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Tennis not affected by recession

January 16, 2009 12:35 IST

As the credit crunch bites deeper into the global economy, tennis has so far managed to escape the effects of the crisis and it will be business as usual when the Australian Open begins on Monday.

While Formula One, golf and soccer have all been hit by the financial downturn, tennis officials are adamant that only a world war, and not the current economic climate, would force the cancellation of one of its blue-riband events.

"The ITF has substantial reserves and we would be able to overcome any catastrophic failure of one of our big sponsors," International Tennis Federation commercial director Jan Menneken said.

"If one of them were to go into administration, we would be able to weather that storm for at least a substantial while.

"One thing is for sure, the Davis Cup and the other big events will happen no matter what, barring a World War III."

On Wednesday, the German Open women's tournament, scheduled to take place in Berlin in May, was scrapped but those connected with the event said the cancellation has nothing to do with the state of the economy.

As in many other sports, the car and banking industries have invested heavily in tennis, with South Korea's Kia Motors being one of the major sponsors of the Australian Open.

Whereas other sports are looking at making cutbacks to survive the recession, tennis has bucked the trend. On Saturday, Australian Open organisers announced a 12.3 percent increase in prize money on last year.

"The increase in prize money, even in these tough economic times, is a positive symbol of...rewarding the players for their role as a partner in the Open," said world number two Roger Federer.

REVENUE AGREEMENTS

There has been a 23 percent increase in prize money from 2008 to 2009 for the WTA events.

WTA chairman and CEO Larry Scott is confident investors would continue to keep faith with the tournaments as tennis offers an attractive business model.

"The beauty of tennis is that the major revenue agreements tend to be multi-year agreements and it is a global sport with diversified revenue so we are not going to be as hard hit as some other sports," Scott said, adding that about 20 percent of WTA events had a car company or financial service as its major sponsor.

"Each tournament has probably got between 15 to 20 revenue contracts as a minimum between sponsors, big hospitality purchasers, advertisers, broadcasters etc. Within the area of sponsorship, there are multiple sponsors.

"No one agreement having difficulty is going to put an event in jeopardy unless it's a title sponsor...which may hurt their profit margin one year but it won't put the event at risk."

Kris Dent, the ATP's head of corporate communications, added: "In November we commissioned a study to understand how they [tournaments] might be affected by the economic issue.

"[At the time], of the 63 tournaments, 48 had title sponsor deals with the remainder having supporting sponsor deals in place. Only six tournaments had not yet confirmed their major sponsorship deal for 2009 and two of those were extremely close.

TOUGH PERIODS

"We have seen a large number of existing sponsors renew three-year contracts with the ATP, companies such as Enel, Ricoh and South African Airways all have deals at or around US$ 20 million, and new sponsors have joined such as Barclays as the new five-year, $38-million sponsor of the ATP World Tour Finals."

Tennis also has the benefit of knowing that is has survived tough periods in the past.

"In Davis Cup we lost two major sponsors in one year [in the late 1990s] which was a big hit but it took us just a year to recover," ITF head of communications Barbara Travers said.

All three tennis bodies, the ITF, ATP and WTA, admit renewing contracts or finding new partners could be a challenge, especially for the lower-tier tournaments, if the recession continues for a long time.

A spokesman for the United States Tennis Association, which runs the US Open, said the real test would be to see: "What impact if any this will have on our ticket sales for 2009."

The women's tour, however, hopes its revenue-sharing platform will offer an attractive incentive to would-be sponsors.

The WTA has started the agreement with most of its 'premier level' tournaments this year. An increase or decrease in prize money will be based on a three-year average.

"Revenue sharing is an excellent idea as it aligns the economic interest of the players and the tournaments who are partners in this joint venture," explained Scott.

"If the economy for tennis is doing well...players should get their fair share. If the tournaments aren't doing well and they are suffering because of the economy, then there is no growth to be shared with the players. I think that's fair, aligns the interest and creates a deeper level of commitment between the players and tournaments."

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