Big deals show Australian Open more than a game
The lucrative tennis tournament is now well protected
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.”
CEO Craig Tiley says Tennis Australia is beginning a new six-year, $346m broadcast deal with Nine Entertainment