July 30, 2021

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The ATP Tour answers the PTPA’s questions (well, some of them)

The rollout of the fledgling Professional Tennis Players Association, some 10 months after it was first announced at the 2020 US Open, hasn’t been without its challenges.

But it appears that its mere existence – or the promise of its existence – has created a few waves.

The ATP Tour has made a move to increase its transparency about the plan towards the players that make up 50 per cent of its organization.

Open Court has seen a confidential, informational email sent to the players by the ATP.

That document attempts to answer many of the questions posed publicly by the PTPA.

(It’s pretty dense – even the summary below is pretty dense. So this post is just for the few diehard tennis political junkies out there).

(The PTPA held a virtual press briefing last week, which you can see here).

Now, the trust level between the PTPA as an organization and the ATP isn’t exactly huge. So it remains to be seen if they accept these explanations and clarifications, and take them at face value.

We’ve reached out to the PTPA for comment on the ATP response (which they’ve surely seen). Notably, about what they think is misleading or missing (if applicable) from it.

When they respond, we’ll update this piece.

Update: No word yet from the PTPA. But we did get a shutout on Twitter late last night..

“30-year plan” actually “31-year plan”

The ATP’s “strategic plan” has been coined the “the 30-year plan” by the PTPA. That’s because of the extended length of the proposed category protection commitment for the current roster of Masters 1000 tournaments.

Here are some of the main points of the explanatory document.

It points out that the fundamentals of the plan have not changed since the 92-page outline was distributed. That was in Sept. 2020 – nearly a year ago.

And the objective of having it come into effect for the 2023 season remains the same.

Timeline of the plan

*It was first presented to the Player Council and to all the mandatory players meeting in Melbourne in January, 2020

*In September, 2020, the detailed plan was sent in the above-mentioned 92-page document.

*The consultation process has continued, the ATP says, through numerous player calls, and about 15 ATP Player Council meetings.

*The plan has “attracted significant interest from potential investors and private equity groups,” the ATP says.

Changes since the Sept. 2020 rollout

*The plan proposes that total prize money at the Masters 1000s would increase by approximately 19 per cent. That would raise it from about $63 million in 2022 to $75 million in 2023. (subject to continued discussions and board agreement).

*The “30-year plan” is, in fact, 31 years. The reviews of some elements of the plan had tentatively been pegged for every 10 years. That window is now more of a “to be determined” length. The ATP points out that the term length “aligns with the existing Indian Wells agreement”.

*The Masters 1000 bonus pool, set at $11.5 million for 2022, will be raised an additional $4 million for 2023. And it will apply to 30 players, as opposed to the current 12. The plan calls for that number to increase to $20 million by 2030.

As well, another bonus pool for the ATP 500 level, based on performance at that category of tournament, is planned. It is pegged at $1.3 million (all of this is subject to continued discussions and board agreement).

Your PTPA questions – answered

The document also attempts to respond to some of the other questions publicly listed by the PTPA. No doubt other players have questions as well.

The PTPA has 30 questions. So not all are answered.

*What about the lower-tier events and lower-ranked players?

“From a calendar standpoint, we must take the same approach and understand what it is that our fans want: to see the top players competing against each other at the world’s biggest events, more often. Any growth and incremental value to be generated in the sport must start at the top of the game. That is why the Strategic Plan focuses on enhancing the premium product.

“As soon as we achieve that, we will be in a stronger position to distribute more resources down the pyramid into the lower tiers of professional tennis.”

*Why 31 years of category protection?

The ATP points out that this only relates to the Masters 1000s (At the 500 level, that category protection is scheduled to be 15 years).

As well, it points out that many of those tournaments have undergone significant infrastructure improvements. Just look at what was done in Cincinnati, for example. And except for Indian Wells, they do not currently have that protection.

It also points out that a category change doesn’t happen that often anyway. And that it requires a supermajority vote from the ATP Board. That means two of the player council’s representatives have to vote in favour.

