SBJ/20080825/SBJ In-Depth

Seeking more green

Do tennis players need a union?

Even as this fortnight’s U.S. Open Tennis Championships are set to award over $20 million, one of professional sports’ top purses, tennis pays perhaps the smallest percentage of revenue to its players of any major sport.

While team sports pay generally between 50 percent and 60 percent of revenue to players, the comparable figures on the men’s and women’s tennis tours are around half that range, and for the four Grand Slams, significantly less.

In fact, Jeffrey Kessler, the influential outside counsel to the NFL Players Association, and his colleague David Feher have been quietly consulting Sony Ericsson WTA Tour players for more than a year on their pay. While they did not advise the women players to form a union, the attorneys have been acting as unionlike advisers in the negotiations over a new WTA prize money system that may be approved as soon as this week.

“Is it fair that these players in nonteam sports get a lower percentage of revenues than other sports?” Kessler asked. “No. It is not fair at all.”

The Open, which commences today and like the other three tennis Grand Slams is not an ATP or WTA event, generates around $200 million in revenue. That means the players receive as little as 10 percent. The other Slams’ percents are thought to be somewhat, but not much, higher.

The WTA, which this year will award $35 million, half of the men’s tour total purse, is believed to pay its players around 30 percent of revenue, a sum that will rise beginning next year. On the men’s circuit of 63 global events, the ATP World Tour, players earn as little as 25 percent of revenue, a figure that will also rise in the future, the group said.

“Men’s professional tennis players get less of the annual revenue than any professional athletes in the world,” Rob MacGill, counsel for the Hamburg, Germany, tournament, alleged last month during the event’s unsuccessful antitrust trial against the ATP.

This week the Sony Ericsson WTA Tour may
approve a new system for prize money.

MacGill cited in court an internal ATP study that placed the players’ take at 22 percent. Iggy Jovanovic, a former ATP board director, confirmed this finding while testifying. An ATP spokesman later called the 22 percent an old figure, and said the current range is between 25 percent and 40 percent, depending on the tournament. The disparity between the number cited by MacGill, and the ATP’s higher range, is likely whether appearance fees are included, as well as prize money increases the last two years. All but the top nine ATP stops can pay players appearance fees that often run into the six figures, and in rare cases, seven figures.

MacGill contended during the trial, in which the soon-to-be demoted Hamburg tourney tried to overturn the ATP’s new 2009 format, that the circuit artificially depressed the earnings of players by forcing them to compete in certain events. Those tournaments do not need to compete for players, he argued, through lures such as higher prize money.

While the jury rejected the argument, even one of the ATP’s outside counsels, Proskauer Rose’s Colin Underwood, said during the trial that players, and not a tournament, would have been better positioned to argue unfair treatment.

U.S. District Court Judge Gregory Sleet, who presided over the case, added during a side discussion with counsel, according to a transcript, “So maybe it’s Mr. [Roger] Federer and Mr. [Rafael] Nadal that needs to be the plaintiffs here.”

To do that, of course, players would need their own group or a union.

Male players and tournaments had separate associations before the ATP formed in 1990. Now they run the circuit collectively, with equal representation on the board of directors. Unique outside of tennis, the structure of labor and management managing a sport from the same side of the table has led to conflicts. A breakaway players’ group fizzled six years ago. (In fact, one of the lawyers leading that effort, Rob Freeman, now works for Proskauer Rose.)

This year the top three players, in an unprecedented development, were elected to the players advisory council; the three player representatives on the board of directors were voted off by the council over their alleged failure to communicate change; and several stars, including No. 1-ranked Nadal, are critical of the ATP.

“[Nadal] feels the top management is not doing the job properly,” the Spaniard’s agent, IMG’s Carlos Costa, wrote in an e-mail. “Hopefully with a new management soon things will be better and easier.”

The ATP has not disclosed plans to replace the current management. Executive Chairman Etienne de Villiers’ contract expires in December, and the top 20 players in March signed a petition demanding a role in finding his successor or renewing his contract.

