Gaudenzi Reflects On Unprecedented 12 Months & What Lies Ahead
In March 2020 the BNP Paribas Open in Indian Wells became the first tennis event cancelled due to COVID-19, and marked the beginning of a five-month suspension of the ATP Tour. One year on, ATP Chairman Andrea Gaudenzi reflects on a period of unprecedented challenge for tennis, the state of play, and what lies ahead for the sport.
1. Describe what the last year has been like for you at the ATP?
It’s been a year that nobody could have predicted. The vast majority of our time has been spent managing the crisis and overcoming the obstacles that are inherent to operating a global Tour during a pandemic.
The circumstances have been extremely challenging, and everyone has suffered in some shape or form. However, in general, one year on from the cancellation of 2020 Indian Wells, I think we can be proud of what our sport has achieved and the collaborative spirit that has endured to keep the Tour going during this difficult time. By and large, we’ve managed to preserve as many events as possible since the resumption of the Tour in August 2020, and we’ve prioritised health and safety every step of the way.
Pandemic aside, we’ve made good progress in some key areas. I began this role in January 2020 with a clear Strategic Plan for the ATP and the sport overall. It’s a big body of work that cuts across the calendar, prize money and profit sharing between players and tournaments, new category terms for tournaments, aggregation of rights, and fan data management (CRM).
At the heart of it all, the first phase of the Plan is about creating transparency and trust between our members to ensure that the 50-50 partnership structure of our Tour is working in an optimal way. I remain hopeful that the Strategic Plan will lead to a bright future for our sport.
2. Is there anything you are proud of and, with the benefit of hindsight, what are some of the things the ATP could have done differently?
In the past 12 months, we’ve had to make more decisions related to the Tour than were probably made in the last 10 years combined. From revising the FedEx ATP Rankings, managing the fluidity of the calendar, changing prize money levels and round by round distributions, tournament financial modelling, implementing health and safety measures, liaising with local authorities and obtaining international travel waivers, the list goes on.
It’s a huge volume of work and I’m proud of the effort our whole ATP team has put in, including the Board. Our Board used to meet a few times a year – we now meet on a weekly basis and the pandemic has totally reframed the way we operate.
I’m also proud of the cooperation we’ve built with the WTA, ITF and four Grand Slams during this time. There are many different stakeholders in our game, and the response to the pandemic has required a true collaborative spirit from all sides.
In retrospect, particularly at the start of the pandemic when there was little clarity and we were extensively analysing all options, our outreach to members could have been more extensive. That’s something that we’ve looked to build on progressively in the past 12 months in order to effectively communicate our decision-making.
As we’ve dealt with all the hurdles of the past 12 months, many individual circumstances for players - usually related to health and safety and travel restrictions - have brought the fairness of the Tour into question. We realise it hasn't been perfect, but our responsibility is to look at the big picture and do what we believe is right for the overall sport.
3. Players have been hit with significant prize money cuts since the resumption of the Tour in August. The conditions under which they are competing, including strict international quarantines and reduction in support staff permitted at tournaments, also put a strain on their mental and physical health. What is being done to help them?
Players are having to deal with long periods in controlled environments with fewer support team members. This takes a big mental toll and impacts their preparation for events. The quarantine period in Melbourne this year was particularly taxing, and we are seeing the knock-on impact of that.
Add to that the fact that players are having to accept prize money cuts across the Tour, and you understand the difficult and uncertain situation they face. Their resilience has been impressive.
We’ve tried our best to help. Last year, the governing bodies delivered over US$20 million in support payments to players and tournaments in a ‘bottom up’ approach to help those most in need. ATP recently announced a support package including up to US$5.2 million for raising the minimum prize money levels at 250 and 500 events until the middle of the year. Funds were primarily redirected from the ATP Bonus Pool - a move backed by top ranked players in support of fellow players. We have also worked collaboratively with the Grand Slams to maintain full pre-pandemic prize money - a major contribution considering the reduced revenues and additional expenses they’ve incurred.
This season, we are on track to retain 77% of overall 2019 prize money levels, and that number will only increase as fan attendance goes up hopefully in the second half of the year. We are also investing approximately $14m in sustaining the ATP Challenger Tour in 2021 – which is critical to supporting lower ranked players. We are proud that Q1 2021 is set to deliver 32 Challenger events, compared with 40 events in Q1 2019, including four top-level CH125 events.
