This weekend, Jessica Pegula and Aryna Sabalenka, and then Jannik Sinner and Taylor Fritz, will face off in championship matches as the U.S. Open concludes what has been a booming 144th run. The tournament is expected to draw more than a million in fans for the first time, sell $10 million worth of Honey Deuce cocktails and offer up its biggest prize pool ever.
But the event’s success highlights the sport’s perennial struggle to get tournaments right the rest of the year. Professional tennis has been troubled by complicated scheduling and late start times that tire players and confuse fans. With private equity firms and sovereign wealth funds hungry to invest in tennis as they plow into sports globally, the big question is whether tennis can fix itself on its own.
DealBook’s Lauren Hirsch spoke with Lew Sherr, the chief executive of the United States Tennis Association, about how the sport plans to approach those challenges. The interview has been edited and condensed.
What explains the surge in attendance at the U.S. Open, beyond the growth of tennis as a sport?
We’re seeing the results of investing in fan week, a period before the main draw when the top players are here practicing. This year we had 216,000 people come through the gates that week free of charge. Last year, we were under 160,000 fans.
Years ago, we worried that investing in that programming might cannibalize first-week sales. It’s been the opposite. When our long-term partnerships come up for renewal, the fact that when the deal was signed, we might have been hosting 700,000 fans and now we’re up more than a million — there’s clearly more value in that partnership.
Alicia Keys, Tony Goldwyn and Simone Biles were among the many celebrities spotted in Arthur Ashe Stadium. We are coming off a huge Olympics, where it felt like celebrities were everywhere. Has there been any extra effort to recruit celebrities to attend the U.S. Open recently?
We’ve made an effort for years and years to lean into that aspect of our sport and our event. Many of our sponsors now are active in facilitating that. We have quite a sophisticated machine that supports it. But so much of that celebrity attendance really is inbound inquiries from some of the biggest celebrities in the world that are just keen to be here.
U.S.T.A. has invested big in building new tennis courts across the country. To what extent has this driven the great tennis and pickleball rivalry?
Where pickleball and tennis come into conflict is when someone makes a decision to convert a tennis court into pickleball courts, even though they didn’t have enough tennis courts to begin with, solely because it’s so much cheaper to just paint over a tennis court. We’re trying to address that.
We provide enormous support in terms of funds, grants for court refurbishments and court construction. And we’re also now starting to take advantage of those pickleball courts for beginning tennis play.
Tennis has a huge fan base, but investors have argued its business is broken. The major parties in tennis have discussed creating a premier league that includes the sport’s best-known tournaments, beyond the majors, like a tennis version of Formula 1. Is that the solution?
About 70 percent of tennis fans really are only paying attention to the Grand Slams. What we would love to see is more attention to tennis on a week-to-week basis. We’re working very closely with the tours, the Association of Tennis Professionals and the Women’s Tennis Association.
How much of the potential financial upside from a premier league would be from TV rights?
We are the third-most popular sport on the planet, but probably come in eighth or ninth against other sports in our commercial efforts, which are primarily driven by TV rights. The solve for that is to create more focus on premier events where the best players are playing the best players.
What is the risk that lower-tier tournaments are dwarfed by that arrangement?
Proceeds generated at the top would need to be redistributed to subsidize prize money and events at lower levels. I’m not sure private equity coming into the sport, or others coming into the sport, would necessarily be focused on reinvesting.
Is there any concern that a premier league would diminish the prestige of the four Grand Slams?
We feel very secure in where our event sits, the history of our event, the investments we’ve made into infrastructure.
Have discussions progressed to the point of hiring a banker or other advisers?
No. These are very productive and cordial conversations that we’re having with the ATP and the WTA and the four Grand Slams to try to work through really complicated issues.
There has been a lot of discussion about maximizing the value of men’s and women’s tournaments by selling them in one combined package. Is one barrier to that kind of deal figuring out how to value each business?
At the U.S.T.A., that issue was settled more than 50 years ago. We started offering equal prize money in 1973, We don’t differentiate when we sell our broadcast rights. It is the U.S. Open: When you buy a ticket, you know you’re going to see a men’s match and a women’s match.
When it comes to combining, the reality is what would be best for the sport is getting to that place. There are some challenges, but I think those are conversations that are happening now between the ATP and the WTA.
CVC Capital Partners is now a minority investor in the WTA Has having an institutional investor had any broader impact on the sport?
I’m not within the WTA and I’m certainly not in their board meetings. What I would say is CVC coming into the sport, and what accompanied that, which was a separation of the commercial arm of the WTA from the sporting arm of the WTA, has probably brought more energy, more focus, more resources to pursuing commercial opportunities. My understanding is they’ve had some meaningful revenue growth as a tour in the past year.
And, of course, the elephant in the room is Saudi Arabia. To what extent has the Saudi threat helped spur these conversations around the premier league?
We’re not involved in any direct conversations with the Saudis. I know it’s been reported the Saudis are in discussions with the ATP about becoming part of that tour and bringing an event to Saudi Arabia. I think it’s reflective of the global interest in the sport.
IN CASE YOU MISSED IT
Harris and Trump outlined economic policies. Aiming to maintain support from progressives while wooing corporate backers, Vice President Kamala Harris said she would largely keep President Biden’s industrial policies but has scaled back the size of a proposed increase in the capital gains tax. In a talk at the Economic Club of New York, Donald Trump retread proposals for higher tariffs, lower taxes and a “government efficiency commission,” a policy idea pitched to him by Elon Musk, who he said would lead the commission.
