Unfinished Business

Tennis is a global sport with a billion fans. Yet, even after nearly five decades of player-led agitation, it only supports the livelihoods of around five hundred players globally. Tennis legends Novak Djokovic and Billie-Jean King think it is high time the current situation changes.

 

Envision one of the greatest tennis players of all time if not simply the greatest, having amassed over US$160 million in prize money and millions more through endorsements, expressing dissatisfaction with compensation. Well, that's precisely what Novak Djokovic, the current world number 1 and winner of 24 major singles titles, did in an interview published by the Professional Tennis Players Association (“PTPA”).

Obviously, Djokovic wasn't lamenting his own earnings. Instead, he was concerned with the pay of lower-ranked players.

"I'm in a privileged position as a top player for many years now, making a great living—for me, my family, and many years to come. The media constantly highlights how much a grand slam champion earns, overshadowing the struggles of players barely making a living from tennis," lamented Djokovic.

The disparity in earnings between the elite and the rest is depicted in Figures 1 and 2.

In the men’s game, the average prize money earned in 2022 by the top 10 players in terms of prize-money earned was US$ 6.6 million. This was 5 times the average of the prize-money of the players ranked 11-90 in terms of prize-money earned, 17 times the average of those ranked 101-200 and 73 times the average of players ranked 201-500. For the ladies’ tour, the corresponding numbers were 4, 12 and 68.

With tennis being an individual sport, compensation in tennis showcases two notable features.

Firstly, while the winners may not take all, they do claim a substantial portion of the spoils. The top 50 players on each tour earn more than the rest, and the game's interest is fueled by a select few players on either side, such as the legendary Federer-Nadal-Djokovic triumvirate on men’s side of the game and the Williams sisters on the other side. Billie Jean King, a tennis legend and equal-pay advocate, aptly noted that "[i]t's the top three or four men and top three or four women that drive ticket sales." As Figure 3 shows, this results in endorsement income being even more skewed towards top players as exemplified by the earnings of Emma Raducanu and Naomi Osaka in 2022, who, despite limited tour participation, were able to monetize that extensive appeal through endorsements.

Secondly, tennis players operate as entrepreneurs rather than salaried professionals. Their prize money and income from endorsements resemble business revenue more than a salary. This distinction arises from players having to secure various goods and services, including travel, coaching fees, and equipment expenses. The burden of with-holding taxes levied in the host jurisdiction of a tournament may further accentuate the challenges faced by players.

Billie Jean King highlighted the stark reality during an interview, noting that players often cite the need to earn "$100,000 to $150,000" annually to "make it." In 2022, only 214 women and 254 men earned more than US$150,000 in prize money. This is shown clearly in Figure 4 below.

Several current and former players, plying their trade at the top-level as well as at the lower rungs of game, have discussed this issue in the legacy media as well as in the social media. Their musings and lamentations about the trials and tribulations of their chosen profession are often enlightening and entertaining and shed much needed light into the economics of the sport.

Given all this, have tennis authorities sought to change the distribution of prize-money between top players and the rest? It is necessary to explore the power-dynamics within the tennis eco-system before answering this question.

The apex body of tennis is the International Tennis Federation. Founded in 1913, it boasts of a membership consisting of 213 national tennis associations of which 160 enjoy voting privileges. Even those with voting privileges are not created equal as 28, a group that includes leading tennis nations such as Australia, France, Great Britain, the US and Germany control 51% of the voting shares.

Whilst ITF acts as the law-giver and facilitator of certain aspects of tennis eco-system such as its anti-doping infrastructure, it organizes only international competitions such as Davis Cup, Billie Jean King Cup and Hopman Cup and a series of low-level or entry-level tournaments known as the ITF World Tour. The grand-slam or major tournaments are operated by national associations of the relevant host nations with the exception of Wimbledon, which is operated by the All-England Lawn Tennis Club pursuant to an agreement with the LTA, UK’s national tennis body. The 4 Grand-Slam organizers coordinate their activity via a body known as the Grand-Slam Board, which is run by representatives of those 4 host associations and the ITF.

Top-level tournaments outside the majors are operated 2 non-profit corporations: ATP Tour, Inc for the men’s game and WTA Tour, Inc, for the women’s game. Furthermore, ATP Tour, Inc and WTA Tour, Inc conduct certain intermediate tournaments known as the Challengers and WTA 125K, respectively.

A recent addition to the tennis landscape is the Laver Cup, a brain-child of Roger Federer. It is a tournament between 6 top European players and 6 top players drawn from the rest of world.

The Association of Tennis Professionals (ATP) and the Women’s Tennis Association (WTA) are akin to unions of male and female tennis players, respectively. ATP was born in 1972 out of grievances of the day that included the struggle to make tennis tournaments open to professionals and the need to combat the inflexibility on the part of grand slam operators to adapt the game of tennis. In 1973, ATP asserted its power by boycotting Wimbledon as a protest against disciplinary action taken against one of its members by the Yugoslav Tennis Federation with the blessing of the International Law Tennis Federation as ITF was known then.

