IBM/ATP TOUR WORLD CHAMPIONSHIP

November 19, 1995

Mark Miles

MARK MILES: Thank you for joining us for the Annual State of the Tour Discussion. As has been our practice for five previous years, we would like to start with an audio visual presentation which would give you a feeling or, our feeling, about the year. This year it is a little bit less jam packed full of data and charts. It is a little bit more about the feeling on-court and then I will have the opportunity afterwards to talk a little bit more about what we think were the highlights off-court as well. So with that, if the technicians are ready, I'd ask them to roll the video. (THE VIDEO WAS SHOWN)

MARK MILES: To the Tour, 1995 was a successful and important transitional year. It was a year for me when every organization in tennis, every major organization in tennis, pulled together or did its own thing to contribute to the promotion and growth of the sport. My personal favorite example is the ATP Tour Kids Funds Program which was mentioned in the tape. I like it because it showed what can happen when players, tournaments, federations, and the industry itself, combine to make something occur to give birth to a new idea. In its first year, we think reaching 275,000 people is an indication of success. The extent to which those people, especially kids, will stay in the sport; to the extent it helps broaden the appeal of the game, we think is an important successful development. On the court, as the tape said, our view is, in a way, that this generation of players really came of age. I think they established their pedigree as champions on the court and off the court as well. Again, some of my favorite examples of this start with the rivalry between Pete and Andre; the fact that they met on the Tour and at the Grand Slams in five important finals, really helped focus tennis fans on the quality of the competition. Another one of my favorites is Pete Sampras finishing his third consecutive year as the No. 1 player in the world. Not to say I am playing favorites, but that is a remarkable accomplishment which puts him in the historic class with Jimmy Connors, John McEnroe, and Ivan Lendl. By the way, Pete Sampras will not be with us this afternoon for the presentation of the No. 1 player award, not because he wasn't willing to be - I spoke to him last night and arrangements were made for him to be here, but he expressed a feeling that his presence, given that he wasn't a finalist, could in some way take something away from Boris Becker and Michael Chang and I appreciate that and think that the world is pretty much aware of his achievement, so I respect his deference to the finalists today. The top three players in the world, Pete, Andre, and Thomas Muster won all four Grand Slams and eight of the Super 9 titles, which shows really the cream coming to the top. The top players as a group exceeded their ATP Tour player commitments to the tournaments and the top 10, for the fourth straight year, averaged between 20 and 21 tournaments played each which, we think, shows a sort of equilibrium has been achieved in the amount that they play at a level which fuels the growth of the game. Off the court, in 1995, two important agreements proved that the major organizations in tennis can agree on important topics. The first one I'd point out is the merging of our respective antidoting programs. This is not hard news - most of you know that it happened earlier in the year, but it has happened and it is, I think, an important achievement for our sport. The Women's Tour, the Men's Tour, and the ITF have one unified program administered by independent officials both in terms of the day-to-day operation of it, and the appeals committee, if we should ever get to that, and I think that it is a very positive statement about the sport and I think it is a first-rate program. The second agreement of this sort was also mentioned in the tape and that is the agreement between the ATP Tour and the Grand Slam Chairman for a unified ranking system. I think it was an important achievement this year. Many of us wished that it might have been a little earlier in coming, but I think it does place the proper emphasis and reward on the Grand Slams and the Tour's Super 9 tournaments and it, in a way, simplifies the granting of points in the ranking system and virtually anything we can do to simplify the ranking system, we think, is probably a good thing. And other governing issues, the Tour Board here made three decisions that I think are probably worth your attention. The first is that it past a resolution endorsing a change in the rules of tennis which would reduce the length of the rackets. Currently, the rule says that the maximum length is 32 inches. The Tour Board's support is for reducing that maximum length to 29 inches. To be clear, that would not change the length of the rackets on the Tour today. The rackets which have received the most attention are 29 inches. The effect of this, if it were ultimately adopted, it would freeze the rackets at their current length, maximum length, as used on the circuit today so that there would not be any extension of that trend in men's professional tennis. This is something that the ITF has been working on. There has been helpful dialogue between the organizations in that regard. The ITF has done, I think, an excellent job in coordinating with the tennis industry, the manufacturers in that regard. My hope is that there can be a consensus and that that rule can be documented soon, but the Tour Board wanted to make its position clear in support of what, I think, is the direction the ITF wishes to take. Another declaration or policy