Big deals show Aus­tralian Open more than a game

The lu­cra­tive ten­nis tour­na­ment is now well pro­tected

The Weekend Australian - - BUSINESS REVIEW - JOHN STENSHOLT

It is a deal cost­ing only a cou­ple of mil­lion dol­lars, but it’s one that has al­layed Craig Ti­ley’s great­est fear. For years, Ten­nis Aus­tralia’s chief ex­ec­u­tive has chased an in­sur­ance deal that would cover the worst case sce­nario of the Aus­tralian Open — now the world’s big­gest sports tour­na­ment in Jan­uary — be­ing can­celled.

The Open is a fi­nan­cial be­he­moth, cost­ing more than $200 mil­lion to put on each year in Mel­bourne and bring­ing back even more in rev­enue from huge broad­cast deals, global spon­sor­ship con­tracts and ever-in­creas­ing ticket sales. So huge has the tour­na­ment be­come that Ten­nis Aus­tralia now boasts re­serves of $80m and is on track for a record-bust­ing $370m rev­enue, up from $337m last year, as the Open keeps grow­ing in pop­u­lar­ity.

It also has eco­nomic clout. A study com­mis­sioned by the Vic­to­rian gov­ern­ment found last year’s Open con­trib­uted $293.2m to the state’s econ­omy, with 49 per cent of fans at the event from in­ter­state and 12 per cent from over­seas.

But Ti­ley has al­ways feared what would hap­pen to the or­gan­i­sa­tion’s bal­ance sheet if the Open was can­celled due a ter­ror­ist strike or other un­fore­seen event. But in a deal struck in re­cent weeks, Ten­nis Aus­tralia would re­ceive a pay­out well north of $100 mil­lion from in­sur­ers Lloyds of Lon­don and His­cox, in a deal ne­go­ti­ated by Marsh, if the fi­nan­cial jewel in its crown were not to take place.

Not that Ti­ley ever wants re­ceive that huge pay­out. “We would not ex­pect it to hap­pen. But we pre­vi­ously had that re­serve fund as a form of self-in­sur­ance. Now we could spend that on strate­gic things like fa­cil­i­ties de­vel­op­ment or the like.

It is a strong stamp of health for the or­gan­i­sa­tion. If we need to spend it we will and only on in­vest­ments that will give us the fi­nan­cial re­turn to keep grow­ing the sport.”

This year’s tour­na­ment be­gins on Mon­day and should see more fi­nan­cial records bro­ken. Ticket sales this week were track­ing 20-25 per cent higher than the same time a year ago and rev­enue will surge to a record high.

Ten­nis Aus­tralia is be­gin­ning a new six-year, $346m broad­cast deal with Nine En­ter­tain­ment and has signed $10m-plus an­nual spon­sor­ship deals with the likes of Korean car­maker Kia and Chi­nese spir­its brand 1715. Lu­cra­tive deals across sev­eral spon­sor­ship cat­e­gories are set to ex­pire, as is a broad­cast deal with US sports gi­ant ESPN. Re­newals will bring in even more rev­enue.

The money com­ing in has al­lowed Ten­nis Aus­tralia to spend huge sums on grow­ing the Open into a sport­ing, food and en­ter­tain­ment event that dom­i­nates Mel­bourne for two weeks. Ti­ley wants it to keep grow­ing.

“We have grown it into more than ten­nis. We’ve added the en­ter­tain­ment streams of food, mu­sic and we’ve fo­cused on kids. We’ve got a film fes­ti­val too. But at the core of it is ten­nis.

“All of these strate­gies are de­signed to grow the event. How our busi­ness model works is we are about de­liv­er­ing events and en­ter­tain­ment, so we can de­liver a profit and in­vest that profit into grow­ing the game be­cause our busi­ness at the end of the day is about grow­ing the game of ten­nis.”

Ten­nis Aus­tralia al­ready has agree­ments for up-mar­ket res­tau­rants like Rock­pool and Nobu to have a pres­ence at Mel­bourne Park and an en­ter­tain­ment zone for young chil­dren. To bridge the gap be­tween those two mar­kets, Ten­nis Aus­tralia will also hold a $500,000 event for the pop­u­lar Fort­nite com­pet­i­tive game af­ter strik­ing an agree­ment with the gam­ing gi­ant Riot Games.

“We want to ap­peal to ev­ery­one across the age spec­tra,” Ti­ley says. “We know we are strong for kids un­der 12, but we tend to lose peo­ple be­tween 12 and 24 be­fore grad­u­ally get­ting stronger af­ter that. The Fort­nite deal has three ob­jec­tives: the first one is new au­di­ences, sec­ond is new au­di­ences and third new au­di­ences.

“Any prod­uct or en­ter­tain- ment that is go­ing to ap­peal to that 12 to 24 de­mo­graphic is some­thing we can in­vest in and need to grow, be­cause we need to bring them closer to our of­fer­ing.”

Last year’s Open at­tracted a record au­di­ence of 743,000 over the two weeks, and while ex­ceed­ing that is usu­ally de­pen­dent on weather fore­casts, Ti­ley says the signs are pos­i­tive.

“We are ahead of bud­get even though we have dropped some ticket prices, and we are pretty ag­gres­sive with our bud­get tar­gets. So even with that we have bucked the trend of other events. They are down, ten­nis is not.”

Next Jan­uary could be big­ger, with ten­nis bid­ding to dom­i­nate the en­tire month with the in­tro­duc­tion of the ground­break­ing ATP Cup to be held around Aus­tralia in the two weeks be­fore the 2020 Open. The $50 mil­lion event will bring all the world’s best male play­ers to Aus­tralia from Jan­uary 3 and looms as an­other fi­nan­cial game changer for Ten­nis Aus­tralia.

It should sell more tick­ets over the month, write spon­sor­ship deals for the new event and will join with the As­so­ci­a­tion of Ten­nis Pro­fes­sion­als (ATP) to sell glo- bal broad­cast rights. Ti­ley says Ten­nis Aus­tralia wants to ne­go­ti­ate with the Women’s Ten­nis As­so­ci­a­tion for the in­tro­duc­tion of a fe­male ver­sion but in the mean­time will con­tinue to run lead-up events around the coun­try be­fore each Aus­tralian Open.

Then there is the Laver Cup, a joint ven­ture in which Ten­nis Aus­tralia has a 20 per cent stake in an an­nual event. It fea­tures Team Europe against the rest of the world, shar­ing its own­er­ship with Roger Fed­erer, the US Ten­nis As­so­ci­a­tion and Brazil­ian bil­lion­aire JP Le­mann.

There have been some crit­ics of the cost of the ven­ture but Ti­ley says the 2018 event in Chicago made a “sig­nif­i­cant” profit and along with the ATP Cup is part of a strat­egy of di­ver­si­fy­ing in­come sources.

“You have to keep in­vest­ing to keep grow­ing. And with the Laver Cup, the val­u­a­tion of that as­set is al­ready far greater than when it started.

“Every de­ci­sion is made with the aim of keep­ing that busi­ness model con­tin­u­ing, with the ul­ti­mate aim of get­ting more peo­ple to con­sume our sport and play the sport.”

Ti­ley

STU­ART MCEVOY

CEO Craig Ti­ley says Ten­nis Aus­tralia is be­gin­ning a new six-year, $346m broad­cast deal with Nine En­ter­tain­ment

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