The Business of Grand Slam Tennis Tournaments: Examining the Financial Impact and Growth Potential
Australian Open. French Open. Wimbledon. U.S. Open. These four tennis tournaments make up the “Grand Slams” of the Association of Tennis Professionals (ATP) and Women’s Tennis Association (WTA) professional tennis tours. These four tournaments are the most prestigious tournaments in the world, with players competing for the largest prize funds of the year before thousands of crazed fans.
The importance of these tournaments cannot be understated, as the top tennis players around the world are judged based on the amount of Grand Slam tournaments they win over the entirety of their career. From an economic standpoint, Grand Slam tournaments are huge international events that attract millions of viewers from all over the world, in person and on TV. Throughout this article, I will examine the economics surrounding the revenue streams of the Grand Slam tournaments, such as ticket sales, broadcast rights, and sponsorship deals. The COVID-19 pandemic forced tennis, along with every other sport, to change their business model. Among these changes, the most prevalent was the addition of technology created to enhance the player and fan experience, combat declining viewership, and maintain the prestige and appeal of tennis in an increasingly competitive sports landscape.
The revenue streams of Grand Slam tournaments come from a variety of different places, with ticket and merchandise sales accounting for an eye-popping 75% of total revenue (McCormick 2020). Since each Grand Slam tournament only occurs around once a year, the tickets are highly anticipated and very expensive. Sponsorship and advertising deals will only be valuable if there is a guarantee that a large number of people will be in attendance at the venue. Due to a high concentration of fans, it is thus worthwhile for a company to place its logo on the court or around the campus of the tennis village. While revenue is mostly made up of ticket and merchandise sales, sponsorship and advertising are also a portion of the revenue created by the Grand Slams. There are 30+ sponsors for the Australian Open every year (Score and Change 2020). These sponsorships include everything from beverages to fashion, information technology to watches, and cars to airlines. Many of the deals are set to last multiple years, usually offering up to $7 million per year. The reason for these high-value deals is due to the fact that companies acknowledge the fan base that attend these events. The high ticket prices allow for companies to presume that the majority of people who attend Grand Slam tennis tournaments are wealthy, and able to spend time and money on their products. While a lot of advertisements are shown in person at Grand Slam events, advertisements are also run on TV channels where the fans at home are watching. Broadcasting rights for these Grand Slam tournaments are worth enormous amounts of money. The United States Tennis Association (USTA) is being paid a total of $770 million by ESPN over an 11-year period from 2015 to 2026 to broadcast the U.S. Open, an event spanning only 2 weeks (Juckett 2013). The U.S. Open averages around 1.2 million viewers across its time frame, thus validating this enormous deal between ESPN and the USTA (Paulsen 2022).
Just like everything else in today’s world, Grand Slam tournaments were heavily affected by the COVID-19 pandemic. Grand Slam tournaments were not just impacted in terms of the decrease of in-person ticket sales; since revenues were down on all fronts, players weren't able to retain their normal salaries. The presence of fans at Grand Slam events is the heart of the revenue stream. If fewer people attend the tournaments, not only will less tickets be sold, but there is less of an incentive for brands to pay for sponsorships and advertising deals. A study that investigated the impact of COVID-19 on the prize money earnings of the top 100 tennis professionals uncovered that the top 80 players on tour lost money every year since COVID-19 (Simic 2021). This manifested in a drop from $150 million to $80 million in earnings, or a drop of 46% from 2019 to 2020 (Simic 2021). This data can be assigned to the inadequate funds brought in by Grand Slam tournaments and other tournaments across the ATP and WTA, which contribute to the pay of the players. The adaptation strategies of the Grand Slam tournaments during the pandemic were not flexible resulting in the cancellation of many tournaments. Overall prize money at tournaments was down 65% from 2019 to 2020 (Patil 2021). This drop in prize funds only exacerbated the already established reputation of “broken economics” across the ATP tour. As it is very difficult for lower-ranking players to adequately fund their trips to different tournaments and training equipment, COVID-19 created even worse conditions in which it is possible to stay on tour and compete at higher-level events.
