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How The U.S. Open Became A $350 Million Business

The United States Tennis Association (USTA) has a lot to be proud of this year.

Sources tell Forbes that the 2018 U.S. Open, which begins on August 27 and is celebrating its 50th anniversary, should generate at least $350 million in revenue this year, significantly more than the Australian Open ($320 in 2017), the second-highest-grossing tennis tournament.

Over the past five years, the USTA has spent $600 million, self-funded, in the strategic transformation of the Billie Jean King National Tennis Center, improving around 85% of the grounds. Replacing the old Louis Armstrong Stadium and the attached Grandstand Court with two new stadiums increased capacity by nearly 10,000 fans a day. The expansion and new stadium construction has doubled the overall square footage of the retail, food and restaurant footprint on the grounds of the Open.

Among the most notable improvements was the $150 million roof over Ashe Stadium. Each year from 2008 to 2012, the usual Sunday airtime of the men's final was shifted to Monday because of rain, which didn't please television broadcast partners. The transformation also allowed the USTA to "unlock" a new hospitality space that doubled the size of the previous hospitality area. The new "Overlook" is a one-of-a-kind hospitality space offering an indoor-outdoor, high-class experience containing a VVIP area called the 1968 Club (named for the first year the tournament allowed professionals). This all contributes to more revenue from sponsorship activation, concessions and ticket sales.

That $600 million investment has already paid off for the USTA. In 2017, ticket sales and broadcasting generated $120 million each, with an additional $65 million from sponsorship deals and $30 million in concessions.

This year, broadcasting will remain the same, ticket sales are expected to increase to $130 million, sponsorship will rise slightly to $70 million and $30 million will be generated from concessions, coming to a grand total of $350 million. Experts project that by 2019 the U.S. Open will generate $365 million and $375 million by 2020.

"Our money doesn't go to shareholders, investors or team owners. We take the money that we make and give it back to the game."
— Gordon Smith, Executive Director & CEO of the USTA

According to TicketIQ, the average secondary market prices for this year's U.S. Open tickets are around $434 across all 24 scheduled sessions. Ticket prices for both the Men's and Women's Final have increased slightly since last year. The average secondary market ticket price for the Men's Championship is around $1,045 and Women's at $618. However, you can still get into the grounds at around $200 on those last days.

Gordon Smith, executive director & CEO of the USTA, emphasizes that "our money doesn't go to shareholders, investors or team owners. We take the money that we make and give it back to the game." He continues to explain that "it isn't just about the prize money, however. It's about creating a viable professional game. We support domestic and international players by funding the pro circuits, college tennis and international tennis centers, which creates a pipeline of players to compete in Grand Slams."

The USTA has successfully used analytics to maximize revenue. For example, they analyze data around the primary and secondary market to determine how they tickets should be priced. Last year they repriced every seat in the Arthur Ashe Stadium, and 54% of their seats had reduced in price. Lew Sherr, USTA's chief revenue officer, says that this allows them to balance the commercial opportunity in their revenue goals with the opportunity to make sure anyone can have access to the event and be inspired to play through the U.S. Open.

In 2017 nearly 700,000 people attended the U.S. Open. An average person stays on the ground for 8-9 hours while watching tennis for half that time and spending the remainder shopping, eating and drinking—generated concession revenue.
The Open has a blue-chip roster of official sponsors. American Express, Emirates, J.P. Morgan Chase, Deloitte, IBM, Ralph Lauren, Spectrum, Rolex, Mercedes Benz, and the Westin are all sponsors. And last month Rolex was named the official timekeeper of the tournament.

Longevity with their corporate partners is important for the U.S. Open as they've been partners with these brands for around 20-40 years. With sponsor logos displayed on nets of every court, and company names displayed around scoreboards, the Open works hard to get key locations to advertise their beloved partners. Sherr, wants to make deals with more global partners to make the tournament more international.

After all, the U.S. Open offers both domestic and international broadcasting rights. As an event, the Open is more like the World Cup of tennis, as opposed to a local sports team. ESPN is the exclusive rights-holder for their live match content in the United States. Television ratings and the number of viewers have been fluctuating over the years. The 2016 men's championship had 1.7 million viewers, down 47% from 2015. The 2017 women's final with two Americans, Sloane Stephens and Madison Key, earned a 1.9 overnight rating, 36% higher than the previous championship. It was the highest overnight rating for the U.S. Open that ESPN had in three years. The U.S. Open draws the most viewers when featuring Americans, with the most popular draw being the match between rival sisters Venus and Serena Williams in 2001, which reached 22.7 million viewers on CBS.

Of course, with all this increased revenue, the big beneficiaries of the Open's growth are the players themselves. The USTA paid out a total of $50 million in prize money last year, with the men's and women's singles winners each pocketing $3.7 million. This year the total purse will be $53 million, the largest in the history of tennis-proving that the richest Grand Slam can always get grander.
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