statement was made by the Tour Board here, the passage of a resolution, which tells us and commits itself to select that we will select one of two paths to standardize and provide for consistent speed of play indoors. The Tour Board, at its next meetings in March, will choose one surface which will be used consistently in indoor events on the ATP Tour, or perhaps two, if we are convinced that we can find two surfaces which have the same effect of providing consistency of play. I talked about this in this room a year ago. Our concern, primarily, is to have the highest caliber of play and, we think, consistency, week after week, is important to that. It helps players play their best and we also think we have seen the speed of play indoors, frankly, both at Bercy as an example and Essen and here in Frankfurt, which demonstrates that balanced play can be achieved; that baseliners and serve-and-volley players can be fairly treated by speed and we want to make sure that that is the case week after week. So, one of those two approaches will be adopted by the ATP board in March. An aspect we hadn't talked about yet - the third item the board took some action on was the passage of what I am calling "attendance standards." The Tour Board believes that every tournament on the ATP Tour must play a role in the promotion, growth of its sport, absolutely, at least in its own market. And while we have looked at other indicators over our history to make sure that tournaments are contributing - one that we haven't really focused on - to the extent that we believe we should, is the importance of the gate or attendance. And so the Board has adopted resolutions which will take effect in January on the tournaments, which establish a minimum attendance requirement for ATP Tour events as well as minimum attendance requirements by event on their weekends. To put this in a broad context, in the development of the Tour and its approach to looking at improving professional tennis, in my mind, the first few years were very heavily focused on the operations. The emphasis, in part, I think, by players was on making certain facilities - the quality, the lockerrooms, press rooms, the physical aspects of the conduct of events was at a very high standard. For those of you who followed the Tour for years, I think can appreciate that significant progress was made. About two years ago we focused on - and at the end of last year, past resolutions which were designed to make a real difference in the way the game is presented on television. Those rules take effect in January 1996. I will mention later about the agreement we have made for the future to incorporate those rules and I think they are going to make a difference in the way the game is presented on television in the way it is appreciated by fans. This third initiative, sequentially, I think will also make a difference. We recognize that the strength, the attractiveness, the appeal of the game, is affected by every tournament on the Tour and we think that by focusing the tournament's attention on this important factor, they can do better at every level and ultimately tournaments which cannot meet what we think is the appropriate, at least, minimum standards for attendance, will not remain as part of the Tour. This is a constructive thing. It is not going to have an overnight effect on tournaments, but I think it will make a difference in the atmosphere on site at every event on tour in the future. Financially, the Tour had another solid year. We experienced our sixth straight year of growth in gross revenues. The cost of producing those revenues and our appropriating expenses in real dollar terms, were reduced from 1994 to 1995 and as a result, the net revenues available for distribution to the players and tournaments increased by about 14% this year. To us, at least a very significant additional accomplishment was that we changed the way we do business in a pretty fundamental way. We have been represented by IMG for the first six years of our history. From my perspective, it was an excellent partnership. They performed well. The Tour felt that we needed to shift to some extent, the emphasis from the dollar to our goals for the promotion and growth of the sport. We felt that if we were going to do that, it was imperative that we sell our own marketing sponsorship television rights and deal directly with our prospective business partners. That has been the case this year in making arrangements - which I will discuss in a second - which will carry us through the year 1999, and it has made a difference I can tell you. While it is clear that we discuss dollars and cents, there was substantially more discussion from the first conversation with each of our business partners about our communications and marketing plans designed to grow the sport, and the emphasis was on matching our objectives to the prospective broadcaster or sponsor perspectives - not simply to conduct an auction, but to look at how we can work together to grow the sport and I believe that all of our future business relationships will reflect that as time goes on. Those efforts in 1995, in fact, have been successful and have been put into place for the Tour, the building blocks, the important components with which we will build the future of the sport. The rules in television which I talked about, same-day exclusivity; limits on delays and reruns; emphasis on production, at least minimum standards for all television on the Tour, have made a difference and have helped us reach television agreements for the next four years. We really had been able to establish a worldwide unwired network. If you think about our