost both Steffi Graf and Boris Becker. Their retirement has created an enormous void. If you live in Germany, you would think that tennis is in crisis.”
Larry Scott is also well aware of the problem: “We can’t expect the craziness that Boris Becker generated in the 1980’s. That was a unique phenomenon. Tennis is still a top three sport in Germany, but there probably won’t be 15 million people watching a final there like they did in Boris Becker’s day,” he says.
However, although German tennis seems to be in a trough, others are enjoying the peaks. Hot young stars in Spain, such as Juan Carlos Perero, in Australia with Lleyton Hewitt, and in Russia with Marat Safin, are driving up viewer ratings. Their popularity also ensures that today’s international stars such as Richard Krajicek of the Netherlands, Cedric Pioline of France, Britain’s Tim Henman and Greg Rusedski, as well as the established trojans such as Pete Sampras and Andre Agassi, have as much competition for media headlines as they do on court.
“It’s now healthier for the sport that there are stars from different countries coming through, including emerging markets like Russia,” says Scott. “Sport is entertainment, and the personalities are driving it. From the point of view of marketing the sport, you have to take a global approach. That’s why bringing in global sponsors is the way forward.”
ISL has already set up broadcast partnership deals around the world with more than 45 TV and satellite companies, from as far apart as Bosnia to Kuwait, and as diverse as Ho Chi Minh TV in Vietnam to US Armed Forces Radio and TV. Deals include news services like Reuters and CNN. In Western Europe, they include Pathesport in France, Germany’s Deutsche Sport Fernsehen, RAI Televizione Italiana and Stream in Italy, Spain’s TVE/Teleporte, Ondigital in the UK, SIC in Portugal and Poland’s Polsat.
However, the deals may be plentiful in number but not in cash. Insiders say there is hardly US$30 million in all the deals and just about enough to pay for the production costs. Beauvois won’t comment but it is clear he needs a few years to get things rolling.
At least the players are doing their bit to promote the sport, realizing where their bread is buttered. Thirty-one-year-old Cedric Pioline, France’s number one player, says: “I think the exploitation of tennis has been really low until now. We can do better. We’ve seen the development of sponsorship in Formula One, soccer and in the US sports, but there’s not been enough exploitation of the popularity of tennis.”
He says that while more sponsorship will bring in additional cash for the top players, it could also help the younger entrants too. “If you’re not in the top 100, it’s difficult because you have to play minor tournaments, with smaller prize money. If the ATP does a good job, hopefully it can increase the money for the lower-ranking players too.”
Richard Krajicek, the tall Dutchman who won Wimbledon in 1996, is vociferous in calling for more dynamic TV coverage. “Television is the key. We need more camera angles, more slow motion. Until now, the biggest shortcoming in tennis has been the TV coverage.” In fact Krajicek’s photogenic wife has often supplied as much interest as the tennis itself, especially a favorite amongst the Wimbledon producers. Beauvois admires the way that Formula One has milked the celebrity circuit for getting itself publicity and high glamour count.
Krajicek believes the ATP’s Stars Programme is also a good move. “That’s going to raise the interest level and the players realize this too, so we’re doing more interviews and signings. We’re talking shorter rests on court as well, in order to keep the games moving. If we do all this, then all players will benefit in the end. The ISL deal will change tennis for the better. It’s nice to be part of something successful, and the players in general are very excited about it.”
Larry Scott has a huge responsibility on his shoulders. If he doesn’t make this work then tennis may find itself in a downward spiral, relegated to secondary status in TV studios of the world and eventually amongst sponsors. He is determined that will not happen on his watch. But his future – and the Dassler family’s money – is in Daniel Beauvois’ hands.