🎾 Peeling back the layers of Tennis

Understanding what makes the sport of tennis click in the business world and how lack of parity continues to be a hot button topic.

After over two weeks of tournament play at Roland-Garros (i.e. the French Open), we finally have ourselves a men’s champion, the 21-year old babyface Carlos Alcaraz from Spain. Of course, we don’t want anyone to be frightened — we know he has the face of your younger cousin who you used to beat up on at the local park when you were kids. But, let’s be real, it’s not like your younger cousin has won 3 Grand Slam Titles (US Open in 2022, Wimbledon in 2023, and French Open), ranks #2 in the world, and just took home $2.6M in prize money. No, your little cousin isn’t that cool 😉.

Even though we could spend days talking about Alcaraz’s ascension and just being old enough to legally drink alcohol in the United States, let’s talk about the role of tennis as a business. How players make their money, how the structure of these tournaments are so different from one another from a business perspective, and why we really only see the top players compete for titles.

Let’s get after it…

What does the business of tennis look like?

Tennis revenue is generated from various sources such as, tournaments, ticket sales, media rights deals, sponsorship deals, apparel, and equipment sales. Frankly, it’s not too dissimilar to how professional golf rakes in the cash.

Tennis Tournaments. Just like golf, there are plenty of professional tournaments to win money and hardware, boost a player’s overall ranking, and the ability to win further sponsorships…if the player performs.

• Tournaments range from prestigious Grand Slam events like Wimbledon and the US Open to smaller, regional competitions such as BNP Paribas Open and ATP Finals.

  • These tournaments are typically organized into a hierarchical structure, with Grand Slam tournaments occupying the top tier, followed by Association of Tennis Professionals (ATP) and Women’s Tennis Association (WTA) Tour events, Challenger tournaments, and Futures events.

  • Each tournament also expresses its own character during the competition.

    • For example: We all know Wimbledon, the oldest and most prestigious tennis tournament in the world. It’s held in London, England and known for its strict dress code and traditions, such as the white clothing rule 💁🏻‍♀️.

Tournament Sponsors. In 2023, according to GlobalData Plc, the All-England Lawn Tennis and Croquet Club (AELTC) — home of Wimbledon — generated over $95M in sponsorship revenue.

• Wimbledon’s top 4 sponsorship deals are with Barclays, Evian, Vodafone, and American Express — all worth over $7.5M annually.

• Over 50% of Wimbledon’s 17 total deals are worth over $5M annually, highlighting the high price for brands to partner with the tournament.

Ticket Sales. This constitute a significant portion of revenue, with fans purchasing tickets to attend matches and experience the excitement firsthand.

• Attendance for Wimbledon in 2023 stood at a record-breaking 532,651 (+17K from 2022). Fans paid from ~$103 to ~$330 for center-court tickets, with prices increasing later in the tournament.

• The French Open welcomed upwards of 650K to their grounds. Even though, there were issues of filling empty seats during the final.

  • It could have been because of scheduling conflicts, high ticket prices, lower demand to watch live sports with the Olympics around the corner, and the elongated nature of the tournament.

Media Rights. Broadcasting rights also play a crucial role, with television networks and streaming platforms paying substantial fees to broadcast live matches to audiences around the world.

• According to The Athletic, Warner Bros. Discovery has a 10-year, $650M deal in place to be the new home of the French Open in the United States beginning in 2025.

  • Just as WBD CEO, David Zaslav, prays to keep NBA broadcasting rights scraps, it looks like some funds are slowly opening up!

  • NBC was at the end of their 12-year, ~$144M deal, while also sharing it with the Tennis Channel.

• ESPN holds the rights to tennis’ 3 other Grand Slam titles:

  • Earlier this year, the Australian Open extended its U.S. broadcasting deal with ESPN through 2031.

  • In 2021, they agreed to a 12-year, ~$990M extension through 2035 to keep Wimbledon.

  • In 2015, they agreed to an 11-year, ~$770M deal to own the rights of the US Open.

Where do players earnings come from?

• Endorsements. Tennis players make their living from their endorsements with different clothing lines, businesses, etc. But to get these top tier sponsors, they need to either a) perform at the highest level or b) be incredibly marketable that any business would want that player to flaunt their logo.

  • Roger Federer and Uniqlo: Federer signed a 10-year, $300M deal with Uniqlo in 2018. It’s one of the biggest sponsorship deals in the history of tennis.