arrangement with Eurosport, with ESPN, and ESPN 2 in the United States and ESPN Internationally, we basically cover the globe and we have also kept the ability to go back and to work with major national broadcasters, like we have announced and we have succeed in doing with ZDF in Germany to focus their attention on the most significant matches and the most significant events. We believe that that really will help us present the sport in the best possible way and I think it is an important improvement for the future. I'd like to just say thank you and introduce Daniel Chambon who represents Eurosport. Thank you for being here and we look forward, in front of all these people, to our collaboration over the next four years. Our strategy to broaden the game appeals to kids and will take another leap forward, I hope, in 1996. In addition to the players having agreed here to extend again their commitment to the Kids's Fund, so their money, prize money, will be reduced by one and a half percent at each tournament played to provide the initial funds for the Kids's Funds activity, we hope to, through sponsorships, sales, and contributions to tournaments, expand significantly the scope of that program. You know that that is FanFest, Smash Tennis, and Kids' Day on-site at the tournaments. But we also are going to take another initiative or go forward with one other initiative. It has been rumored about the press and I am going to tell you a little bit but not all about it. The Tour has reached an agreement with the international recording star Seal. He is going to give us rights to one of his most popular songs and he is participating in the creation of an advertising and promotional campaign. He is a world class tennis fan and he wanted to be involved. So, we have had film crews at his concerts and all over the Festhalle - if you haven't seen them this week - and they are producing a campaign which would be launched in the spring which, we think, will reach the MTV generation in a precedent way for tennis and will also be available for use by all of our other broadcasters to really begin to -- it is one other step in our efforts to broaden the appeal of the game to kids and I think it will make a difference beginning next year. One of those other future agreements which has been reached, which we will be talking more about undoubtedly, is the agreement, vis-a-vis the World Championships, which will move next year, as you know, to Hanover in partnership with Expo 2000. It should be absolutely clear, we have really loved our experience in Frankfurt. We think these six Championships have been superb and set a standard which would be very difficult for future cities to meet and exceed, and yet, in their own way, we think that the opportunity for the people at Expo 2000 and tennis fans in Germany, is real; that they can do that. They will put their own special mark on the event. They have fantastic plans to add other elements and dimensions to it. And we think the feeling at the event won't be the Festhalle in Frankfurt, but it will have its own character and will contribute significantly to the importance of the event and its growth. Equally important, it is not just an arrangement which provides for a place to play the World Championship, it is a marketing and promotional relationship with Expo 2000. We think that Expo 2000 is a significant opportunity with the ATP Tour to work hand-in-hand, to make both their event, the Expo in the year 2000 and the ATP Tour World Championship will be better known around the globe and their commitments and their ideas about ways to produce that sort of public awareness campaign for four years is exciting to us and one which, I think, you will appreciate better as it rolls out beginning next year. I think, without a doubt, the most significant accomplishment of last year which will have effect in the future is, as mentioned, our relationship with Mercedes-Benz. Mercedes-Benz, for me, is a match made in heaven. Let me take a moment just to introduce Prof. Dr. Winkler, if you could, maybe just wave to our friends and Martin Geers representing the corporation. I think Detlef Gobels, a friend of ours from Mercedes is also in the room. As I said from the very beginning, the discussions were about how did the organizations fit; what do you want to accomplish; and how can we grow the game. I believe that the plans are in place to do that. Mercedes is a company that has incredible worldwide reach; and everywhere it reaches, it means quality. That is a relationship we want to be a part of. Mercedes wanted to include as many tournaments as possible and will be involved in something like 60 tournaments next year in the first year of the relationship. It will grow in future years. They will place a special emphasis on our Super 9 events, which I think will help us accomplish some of our marketing objectives for those tournaments; to create special awareness internationally for the top class of ATP Tour tournament and they will invest their marketing, communications, and advertising resources to help not only accomplish their goals in the marketplace, but also help us do what we want to do to grow the game. So, in many respects, I think 1995 was important and successful for us. I think it was a year of transition. We can now see our way pretty clearly through the year 1999, the rest of the century and we are excited about our prospects for future growth. Those really conclude my comments. Don't run off because there is going to be a little Lufthansa drawing, which some of you are looking forward to the results of, but before we do that, as usual, I am happy to take any questions.