Biden is reportedly preparing to block the U.S. Steel deal. The Committee on Foreign Investment in the United States is expected to raise national security concerns over selling the iconic steel producer to Japan’s Nippon Steel for $15 billion. Both presidential candidates have said that they oppose the deal, which has become a key issue in the battleground state of Pennsylvania, where U.S. Steel is based.
The latest jobs report showed signs of a softening labor market. Employers added 142,000 jobs in August, a weaker-than-expected showing, but the unemployment rate fell slightly to 4.2 percent, alleviating concerns that it was on a steep upward trajectory after July’s jump to 4.3 percent. The mixed report was unlikely to send a clear signal to the Fed as it weighs how quickly to cut rates starting this month.
Where have all the I.P.O.s gone?
Despite this week’s stock market swoon, the S&P 500 is on a run for the ages. The benchmark index has risen nearly 40 percent over the past two years, and has more than doubled from the pandemic low it hit in March 2020, earning Wall Street trading houses bumper profits.
There’s one thing conspicuously absent from this rally, however: I.P.O.s.
“It does perplex me,” Jay Ritter, a professor at the University of Florida who has studied the I.P.O. market for decades, told DealBook. Historically, when markets are riding high, investor appetite for new listings surges. But these days, highflying stock prices haven’t been accompanied by a flood of private companies coming to the public markets.
There have been a few notable I.P.O.s over the past 12 months, including the SoftBank-backed chip design giant Arm, which raised $4.9 billion last year, and Lineage, a real estate investment trust, which nearly matched that haul in July.
But otherwise it’s been listless. There have been 96 new listings in the U.S. as of this week, according to LSEG, the market data provider. That’s down sharply from the levels reached in 2021, the year of the SPAC, and in 2020.
Wall Street has seen I.P.O. droughts before. In 2017, UBS researchers sounded the alarm about an “incredible shrinking universe of stocks,” as the number of new listings nearly halved over a 20-year period. That became a big issue for banks — and for politicians, too: At Jay Clayton’s confirmation hearing for S.E.C. commissioner in 2017, senators asked him what he would do about reviving the I.P.O. market.
Aside from brief spikes in 2018, 2020 and 2021, the rebound hasn’t really materialized. “The I.P.O. market, for 24 years now, has been a fraction of what it used to be, and the last couple of years have been an even lower fraction,” despite boom times for stocks, Ritter told DealBook.
Deal makers blame a number of factors. High interest rates are cited often, as higher borrowing costs often weaken a young company’s growth potential, making it less attractive to investors.
There’s also a disconnect in valuations, observed Mark Schwartz, who leads I.P.O. and SPAC advisory at the consulting giant EY. Young companies that have raised big investment rounds may find it beneficial to stay private for longer. One reason: Achieving a higher valuation on the public market could be difficult.
That “big chasm,” Schwartz told DealBook, “is another reason why I think we’re experiencing a different phenomenon than we might have otherwise in the past.”
Will things turn around? I.P.O.s tend to lag the stock market, often taking a few quarters to catch up, Schwartz said.
When will that recovery come this time? Ritter questioned whether I.P.O. levels would ever recover, while Schwartz doesn’t expect them to return this year. “I feel like we’ve hit a bit of an air pocket right now,” Schwartz said.
On our radar: ‘Supremacy: AI, ChatGPT and the Race That Will Change the World’
The artificial intelligence boom isn’t slowing down. Just this week, Safe Superintelligence, a three-month-old start-up with 10 employees, said it had raised $1 billion.
In “Supremacy,” Parmy Olson, a technology columnist at Bloomberg, tells the story of two of the A.I. industry’s most consequential founders to explain how we got here: Demis Hassabis, the C.E.O. of Google DeepMind, and Sam Altman, the C.E.O. of OpenAI.
DealBook spoke to Olson about what her book reveals about the sector’s development and its next challenges. The interview has been edited and condensed.
What can we learn about A.I. from the stories of these two chief executives?
Demis and Sam were the first entrepreneurs crazy enough to start companies solely to build an artificial general intelligence. Both were driven by world-saving visions: Demis thought A.I. promised scientific discoveries that could cure cancer and solve climate change, while Sam wanted to create wealth for everyone.
But building A.I. was insanely expensive, so both pivoted toward more commercial goals. And they both tried and failed to put responsible oversight in place for their technology, with ethics boards and nonprofit structures.
Their stories illustrate one of the biggest challenges in A.I.: the near impossibility of proper governance as money has become a greater focal point and entrenched the power of tech giants.
Companies say they are attempting to reconcile ethics and commercialization. Can we rely on those efforts?
The tech industry has been self-regulating for years, often for P.R. purposes.
One effort that probably wasn’t strong enough was to implement boards. So many tech oversight boards have blown up, and Demis and Sam seemed to give up on those efforts.
There are other promising avenues. I’m impressed by Anthropic’s pivot to become a public benefit corporation, putting its obligation to human well-being and the environment on par with their fiduciary obligation to investors.
But companies can’t be left to regulate themselves. Governments will have to step in.
Thanks for reading! We’ll see you Monday.
We’d like your feedback. Please email thoughts and suggestions to [email protected].
The post Can the Business of Tennis Be Fixed? appeared first on New York Times.