Overall, since the Tour’s return from suspension in August 2020 through to February 2021, players ranked 51-250 have mostly maintained or increased their earnings from the same period in 2019/2020. If you track back to five years ago, they have all increased their earnings by over 50% relative to 2016/2017. The reductions have instead been focused at the top of the rankings, enabling us to protect those less able to absorb a financial hit. The top players deserve huge credit for the support they have given throughout this process.
On a mental health front, we are pleased to have established several partnerships and support services such as Headspace and an anonymous counselling service for professional athletes called Sporting Chance. It’s a start and we know that more needs to be done. Within the recently announced support package we have expanded the ability for players to bring additional support team members on the road – which will make a difference.
4. The NBA bubble in Orlando was a solution that successfully addressed the complexities of travel during a pandemic. How realistic is implementing something similar in a single location for tennis, which faces far greater complexity in global travel?
Playing in the same location solves the complexity of international travel but doesn’t solve financial problems. The NBA reportedly invested US$180m in setting up and operating the bubble in Orlando. This is a huge amount of money, largely justified by the fact they stood to lose an estimated US$1.5bn in revenue from TV and league sponsorship deals were they not to finish the season.
For tennis, the economics are different. Tournament sponsors are local to each event. So, on top of lost ticketing revenue, if you move location you lose sponsorship and have to renegotiate broadcasting deals due to changes in broadcast slots and time zones. It would be almost like starting from scratch. The business of moving a global Tour to one location simply doesn’t add up compared to what a national league is able to do.
There are of course exceptions within markets where it makes financial sense, also from an event ownership perspective. We’ve been agile in capitalising on those opportunities, such as relocating the Western and Southern Open from Cincinnati to New York, and playing all Australian Summer events in Melbourne in January.
There’s no question that the scale of our Tour with 64 events, in addition to the four Slams, the time zones, our governance structure and the multiple different stakeholders all combine to make tennis one of the most difficult sports to manage in a pandemic. The external feedback we have received from other sports who are looking at tennis from the outside has been very positive. Ultimately, we need to continue assisting tournaments to weather this crisis and help them develop revenue streams that are better future-proofed. And for players, we must continue doing everything we can to make the Tour safe and financially viable within the current model.
5. Live events all over the world have experienced cancellation and financial loss over the past year. Is running an ATP Tour event still a viable business model for operators, and what is being done to future-proof this going forward?
Historically, our events have relied disproportionately on ticket sales relative to most other major sports, and the pandemic has exposed that. It’s one of the main reasons our prize money levels have suffered.
6. Events have all suffered, to varying degrees, from a loss in ticketing revenues. However, for the biggest events there are still considerable revenue streams from broadcast, data deals and sponsorship. How can such reductions in player prize money be justified?
It’s important to understand the economics of most ATP events. There are slight variations depending on the category of tournament, but on average ticketing represents approximately 40% of overall revenues, which is a considerable proportion.
Other revenue streams have also been impacted. Sponsorship represents around 35% of event revenues and have been reduced by an average of 30% due to the reduced visibility of having no fans on-site, and no hospitality. Broadcast revenues have also gone down due to the reduced number of events – our tournaments’ international media rights are pooled by category, so for each event that doesn’t take place, for example at ATP Masters 1000 level, that has an impact on the overall pool.
ATP events are losing more than 50% of their overall revenues, and these are events that operate on very small profit margins. That quickly means you have to reduce costs in order to operate, which unfortunately means reductions in prize money.
Our job is to try and find the middle ground in setting prize money levels that enable tournaments to still operate, while obviously still making financial sense for the players as well. Just as the players are competing under difficult conditions with reduced prize money, we’re also fortunate to have tournament promoters that are willing to take the risk to operate in this climate. Many ATP events have taken significant losses in the past 12 months, to the tune of $60-80m.
7. The pandemic has put obvious strains on both sides of the membership and raised questions about the decision-making processes of the sport. Has this prompted a governance review, and if so, what are the issues it’s looking to address?
We always need to update and evolve the way in which we operate in this fast-changing world. Internally at the ATP we have recently been conducting a review of our governance, looking at areas such as adding independent directors on the Board, addressing conflicts of interest, and imposing term limits. This remains a work in progress. No governance structure in sport or business, including ours, is without its issues. I fully believe in the 50-50 partnership of the ATP Tour, and our job is to continue to show how our structure is delivering for all our members. Negotiation and compromise is a reality in any structure - for us it happens inside our own Boardroom, while for some other sports, particularly in the US, it happens through collective bargaining agreements.