MARK MILES: Two different standards will be applied - and I want to stress, while it is a rule, the philosophy of the Tour Board is that these are standards and this is to change focus; apply emphasis, more than being sort of punitive. But the idea is to take each of our World Series Championship Series and Super 9 categories and to have a minimum total attendance for the week level, which varies for the three of them. Ultimately, we think the minimum level ought to be 17,500, but in transition for 1996, it will be 15,000 for the smaller tournaments. We think all of our tournaments can reach that minimal objective. We recognize there is a difference with the populations in different markets, but we think in the end, every ATP Tour event has to be successful in its own market to maintain the standard for the top level of the game and we want to get each tournament to that level. At the same time, John, there would be a second standard which is about the percentage of your stadium court capacity for the weekend reaching about 75% of that capacity over the weekend. It is written more artfully than that. Obviously, the Tour Board would have to take into account rain, fields and the like. It is not a black-and-white-make-it-or-you-are-shot sort of approach. It is constructive and would be implemented over time. Other questions?

MARK MILES: No.

MARK MILES: Chang is 29. What this does is grandfather in the longest racket on the circuit today, but ensure that the industry understands we are not going further unless there was agreement in the future. I think I said it clearly to those of you who speak with us most often, but just to emphasize, this is the Tour Board's position, statement, which is in support of what the ITF is trying to do. We think it is important if we can do it that we all move together in this way, so, we don't want to get ahead of anybody. It is a statement of support for the direction that I think the ITF is headed.

MARK MILES: I do think the last point is a good one that the ITF and we have worked for a consensus in the industry to try to make this evolution in regulation work. We will talk with Brian about that. We want it to have effect as soon as possible and we felt that by taking this position here in concrete form, it will serve notice that at least with respect to the Tour we are eventually going to do that. We would like to do it in sync, timingwise, with the ITF.

MARK MILES: Right, again, our approach will be to have another set of conversations with Brian and if -- we will have the quickest possible implementation date.

MARK MILES: I think a lot of progress has been made this year on an informal basis by the Tour's focus on it. We began to talk with you about it at this discussion last year, and in a behind the scenes way, worked very closely with manufacturers and the tournaments. In the principle, if I can call it that, indoor season in Europe in fall, I think we really saw four different -- not more than about four different surfaces. And the vast majority of the tournaments really used one of the two surfaces that I alluded to earlier. So great progress was made on an informal basis in 1995, but we think there is still a need to go a step farther and that is because of more mundane issues like wear. You can improve for use a particular surface, but if it is used too long or if it's stored improperly; if it's flipped over before it is put down; if the subsurface isn't right, can still have pretty significant differences in play which cannot only affect the player quality, the level they play, but also the speed. So by having one or two approved approved surfaces we think we can work in a very concrete way with those manufacturers or that manufacturer to provide for the implementation of it as well.

MARK MILES: Well, I think first there is an emphasis on the Super 9 which is another category tournament that many of you are focusing on; fans are beginning to get as a concept. And I think that is helpful. But to the point, the Tour Board has had three special meetings this year as far back as February to take a good look at it and that process continues. I think it is too early to tell exactly what will come out of it. But we realize that there hasn't been structural change in the circuits since its founding in 1990 and if we believe there is a way to accomplish our goals, to grow the game, which requires changes in the calendar, we will make them. It takes some time, as you can appreciate, to make any significant changes, in particular. So I am not going to give you much more for shed on that. But it is fair to say there were three special meetings of the Board just for that purpose this year and they are ongoing.

MARK MILES: Yes and no. We are trying to work very closely with the industry and local organizations; whether it is in the United States, the USPTA, the Professional Teachers Association which was involved in every one of our Smash Tennis Programs, or more typically in Europe dealing with the Federation where they are very much involved. The objective there is to provide the kind of bridge, the opportunity for the grass roots level of tennis to get their arms around these kids when they show up for Tour sponsored promotions. I think that is working. It is difficult for me to quantify exactly what the retention rate is, if you will. But that is there. In terms of money - we have limited resources in spite of some perceptions and we don't think we can fund, on a worldwide basis, grass roots programs per se. We believe the Tour's best role is to work closely with the other organizations in the grass roots and the federations, and to use the excitement, the appeal of the tournaments and the top players in the world to attract kids and then get them excited about the sport and then, in a way, try to hand them off to local programmers at the grass roots level. I think it has worked pretty well, but we look forward to expanding that with other federations and other organizations around the globe.

MARK MILES: No. Actually, I think it has been two years since we past what we call "out of competition testing." We are at least in the second year of that. I am not certain whether it is three or not -- it is two years. We pick a percentage of the top 100 players in the world, about 10% of them, so obviously, that is about 10 guys, who do not know who they are; only the administrators of the program do and they are tested without prior notice at a competition, wherever that might be; at home; practice, or otherwise. Obviously, the vast majority of the testing is on site at the tournaments, again, unannounced.