Fairness in sports is something that is desired worldwide. In soccer, Video Assistant Referee (VAR) has been implemented in order to make sure that every controversial call that is made can be viewed from many perspectives by the referee, ensuring the fairness of any given call. Football and basketball have instant replay in order to make sure that the correct calls are made. Tennis has also implemented this type of technology in order to help make the sport as fair as possible. This is done through a technology that marks exactly where the ball lands, thus automatically ruling the ball in or out based on if it is touching the line or not. Therefore, the ball's position on the court is not determined by the human eye of a line judge, but rather by a computer. Starting in 2021, the U.S. Open did not hire line judges to make calls, rather opting to only use computers (Reuters 2021). The addition of this technology allows for the sport to be indisputably fair–making it more fun to watch, and granting a better game to viewers. In turn, if the game is being enhanced by technology, more people will attend and ratings will increase.
Unfortunately, the viewership of Grand Slam tournaments has been declining over recent years. Viewership numbers have plummeted by three to four million viewers over the last year (Krishna 2023). In an attempt to regain those numbers, the players of the ATP tour and different media members of Grand Slam tournaments brought tennis to Netflix. In an upcoming documentary called “Break Point”, many of the most famous and entertaining players are followed during their runs at various Grand Slam tournaments. As there are not many tennis documentaries available, this publicity will only help grow interest and involvement in the sport, which will then increase the popularity of Grand Slam tennis tournaments. With newfound interest, people will then be invested in all aspects of the sport; tickets sales, merchandise sales, broadcasting rights, along with sponsorship and advertising deals will all benefit.
The business of Grand Slam tennis decreased during COVID-19 and is on the way to regaining its historical prowess. With the continued popularity of the sport globally, the business is expected to keep growing in the future. Innovations in sports technology such as Hawk-Eye, which allows for more accurate line calls, are enhancing the quality of play and improving the fan experience. The sport's top players also play a crucial role in driving the business of Grand Slam tennis. With their global popularity and endorsement deals, they help to generate significant revenue for the sport and its stakeholders. In the future, we can expect to see further advancements in technology, more international expansion, and continued growth in the popularity of the sport. Overall, the business of Grand Slam tennis is a promising industry with many exciting opportunities for growth and innovation.
References
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Krishna, Gautham. “Absence of Federer, Serena Williams and Early Exit of Nadal among Reasons for Poor Australian Open TV Ratings, Says Tennis Journalist.” Sports news. Sportskeeda, February 3, 2023. https://www.sportskeeda.com/tennis/absence-roger-federer-serena-williams-early-exit-nadal-among-reasons-poor-australian-open-tv-ratings-says-tennis-journalist.
McCormick, Bret. “Fan Revenue Big Slice of Tennis Pie.” Sports Business Journal. Sports Business Journal, May 11, 2020. https://www.sportsbusinessjournal.com/Journal/Issues/2020/05/11/Events-and-Attractions/Tennis-revenue.aspx.
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Reuters. “U.S. Open Line Judges to Be Replaced by Technology This Year.” Reuters. Thomson Reuters, May 24, 2021. https://www.reuters.com/lifestyle/sports/us-open-line-judges-be-replaced-by-technology-this-year-2021-05-24/.
Score and Change. “Grand Slam Sponsors.” Score and Change, August 31, 2022. https://www.scoreandchange.com/grand-slam-sponsors/.
Swarali Patil PhD Candidate and Graduate Teaching & Research Assistant. “French Open Postponement Serves as Latest Example of Tennis Players' Struggles during COVID-19.” The Conversation, July 20, 2022. https://theconversation.com/french-open-postponement-serves-as-latest-example-of-tennis-players-struggles-during-covid-19-159666.
Šimić, Vladimir. “Prize Money Earnings of Tennis Professionals and the Impact of COVID-19 Pandemic.” International Journal of Business and Economic Sciences Applied Research 14, no. 1 (2021): 47–57. https://doi.org/10.25103/ijbesar.141.04.