Involvement in decision-making is an interesting point with a membership as diverse in its interests as the ATP. All stakeholders have the right to vote their representatives and remain informed however not everyone can be consulted on every decision – it’s simply not viable or efficient to micro-manage, and it can be a challenge to manage those expectations. The Board is responsible for approving the overall strategy and direction, and management needs to execute on that with full transparency. We have a democratic structure and processes in place for decisions to be made, which require a huge amount of detail, analysis and time commitment.
For this to work it’s important we consider the checks and balances that are going to give constituents the greatest trust in elected representatives and the governance process. We have also worked hard over the past year to improve our communication around decision-making, following feedback from our members.
More broadly speaking about governance across all of tennis, there could be a lot of upside for the sport if we can make some progress on a unified governance to allow for the most effective decision-making across tennis. I believe this is critically important for the sport to offer the best fan experience and fulfil its true potential in the long term.
8. Last summer, in the midst of the pandemic, the Black Lives Matter movement highlighted deep-seated issues of social injustice and racial inequality across the world. As a global governing body that represents a diverse body of players and tournaments, what do you see as the role and responsibilities of the ATP to be taking a stand?
We are a diverse organisation with a global platform - therefore we have a duty to speak up for what’s right. Last year the Tours had a one-day suspension at the Western & Southern Open in reaction to the shooting of Jacob Blake. Tennis United became an important outlet for ATP and WTA to amplify players’ voices on several issues, from Black Lives Matter, to mental health and LGBTQ Pride.
Credit needs to go to the players for leading the way. Players like Naomi Osaka, Frances Tiafoe, Gael Monfils and Coco Gauff in particular, stepped up and inspired others to speak out. Marcus Daniell has done tremendous work in the Effective Altruism space. The desire to serve others is clearly there amongst our members and we owe them our support.
Until now we have been led by what’s important to our members. We have some work to do in getting our own house in order and identifying some areas where we can make a positive impact in a credible way. Our team has made a lot of headway in developing a new Purpose strategy for the organisation, and we will have more to say on that soon.
9. Last year the ATP unveiled a strategic plan for tennis, outlining a vision of a more unified sport, working together to unlock its full potential. Where does the implementation of this currently stand?
The details of the Strategic Plan were formally presented to players and tournaments in September 2020. We continue to work through the details with our members and the Board, and we hope to make further progress on that by Wimbledon 2021.
10. Two of ATP’s marquee events, the Nitto ATP Finals in November 2020 and ATP Cup in January 2021, were able to be staged. What are the financial implications for the ATP of having those events go ahead?
In a normal year, our owned and operated events account for over 35% of the Tour’s annual revenues. Being able to stage these events was a huge boost in the face of severe financial impacts elsewhere. That said, we obviously suffered significant reductions in revenues, and we’ve been doing our best to save money since the pandemic hit. We cut overall compensation of top executives - the Chairman, CEO and Chief Legal Officer roles - across 2020-21, equating to a total of $1m in reduced compensation. We furloughed 10% of our staff. Another 20% of staff were at reduced capacity. We also implemented a hiring freeze, cut vacation time and bonuses and froze salaries.
The multiple cost-cutting efforts delivered a total reduction in operating and marketing expenses of approximately $9.5m. With all our revenue streams severely impacted, our savings still allowed us to fund ATP’s operating costs, including services to players & tournaments, and enabled us to deliver a 92% increase ($5.53m) in ATP contributions towards the member rebate compared to 2019 ($2.64m). This contributed towards approximately $20m in support delivered to ATP players and tournaments in 2020.
The ATP has managed to remain in a solid financial position as a result - however we must continue to be prudent in our financial management over the coming months.
11. Looking ahead, describe your realistic and optimistic expectations for the 2021 season.
We are cautiously optimistic that Q3 and Q4 of this year will see brighter days for our sport, with the return of fans who have been so missed. A lot of this depends on speed and efficacy of the vaccine roll out in the markets we play, which is happening at a different pace around the world.
From a financial point of view things don’t get any easier in year two of a crisis, especially for events that face a potential second year of cancellation or impacted revenues. Of course, we all wished for a return to normal operation to have come sooner, which I tentatively hope will be a reality in 2022.
In my opinion the collaboration and the resilience of our sport are the biggest causes for optimism. The past year has shown how much more we can achieve working together and highlighted the champion spirit of everyone that has held strong through challenging times.
I believe we will get through this storm and I’m optimistic about the future. It requires us to make some changes that are outlined in our Strategic Plan, but there will be big opportunities ahead if we can step up and do the right thing for our sport.