As well, the ATP says that this protection comes at a cost to the tournament: an investment in helping to increase the bonus pool, as well as a commitment to full transparency to the players in terms of its financial auditing processes.

*What about data rights?

The ATP clarified that by data, it means “match data”. And, generally speaking, no one actually “owns” match data; it can be licensed, aggregated and marketed by the organization that owns the database. But each individual’s data cannot be protected, nor is there much value in marketing it individually.

The ATP says that Tennis Data Innovation, an entity set up this season, has already already delivered a 38 per cent increase in gross sales of data and streaming revenues year to date. That. iscompared to the last non-pandemic year in 2019.

The ATP says that singles and doubles players eligible for the ATP pension plan already benefit from those increases, which are split between the players and tournaments. It says that there are no proposed changes in the new plan that affect the distribution of data revenues.

*Why do the tournaments own the media rights?

The ATP says that with with increased transparency, the question of who actually “owns” the media rights is a technicality. That’s easy for them to say, of course.

It also says that “ownership comes with the the significant financial liability for tournaments to deliver prize money, hospitality and all operational aspects of event delivery. This includes the risk of taking losses.” (This pandemic time certainly highlights that aspect of it).

The ATP adds that beyond funding the prize money, “revenues from media rights will flow back to players in the form of 50-50 Profit Sharing, meaning players will benefit considerably if there is growth in the value of media rights at the Masters 1000s.”

*Why the rush? (#delaythevote)

The ATP says that there already has been 18 months of communication about the plan. And that in order to put it into effect for 2023, all of it needs to be approved by the end of this year. That is so that the tournaments can have a full year to adjust to the increases in investment, the required increase in transparency, the potential changes in the calendar and other issues.

*What about the “outside investors”?

“The interest from outside groups, such as the recently publicised CVC proposal, validates the strategy we put forward in 2020 to our members. CVC is one of the leading and most credible investors in sports, with investment spanning the likes of Formula 1, Moto GP, Rugby and Football, for more than 20 years. Discussions with CVC are very much at exploratory stages and there is no commitment to proceed with CVC (or any third party) involvement at this stage.”

*What about “Phase 2” with the other governing bodies? What if they’re not on board?

The ATP says this isn’t fully under their control, but that doesn’t change the merits of executing Phase 1 by any means. “The execution of Phase 1, on its own, will be a major step forward for the ATP Tour,” it says.

Why is the profit share done on an aggregate Masters 1000 basis and not by individual tournaments? And why is the formula based on net revenues rather than gross revenues?

“This is the fairest way for the profit share to operate, minimizing the impact of any outliers (high profits or high losses) from the equation, and assessing the performance of the category as a whole,” the ATP says. “We believe that taking an aggregate provides a fair and accurate picture of the state of the business, a position that can ultimately also protect the players.”

*Why is tournament infrastructure included in expenses?

“Capital expenditures are part of the proposed net revenue calculation. This is an issue very common to any type of business and not unique to our sport. … For net revenue purposes, depreciation will only be related to the respective tennis event. If a facility or other assets are used for other purposes (for example if a facility hosts other events during the year), then an allocation between events/uses will be required.”

*When will the 500s and 250s adopt the new prize money formula?

Says the ATP: “When those categories as a whole get close to generating net revenues that exceed base prize money levels. Until that time the 500s will continue with the current prize money formula.”

It points out that the “full audit process” mandated for the Masters 1000s as part of the new deal comes at significant cost. And the lower-level events don’t have the financials to absorb that, at least not at the moment

*Why aren’t the ATP-owned events part of the plan?

The Nitto ATP Tour Finals, ATP Cup and Next Gen finals are the only events owned outright by the ATP.

“They have unique individual contracts with ATP, including any associated license fees which contribute towards the ATP’s bottom line, of which any surplus is shared with player and tournament members via a rebate, if applicable,” the ATP says.

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