Why Saudi Arabia Will Invest Billions In Tennis
Huddle Up is a 3x weekly newsletter that breaks down the business and money behind sports. If you are not already a subscriber, sign up and join 100,000+ others who receive it directly in their inbox each week. Today At A Glance:When it comes to Saudi Arabia and sports, all eyes are on the merger deal between the PGA TOUR, DP World Tour, and LIV Golf. But in the background, talks about Saudi Arabian investment in professional tennis are brewing. So today’s newsletter details why professional tennis is of interest to the Saudi Arabian Public Investment Fund (PIF) and why the sport’s economics make it a prime target for financial disruption. This newsletter is also available via podcast on Apple or Spotify. Enjoy! Today’s Newsletter Is Brought To You By SoFi!
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ATP Chairman Andrea Gaudenzi said in June 2023 that ATP has had “positive” discussions with Saudi Arabia and other potential partners about investing in the organization. He did make it clear that he wants to keep the ATP’s infrastructure in place and wants new investors to work with the current powers in tennis, not create a new tour. “There are many ways to become an investor of the ecosystem. It’s not only about creating a new tour or buying a tournament,” Gaudenzi told the Financial Times. “You have to preserve something which is almost sacred, the rules of the game. This is not a video game, this is not a movie.” But with PGA Tour officials testifying before a U.S. Senate committee last week about their $3 billion commercial partnership deal with Saudi’s Public Investment Fund (PIF), it’s clear Saudi Arabia is looking to refocus its efforts on another sport. And there are more similarities between golf and tennis than you might realize. In golf, the athletes are independent contractors. They pay for their own flights, hotels, meals, and coaches, and only make money if they play well in tournaments. There is no fixed salary or guaranteed payouts. And many players end up losing money when they don’t play their best and miss the cut at a tournament. Take Rory McIlroy, for example. He takes a private jet with his family and friends to Augusta National every year for the Masters. He then rents two houses: a family house and a staff house. And he spends thousands on a swing coach and psychologist. But when Rory missed the cut this year, he made just $10,000 — a number that is typically zero at a normal tournament but a nice consolation prize at the Masters. Still, that means Rory probably spent $150,000+ that week alone — nice homes in Augusta cost $50,000 for the week — and walked away with just a $10,000 check. You shouldn’t feel bad for Rory, of course. He has a $200 million endorsement deal with Nike and has already made $10 million in 2023 on-course prize money. But Rory’s appearance at the tournament brings a lot of monetary value to the event organizers. And you can see why this structure would be problematic for lower-ranked players who don’t have $200 million Nike contracts yet spend thousands on travel and training just to leave tournaments empty-handed when they don’t play well. That’s precisely why LIV was able to challenge the PGA Tour. They came armed with a bottomless pit of cash, and the league’s unique structure (fixed schedule, large signing bonuses, $25 million purses) flipped the PGA Tour’s model on its head. And this same model can be applied to the highest levels of professional tennis. Remember, all tennis players, from World No. 1 to World No. 1500, are self-employed, meaning they must pay for their own travel expenses and coaches, just like golfers. This is a significant problem for anyone outside the Top 100 rankings. For example, Noah Rubin made just $60,000 after expenses as the 195th-ranked player in 2019. Noah Rubin’s 2019 Total Earnings
That also doesn’t account for the estimated $400,000+ in training costs Rubin’s parents paid throughout his youth career to help him reach the professional level. And this is the same reason why the world’s best tennis players historically earn much more off the court (via sponsors) than they do on the court (via prize money). Top 10 Highest-Paid Tennis Players 2022
That’s why tennis always seemed like the next likeliest target for Saudi Arabia. It’s a global sport with more than 1 billion fans worldwide. The governing bodies have a significant money problem — the PGA Tour ($1.5 billion) brings in 6x more annual revenue than the ATP Tour ($250 million). And Saudi Arabia already has a vested interest, signing a 5-year deal to host The Next Gen ATP Finals starting next year. ATP Overview
WTA Overview
The world’s best players seem to be ok with it, too. Men’s World No. 1 (and newest Wimbledon Champion) Carlos Alcaraz and Women’s World No. 1 Iga Swiatek have already said they would play in future Saudi Arabian tennis tournaments. And Nick Kyrgios recently tweeted his support of Saudi Arabian investment in the ATP Tour, saying, “FINALLY. THEY SEE THE VALUE. WE ARE GOING TO GET PAID WHAT WE DESERVE TO GET PAID. SIGN ME UP.” along with ten money bag emojis. Now, there is definitely some sportswashing going on here. Saudi Arabia will never make back the billions it spent on LIV Golf, and many of its other sports investments are too small for them to seriously claim its intent is financial diversification. But I don’t think that’s their goal. Instead, Saudi Arabia wants to turn their country into a tourist destination, like Dubai. That’s because they will make significantly more money on that than anything else. And by investing in sports assets like Formula 1, Newcastle United, and the PGA Tour, companies like Uber, Disney, and Facebook, and multi-million-dollar tourism sponsorship deals with athletes like Cristiano Ronaldo and Lionel Messi, Saudi Arabia is hoping to soften its image and promote its country as a welcoming place. We’ll see if that happens. But regardless of whether Saudi Arabia’s tourism numbers 10x or go to zero, they will keep investing in sports. And with the NBA recently relaxing its minority investment parameters, major US sports leagues might be next. I hope everyone has a great day. We’ll talk on Wednesday. Listen to the Joe Pomp Show on Apple or Spotify. Interested in advertising with Huddle Up? Email me. Your feedback helps me improve Huddle Up. How did you like today’s post? Loved | Great | Good | Meh | Bad Huddle Up is a 3x weekly newsletter that breaks down the business and money behind sports. If you are not already a subscriber, sign up and join 100,000+ others who receive it directly in their inbox each week.
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