Facing the same challenges?
Panelists in the Turnkey Sports Poll were asked the same questions in recent years regarding the health of professional tennis. Here is what they had to say:
In your opinion, what is the single biggest obstacle to professional tennis becoming more popular in the United States?
2008
2006
Too few American stars
47.94%
48.91%
Sport’s structure and schedule is too fragmented
29.90%
26.20%
Too little media coverage
7.22%
2.18%
Inadequate player marketing
3.61%
5.68%
Inadequate event marketing
3.61%
2.62%
Other
6.19%
12.23%
No response/not sure
1.55%
2.18%
To what extent do you agree or disagree with the following statement? Fewer people follow professional tennis today than did 25 years ago.
2008
2007
Strongly agree
41.24%
45.45%
Somewhat agree
38.66%
37.12%
Somewhat disagree
13.92%
12.88%
Strongly disagree
3.09%
2.65%
No response/not sure
3.09%
1.89%
Note: The Turnkey Sports Poll covers more than 800 senior-level sports industry executives spanning professional and college sports.
Source: Turnkey Sports & Entertainment in conjunction with SportsBusiness Journal. Turnkey Intelligence specializes in research, measurement and lead generation for brands and properties. Visit www.turnkeyse.com.

The players’ beef appears to be more about process and where they play than about pay. The ATP, which will award $70 million this year, plans to increase prize money by $107 million over the next 10 years, according to trial testimony of ATP executives.

Mark Miles, who ran the ATP from its inception though the middle of 2005, said that during his tenure the percent of player pay, including appearance fees, reached 50 percent. After departing, he said he learned the figure had declined significantly, reflecting the improved financial fortunes of many events that did not increase prize money. ATP executives testified during the trial that 73 percent of their events are profitable, but between 2000 and 2006 there were no pay increases.

Now, the ATP and the WTA are publicly committing to revenue sharing, a team sports staple. The WTA this week may sign a five-year revenue-sharing agreement, said Lisa Grattan, a WTA player board representative. While the top four WTA events would not be part of the system because their prize money is pegged to a twin men’s event, the next two tiers of WTA tournaments would commit to base prize money levels, and then share revenue based on certain parameters, Grattan said. The tournaments wanted expenses deducted from revenue, she said, but the players successfully resisted.

While the WTA seems headed for a happy short-term solution, the question remains whether players need to organize more effectively to push the Slams and other tournaments for more pay.

Whether tennis players could even legally form a union is a question. Conventional legal thinking is to start a union, future members need an employer to collectively bargain against. In tennis, the players are independent contractors, and not employees of either the ATP, WTA or the tournaments.

Mark Levinstein, a partner with Williams & Connolly who advised the short-lived ATP splinter group, said that because of the ATP’s oversight of the players, a tennis union might legally pass muster.

The ATP, he explained, tells players to compete in certain events, requires promotional appearances, restricts what they wear on court, and controls their off-court earnings through rankings, he said. Endorsement contracts often are based on rankings. While Levinstein did not mention the WTA, the women’s tour exerts similar oversight.

Because of the wide range of nationalities and languages among the players, not to mention the influence of agents, Levinstein said, organizing would be a Herculean task.

Kessler, the NFLPA outside counsel advising the WTA board of director player representatives, said another issue is culturally the tennis tours were started by players, and many of the tournament owners are former players. The PGA Tour, he continued, is riper for organizing because there the players are not represented on the board of directors, unlike the WTA’s and ATP’s.

Including pension benefits, the PGA Tour awards roughly 50 percent of its revenue to players, according to the group’s tax return. Calculating how much of the revenue of golf’s Slams goes to players is difficult because other than the Masters, the events move between courses, changing, sometimes dramatically, each contest’s revenue total. However, like in tennis, these Slams award far less as a percent of revenue than Tour events, arguing like their tennis peers that much of their proceeds are required to expand the game.

Shortly before he resigned from the ATP, Miles, responding in part to unease with stalled prize money levels, demanded another $50 million from the Slams. The top four events in tennis, far and away the economic and political force in the sport, brushed aside the request.

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