  • Novak Djokovic and Lacoste: Djokovic signed a 5-year deal with Lacoste in 2020 that’s worth ~$9.4M per year. He makes ~$30M per year from endorsements.

  • Naomi Osaka and Nike: Osaka signed a deal with Nike in 2019 that’s worth ~$10M per year. She also has sponsorship deals with Nissan and Mastercard.

  • Rafael Nadal and Kia: Nadal has been sponsored by Kia since 2004, and the deal is rumored to be worth ~$6M per year.

  • Serena Williams and Nike: Serena and her 23 Grand Slam titles has had a long-standing partnership with Nike. Her latest deal is rumored to be worth ~$10M per year.

• Prize Money. When tennis players participate in tournaments, they are compensated based on the round in which they lose, with payouts escalating somewhat exponentially as the player continues to win (now you’re seeing how similar golf and tennis are!).

  • Although the ATP Finals and WTA Finals at the end of the calendar, they draw much less viewership than the majors where the money is way more lucrative (see Table 1).

  • The $4.4M Djokovic earned for winning the 2023 ATP Finals is nearly more than what he made for winning the Australian Open ($2M) and French Open ($2.5M) combined.

Why tennis has such a lack of parity?

• For both men and women, tennis is dominated by the top tier players.

  • Last year, Djokovic earned 4x of the 11th highest-paid man, Taylor Fritz. Very similar to #1 WTA ranked Iga Swiatek’s earnings compared to the 11th highest-paid woman, Petra Kvitova.

  • The ATP Finals and WTA Finals had purses last year exceeding $14M and $9M.

    • These tournaments only include the top 8 players in the rankings, which contributes to the top-heavy money distribution in tennis.

  • Djokovic’s 2023 ATP Finals win gave him the fifth-most prize money ever in a season. He now holds five of the top 10 prize money seasons of all time and entered the season with a $46M lead over Rafael Nadal for the most career winnings.

• For years, mens tennis was dominated by the “Big Three” of Federer, Nadal, and Djokovic. This weekend’s French Open final was actually the first since 2004 that didn’t include either of the “Big Three” (see Table 3).

  • During those 19 years, they lifted La Coupe des Mousquetaires a combined 18x, with Nadal winning 14 titles to Djokovic’s 3 and Federer’s 1 French Open title 🤯.

• With Federer and Serena retiring in 2022 and Nadal and Djokovic knocking on the door to 40, we hope to see more parity in tennis…

  • And maybe depth has always been an issue when it comes to both the men and women’s game. But, as money continues to flow into the sport from higher ticket sale prices and increased media rights deals, we’re seeing these top tier players take advantage of the money they’re receiving from tournament winnings and sponsorships. All by expanding their teams to hire more coaching for technical skills, recovery, strength, and health/nutrition to ultimately fortify their bodies for these competitions.

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Quick Hitters

• 📊 DC sports and Ted Leonsis just can’t stay out of the news can they?! The Washington Capitals have reached an agreement to purchase the hockey website CapFriendly, a popular destination for NHL executives, fans, and media looking to track contracts and salaries. The Capitals plan to integrate CapFriendly’s data, tools and other functions — as well as some of the site’s employees — into their in-house hockey operations. Unfortunately, this means fans will be unable to pretend like GMs and know what they’re talking about as the public site will cease to exist. What’s even crazier is the fact that a number of NHL teams had contracts with CapFriendly to better utilize the site’s tools and data. But now, they’ll have to find a new way to pluck data and analyze hockey contracts.

• 🥳 What a week for attendance! And not just for the normal sports, but emerging sports and pro leagues are making a name for themselves too!

  • Women’s Professional Soccer: The NWSL set a single-game record with a crowd of 35,038 on Saturday at Wrigley Field for a game between the Red Stars and Bay FC. It was also the first time the league in total has surpassed 100K in attendance in a single weekend.

  • Men’s Cricket: The ICC Men’s T20 World Cup registered a turnout of 34,028 on Sunday in New York for the high-profile match between India and Pakistan, setting a new record for cricket in the U.S.

  • Women’s Basketball: A sellout crowd of 20,333 filled Capital One Arena in Washington, D.C., for an Indiana Fever and Washington Mystics game Friday. It was the biggest WNBA turnout for a game since 2007.