On the other hand, Women’s Tennis Association (WTA), was formed in 1973 under the leadership of Billie Jean King to not only promote the women’s game but also fight for pay equality,

A new set of player grievances which included the perception that the sport was not marketed as best as it could and a need for players to have their voices heard when constructing tournament schedules ushered in another transformation. Thus, the 2 player unions joined hands with tournament owners to form 2 membership organizations, ATP Tour, Inc and WTA Tour, Inc. which organize tennis actively below the Grand Slams and above the lowly ITF tournaments. Each entity was governed by a board consisting of player representatives, tournament owner representatives and managers. The resulting tours were born circa 1990 and 1995, respectively.

The governance structure of the 2 organizations is depicted below in broad terms. It is pertinent to note that the power of each player council is, effectively, in the hands of the top singles and doubles players through the control of the respective player councils which nominate player representatives to the respective boards. For example, 4 out of 8 members of the current WTA Player Council are Top-20 players.

In this highly fragmented tennis eco-system where the four Grand Slams, the 2 player-led tours and ITF rule over various niches, value created by tournaments is distributed using a multitude of models.

Table 1 shows the evolution of prize-money distribution at the 4 Grand Slam singles tournaments over the past 10 years and highlights the effort taken by Grand Slams to increase the share of the prize-money paid to those who exit during the initial rounds. In general, this inures to the benefit of lower ranked players.

Many ATP and WTA tournaments, too, have followed suit. At Indian Wells, where a ATP 1000 tournament as well as a WTA 1000 tournament are held, the prize-money paid to those who exit in the early rounds have increased at a faster pace than the winner’s purse.

Another program that has a comparable distributive impact is Baseline , announced by ATP in 2023. This program guarantees to players who finish in the top 250 of ATP rankings in a given year a certain minimum income level in the year that follows. Had this program being implemented at the end of the 2021 season, circa 39 players would have received around US$ 3 million in 2022. It also provides a one-time payment of US$ 200,000 to a player when he breaks into the top 125 for the 1st time.

At the opposite end of the spectrum are the bonus pools which are split on the basis of merit and thus flow, in large measure, to players at the very top, as shown in Table 2 below.

ATP 1000 Series variable bonus is of particular interest as it provides an insight into the financial performance of the ATP 1000 series of tournaments. This series consists of 9 tournaments of which only 8 were held in 2022. Once audited financial statements of all the tournaments are available, a variable bonus pool equal to 50% of the aggregate profit made by the series is distributed between each and every player who played in the series based on the points they earned. In 2022, those 8 tournaments generated a profit of US$ 24.4 million. This was shared equally between the participating players and tournament owners, i.e. US $ 12.2 million for each group.

Given that All-England Lawn Tennis Club (AELTC) which operates Wimbledon publishes audited accounts as well, it is now possible to compare the value generated (i.e. prize-money, bonus amounts and distributions to national associations) by an old-fashioned Grand Slam and by a top-level series organized by an up-start player-led organization.

Table 3, below, compares how value created by Wimbledon and by ATP 1000s are allocated. It shows that, in the case of Wimbledon, value created is shared in roughly equal measure by participating players and national associations, whilst in the case of ATP 1000s, circa 85% of value created flows to the players, mostly the top players.

The value generated to players and tournament organizers by the 2022 edition of ATP 1000 series which had 8 tournaments conducted over 10 weeks is matched by the iconic Wimbledon, which unfolds over a mere 2 weeks. Of course, Wimbledon has women’s singles and doubles as well as mixed doubles events in addition to men’s singles and doubles, which it has in common with ATP 1000 tournaments. Even after accounting for that, it becomes abundantly clear that Grand Slam events transcend other tournaments in terms of earnings power, not to mention global reach and sheer prestige.

In other words, it's not merely a handful of male and female players who propel tennis into the limelight; the four Grand Slams undeniably serve as important drivers of the sport's interest and allure. Their significance is unparalleled.

This aspect is highlighted by Figure 5 which shows the aggregate amount of prize-money distributed by different types of tournaments.

The influence of player power, asserted through bodies like the ATP and WTA, has undoubtedly led to a surge in prize money and bonus payments, primarily benefiting top-tier players and, to a lesser extent, the other players who regularly participate in the 2 main tours. Little or none of its largesse has reached players ranked below 200.

This is neither surprising not undesirable. In an individual sport, the power of top-players is a reality that has to be respected. Stability within the tennis eco-system depends on top players feeling that they can obtain the optimal reward for their skills from within the current system. Of course, their power is not absolute. Grand slams remain unbowed. Their capacity to generate value appears to exceed whatever the 2 player-led organizations have been able to conjure. Likewise, the low rungs of the game have no value for the top players and, as such, will continue to be a territory that top players will cede to the ITF.

Thus, tennis may have to look elsewhere to generate additional value.

According to estimates, tennis boasts a staggering 1 billion fans, a number only exceeded by a select few including soccer/football, cricket and field hockey. Tennis fans are gender neutral, with a majority coming from middle-to-upper echelons of the socio-economic ladder. The percentage of fans who are also recreational players is high relative to other sports, with many playing the game well into their senior years. Despite all this, the monetization of tennis lags behind other major sports such as soccer/football, basketball, and American football.

So, what causes this? Is it the absence of team loyalties and associated rituals. If so, why is field hockey even under-performing tennis? Is it due to scheduling issues? Is it the absence of a large enough a footprint in the US?

Tennis has to get back to the drawing board. Did someone say "replay the point"?