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On Monday, Sky News reported CVC Capital Partners has made progress in negotiations with Russia ATP and WTA (The CVC is said to seek government approval from governing bodies later this month). According to the transaction, the private equity firm will invest $ 600 million in the Community (one Tennis), which combines men’s and women’s professional tennis rounds (or at least their commercial aspects).
The merger would theoretically alleviate some of the short-term economic pressures on sport caused by the pandemic. But conversations with tennis insiders media Both the authorities suggested CVC and those behind the One Tennis initiative are also likely to look at the longer-term possibility of being critical in the ongoing transition from wholesale and retail media distribution. If you reflect the direction of the entire OTT, DTC streaming business based on all these changes in technology and consumer behavior, sports, and sports [broadcast] especially those with a global appeal will play a major role in taking this forward, Chris Bevilacqua (founder, Bevilacqua Helfant Ventures).
CVC did not respond to our request for comment. The ATP and the WTA responded with a joint statement, stating in part that by working together, we believe there may be significant opportunities ahead, and we are exploring all options, but we did not realize where they are experiencing these opportunities.
Our Take: For clarity, combining the commercial elements of ATP and WTA tours under a single umbrella is not a new concept. Leaders of the entire sport have long experienced the ability to maximize the value of global tennis (and keep costs low) if they work together as opposed to competing with each other. Alongside political and administrative programs, the challenge has always been how to do it and how to share the costs and benefits of it, said Marshall Happer, former executive vice president of the International Men’s Tennis Council. There have always been too many chefs in the kitchen, all of whom want to stick their pieces to the pie in order to make radical changes.
However, it was before the pandemic, before many high-profile tournaments, including Wimbledon, were canceled (see: International Travel Restrictions). While the pandemic hurts all sports, tennis has suffered (and continues to suffer because the coronavirus is not yet under control in many countries) more than most because its income model is heavily based on both hospitality (for both fans and sponsors) and ticket sales.
The advent of DTC technology and the change in leadership are also seeking to make these two tours different. In its current form, neither tour moves the needle in terms of digital revenue. But Bevilacqua said: It’s similar to the old Wayne Gretzky reference field, where the puck goes, not where it is. There are currently about 650 million direct consumer subscribers worldwide. By 2024-2025, this figure is projected to be around 1.3-1.5 billion. The only way [a digital service] is able to drive such prevalence globally by going beyond general entertainment (the taste of shows and films varies greatly across cultures) and sports. Sports rights can drive much deeper into penetration. Needless to say, he sees the value of direct sports rights around the world with premium features just up.
Logic shows that selling ATP and WTA tour rights together would mean one and three, Bevilacqua said. He argued that the tonnage gained by the broadcaster is becoming more valuable as the media becomes more retail-focused (especially for a global sport like tennis) and suggested the ability to reach male tennis enthusiasts, female tennis enthusiasts and casual tennis enthusiasts over the age of 45. 50 weeks a year would be quite intense in a fragmented world. Octagon media rights consultant Dan Cohen pledged $ 200 million a year in combined media rights. Perspectively, the WTA is in the middle of a 10-year $ 525 million deal. It estimates that ATP imports an average of $ 120 million a year in broadcasting rights.
But the One Tennis concept is not just a desire to increase media and data rights revenue. As one tennis insider explained, this is largely a matter of value creation (which makes sense since both governing bodies have been quite locked into media rights agreements in the near future). WTA and ATP saw what Formula 1 did Drive to survive and how it increased the number of viewers. They saw Liberty Media buy F1 and watched the rise in prestige. They see what other leagues are doing and wonder why they are not doing the same.
In addition to digital, the combined unit has the ability to both organize joint events (which are usually the most successful in pro-tennis) and create new events. Cohen noted that the combination of production costs and the savings from the merger can be as important as the potential revenue growth achieved.
The global appeal of tennis makes CVC a sensible asset for shopping in the current environment (football, golf and martial arts should also be valued on retail platforms). Of course, investing in sports and sports-related properties is no stranger to a private equity firm. Formerly a Formula 1 and MotoGP stakeholder, the company currently holds stakes in Premiership Rugby, Pro14 and the International Volleyball Federation’s commercial rights. They are also trying to buy Six Nations Rugby.
CVC also seems to be a strong partner for ATP and WTA. They have demonstrated the ability to produce media rights around the world, our insiders said. Their contribution to the sport would also reinforce the vision. If we all say tennis [this combined entity] is worth a lot of money, it is quite different than if a private equity firm says it is a lot of money. As private equity firms do it, he added. CVC is expected to own a 15 percent stake in the new unit worth $ 4 billion.
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