New ATP strategic plan focuses on unity
An internal ATP strategic plan shared with stakeholders in early September unveils a vision to more closely align the interests of all tournaments and players through four pillars, including a more stable prize-money formula and aggregated tournament media and data rights under the tour’s direct control.
The ATP’s dissemination of the 92-page document came shortly after the Professional Tennis Players Association — a players-focused group led by Novak Djokovic that threatens to upend the tour’s 30-year-old structure — announced its formation. The need for unity and greater alignment of interests within the sport is addressed 22 times in the first 68 pages (containing the actual plan) of the ATP document, which Sports Business Journal has reviewed.
“In no way is it related to the PTPA timing,” ATP Chairman Andrea Gaudenzi told SBJ last week.
Gaudenzi, who said he was hired based on an eight-slide version of the strategy and that a 20- to 25-page edition was shared with players and tournaments at the 2020 Australian Open, wanted the plan negotiated and approved by the end of this year but said the timing of next steps is uncertain.
“We’re still trying to stick to that timeline,” he said, “but COVID definitely has delayed the process, and somehow diverted attention onto the other topics, some of them not so positive.”
The full document, which PTPA co-leader Vasek Pospisil told SBJ the new group supports, begins with the ATP-centric Phase 1. The pooling of the 64 tournaments’ media rights is arguably the most crucial aspect for the tour’s future revenue growth. According to the document, tennis commands just 1.3% of global media rights value despite being the world’s fourth-most popular sport.
The plan’s overarching message: Working together will lead to greater prosperity for all. But there are some clear potential losers, including the smallest and most vulnerable tournaments, the 250s, which constitute 56% of the tour.
The bolder half of the plan, Phase 2, will try to pool the data and media rights and customer services of the other six tennis governing bodies — the four Grand Slams, the ITF and the WTA — with the ATP, though no timetable is mentioned and it would require serious negotiations.
“It’s ambitious, but I view that as a virtue,” said Mark Ein, owner of the Citi Open ATP Tour tournament, about the overall plan. “When you look at the big picture, it really captures where [tennis] needs to go.”
Challenges for the 250s
Trickle-down economics is the underpinning of a revised 2022 tournament calendar proposal that focuses on improving the premium product (the nine Masters 1000s), then filters financial benefits throughout the ATP ecosystem.
The new calendar would move six 250s into the second half of two-week Masters 1000 tournaments. Players, possibly even high-ranking ones, who lose early in the adjacent Masters 1000 tournament could then potentially enter the next week’s 250 tournament with late notice. The tour plans to financially subsidize the 250s that move into the shared slots.
ATP Strategic Plan: Phase 1
The first phase of the ATP’s new strategic plan focuses on four key goals:
■ Aggregating rights and centralizing services: The ATP plans to combine all tournament media and data rights and consumer services. Media rights would be pooled with ATP Media, data rights with a new in-house creation called Tennis Data Innovations.
■ A long-term prize-money formula: Base prize money would automatically increase 2.5% every year, and tournaments’ net income before taxes in excess of established prize money would be split 50-50 with the players.
■ Emphasizing premium events: A major focus on the nine Masters 1000 tournaments, including Indian Wells and Miami, would add days to some events, increase draw size and improve the experience of star players.
■ Longer tournament category terms: By locking in agreements, including 30 years for Masters 1000s, the ATP hopes to increase enterprise value and spur investment and development in infrastructure and fan/player/media experience.
Bill Oakes, the former tournament director of the Winston-Salem Open 250-level tournament, was impressed with the plan, but also concerned that 250s wouldn’t be able to market high-ranking players showing up late after losing in Masters 1000s, minimizing benefit. Oakes also worried about where American 250s fit into the new calendar, especially the Delray Beach (Fla.) Open and Truist Atlanta Open.
“It’s the backbone of the tour,” Gaudenzi said of the 250s. “If the assumptions of the plan are true, which means the media and data — by far the biggest opportunities in terms of upside — we are telling them ‘come on board and you will benefit from that growth and upside.’”
The strategic plan offers potential help through non-ticket-based revenue streams, like giving the 38 250-level tournaments equity stakes in ATP Media, the tour’s media arm that has delivered 16% net revenue growth annually since its 2009 creation. Eighteen 250s already pool their rights with ATP Media, earning a forecasted $12.2 million in revenue in 2019, according to ATP financial documents SBJ reviewed, a 35.7% revenue increase from the year before.
Tournaments would also be offered equity in Tennis Data Innovations (TDI), a separate entity that would handle data rights and customer data and that the tour is currently building to be operational by year-end. Data rights produced more than $21 million in revenue for the ATP in 2019, according to tour financials, $7.2 million of which was distributed to tournaments.
The grand vision
By offering tour events long-term protection to remain in the same tournament category, which doesn’t currently exist, the tour will try to tap into the financial benefits of stability, what Ein called “the virtuous cycle.”
“I think if we can make that shift in tennis, what you’ll see is even greater investment in the events, both in their infrastructure capital needs and in just how they’re run, because you know you’re building an asset value that is increasing over time,” said Ein. “When you have a longer time frame it means you’ll make much more aggressive and larger investments, which then grows all the revenue streams.”
Successful completion of Phase 1 would strengthen the ATP. But Phase 2 is far more aspirational, and some in the sport would say impossible. Aggregating rights and services of the WTA, ITF and the four Grand Slams under the ATP Media and TDI umbrellas would create one common entry point for fans, major revenue streams and increased commercial negotiating leverage.
This phase would require the sport’s famously divergent interests to align for maybe the first time ever. In a promising sign, Gaudenzi said the CEOs of the seven governing bodies are meeting virtually on a biweekly basis discussing topics from the ATP strategic plan.
“There definitely can only be a positive outcome,” said Gaudenzi. “If we can achieve part of what our ambitions are, I think it would be a positive. Not seriously trying would be a serious mistake.”