MARK MILES: Well, it is a discussion we have had for a long time. Honest people can disagree about how it counts. It counts if they don't win points. Your question desires -- has the desire for some kind of penalty when they lose. Our concerns, again, are that the ranking system be accurate and we think it is. That the ranking system not discourage play. I mean, there are examples that some of you can cite certainly in the history of men's professional tennis not so distant, but certainly in women's tennis which has an average system now; where women have sat home in the last year or two and watched their ranking go up. We think that is a bad system in and of itself where a player can sit out for a month and watch their ranking improve. So we don't want a system which discourages player and encourages what used to be called icing your ranking - to take from hockey. But as I said to you last year, we also care about the perceptions and if in fact over time the public has any doubt about the intensity of competition, then that is something we have to address. And we worked hard this year to understand exactly what players think and tournament directors and some of you, probably harder than anybody else has, and in March of this year we surveyed not through some kind of quick forum, but through individual discussions, the top 100 players in the world and they were split evenly. I mean, split at every level - split in the top 10 evenly, split in the top 25, top 50 and top 100. So it isn't fair to say the top players demand this. Half the top players demand it. We have looked at other alternatives. I mentioned in an interview about a week or so ago one of them that does get attention is and has been the subject of discussions between ourselves, the Grand Slams, the ITF, and internally, is the possibility of some kind of a race, some kind of an annual points ranking. The primary motivation for that, for me, is again, we must have accuracy. We must not have a situation which is an incentive, in effect, not to play. But I would like to find a way to make the ranking system easier for fans to follow, while doing those first two things. The concept of a race is appealing in many respects - the devils and the details - John Parsons and I could each give ten reasons why you have to be very careful with an idea like this. We don't want a system which encourages too much play, which encourages or rewards quantity of play over quality of play. So there are concerns about the concept of an annual calendar race, but a fair amount of work is going into seeing if those things could be addressed. We wouldn't make a radical change like that without being very comfortable that the potential negatives could be overcome. Other questions?

MARK MILES: The Prague event made a request because it found itself right in the middle of the Olympics and we had an opportunity to move it to what was the Madrid week. For those of you who know the calendar off the top of your heads, that was approved for 1996 because of the Olympics. It normally would go back to that slot for 1997. But we have not made the 1997 calendar yet. It is conceivable it could move, but the starting point for the discussion is Prague is back in its old date.

MARK MILES: It is possible.

MARK MILES: That is okay, as long as it is not on the circuit. There has been a lot of discussion and I think, as John Parsons puts it, I think there is essentially a consensus. I can't tell you whether every manufacturer would support that, but I think that from our discussions, with the TIA people, the Tennis Industry Association people, they feel like they have achieved a level of consensus.

MARK MILES: I personally can't give you the science for it, but I think there is a belief, broadly, that the speed of the game can be affected by the length of the racket, yes. And again, that is a concern. We believe indoor tennis, in particular, can be a very appealing part of the game. We have seen it at its best in terms of speed and it works and it is great tennis. We want to make sure we deliver that level of sport every time we play indoors.

MARK MILES: The question is not one of fashion, it is one of conditions and being able to see the ball.

MARK MILES: I hadn't heard that. So we would have to take a look at it. I have not yet heard a complaint that any particular apparel in the last year, for example, has made it hard to see the ball. In fact, I had a discussion with a couple of players about the question that was brought up in another context and they said that while colors in the back could make a difference, the color on a player presumably because he is usually closer has historically not made much of a difference, but if that is new news, we will look at it.

MARK MILES: We did it already this year; didn't we?

MARK MILES: That wasn't the question I thought you were going to ask.

MARK MILES: So you get another one. My understanding is that the rules allow for tennis apparel which is especially made for tennis and that the approach our administrative regulations has taken is not so much about whether it has a collar or not, but whether or not it is a tennis shirt. And obviously, that definition can vary and certainly has changed for us over the last several years. We want -- By the way, that shirt, just to finish the thought, has been viewed as not just a t-shirt like my son might buy off the rack, but a shirt constructed for tennis. David Cooper can sit down with you and show you the shirt and tell you why we do it that way. What I want is tennis to be a hot sport and to be appealing. Obviously, the same shirt, the same fashion isn't going to appeal to all people. We don't want it to look like the practice courts, to be sure, because it is our competition, and it needs to generate a certain seriousness - the look of a certain seriousness. But I also think it is important that the manufacturers be able on the Tour to display their garments to the tennis industry, which the tennis industry demands - wants to buy. And there will continue to be some standards in that regard, but apparel which helps with the popular of the sport, I think is a good thing.

MARK MILES: If it needs to be clarified, yes. We meet regularly with the industry and as between the Tour and the manufacturers, I don't think there is any confusion.

MARK MILES: Well, he knows the answer, so that is why -- if the question was when are we going to not have the men's and women's World Championship in the same week, the answer is next year. In 1996, as most of you know, that won't happen. But I can't take credit for it as I would like to, John.

MARK MILES: Unless the women are moving, I believe that is the case. Let me put it this way: The ATP Tour World Championships, doubles and singles, the order will be reverse and the World Championships in doubles will be the week before the singles. I thought that that would led to a change. No.... Larry is shaking his head no. Sorry, John.

MARK MILES: We switched and to no avail.....

MARK MILES: If we did it the same.

MARK MILES: We plan to switch back.

MARK MILES: Good, we will pop the cork together. Any other questions? Thank you all very much.

End of FastScripts….