On Monday, Sky News reported CVC Capital Partners is in “advanced stages” of negotiations with the ATP and WTA (CVC is said to be seeking board approval from the governing bodies later this month). The deal would see the private equity firm invest $600 million into an entity (One Tennis) that would unify the men’s and women’s professional tennis tours (or at least the commercial aspects of them).
A merger would theoretically alleviate some of the sport’s short-term financial pressures, brought on by the pandemic. But conversations with tennis insiders and media authorities alike suggested CVC and those behind the One Tennis initiative are likely also looking at the longer-term opportunity—to play a critical role in the ongoing transition from wholesale to retail media distribution. “If you project out where the whole OTT, DTC streaming business is headed, by virtue of all of these changes in technology and consumer behavior, sports and sports [broadcast] rights—particularly those with global appeal—are going to play a big role in driving that forward,” Chris Bevilacqua (co-founder, Bevilacqua Helfant Ventures).
CVC did not respond to our request for comment. The ATP and WTA responded with a joint statement that said, in part, “By working together, we believe there may be significant opportunities ahead, and we are exploring all options,” but did not address what they perceive those opportunities to be.
Our Take: To be clear, combining the commercial elements of the ATP and WTA tours under a single umbrella is not a new concept. Executives across the sport have long felt they could maximize the value of global tennis (and keep costs down) if they worked together as opposed to in competition with one another. Political and governance agendas aside, the challenge has always been “how to do it and how to allocate the costs and rewards from that,” Marshall Happer, former COO of the Men’s International Tennis Council, explained. There have always been too many cooks in the kitchen, each looking to secure their piece of the pie, for radical change to be made.
That was pre-pandemic, though, before many high profile tournaments—including Wimbledon—were canceled (see: international travel restrictions). While the pandemic hurt every sport, tennis has suffered (and continues to suffer since many countries still don’t have coronavirus under control) more than most, as its revenue model relies heavily on both hospitality (for both fans and sponsors) and ticket sales.
The advent of DTC technology—and changes in leadership—also make this effort to bring the two tours together different. As it currently stands, neither tour is moving the needle in terms of digital revenue. But Bevilacqua said, “It’s kind of like the old Wayne Gretzky saying—skate to where the puck is going, not to where it is. There are currently about 650 million OTT, direct-to-consumer subscribers worldwide. By 2024-2025, that number is projected to be somewhere between 1.3-1.5 billion. The only way [a digital service] is going to be able drive that kind of penetration globally is by going beyond general entertainment (taste in shows and movies varies greatly among cultures) and into sports. Sports rights can drive a much deeper level of penetration.” Needless to say, he sees “the value of live sports rights across the globe for premium properties only going upwards.”
Logic indicates that selling ATP and WTA tour rights together would be “a case of one and one equals three,” Bevilacqua said. He reasoned that the tonnage a broadcaster gains will be increasingly valuable as media becomes more retail-focused (particularly for a global sport like tennis) and suggested the ability to reach “men’s tennis enthusiasts, women’s tennis enthusiasts and casual tennis fans with events across 45 or 50 weeks of the year would be pretty powerful in a world of fragmentation.” Octagon media rights consultant Dan Cohen pegged the value of the combined media rights at +$200 million annually. For perspective, the WTA is in the midst of a 10-year $525 million agreement. It’s believed the ATP is bringing in on average $120 million/year from broadcast rights.
But the One Tennis concept isn’t just about a desire to grow media and data rights revenues. As one tennis insider explained, it is largely about trying to create value (which makes sense as both governing bodies are pretty much locked in to media rights deals for the near future). The WTA and ATP “saw what Formula One did with ‘Drive to Survive’ and how it increased viewership. They saw Liberty Media buy F1 and watched the valuation increase. They see what other leagues are doing and are wondering why they’re not doing the same.”
Beyond digital, there is an opportunity for a combined entity to both put on joint events (which tend to be the most successful in pro tennis) and create new events. Cohen noted that the “production cost consolidations and savings” achieved from a merger could be as important as any revenue growth achieved.
Tennis’ worldwide appeal makes it a sensible property for CVC to buy into in the current environment (soccer, golf and fight sports should also be valued by retail platforms). Of course, the private equity firm is no stranger to investing in sports and sport-adjacent properties. Formerly a Formula One and MotoGP stakeholder, the company currently holds interests in Premiership Rugby, Pro14 and the International Volleyball Federation’s commercial rights. They are also trying to buy into Six Nations Rugby.
CVC seems like a strong partner for the ATP and WTA, too. “They’ve shown an ability to generate media rights around the world,” our insider said. Their investment in the sport would also validate the vision. “If we all as tennis people say [this combined entity] is worth a lot of money, that’s very different than if a private equity firm says it is worth a lot of money. Because that’s what private equity firms do,” he added. CVC is expected to take a 15% stake in the new entity at a $4 billion valuation.