ATP Tour World Championship

November 24, 1998

Daniel Beauvois

Mark Miles

GRAEME AGARS: Ladies and Gentlemen, if I could have your attention, please. Welcome this morning to this ATP Tour announcement. I'd like to introduce en masse, the Super 9 tournaments; we call them the Handsome 9. Also Daniel Beauvois, representing ISL and Octagon. This man over here you know is the CEO of the ATP Tour, Mark Miles. With no further ado, I'd like to hand it over to Mark to get it underway.

MARK MILES: Charlie Pasarell is actually one of the Handsome 9 or Gorgeous 10, including Jane. We have two representatives from the Canadian Open with us. He is concluding his regional meeting of Americas Tournament Directors, but I'm sure he'll be here to join us shortly. Shortly, we're about to see some great tennis. We think it will be appropriate to turn our attention to the sport on court. But we thought we'd take a few minutes before the balls are hit to make a couple of important announcements, specifically about two new agreements which represent I think important developments in the business of the Tour. The first is that the ATP Tour and the Super 9 tournaments have, in fact, formed a joint venture for the unprecedented long-term pooling of a substantially larger package of our commercial rights than has been possible before. This new joint venture will achieve four principal goals: First it will allow for the creation of a new, strong brand of men's professional tennis, composed of the properties of these nine tournaments behind me, and the ATP Tour itself. They will be identified as the elite level of this game. Second, through the control of the substantially increased package, or bundle of rights, we'll be able to attract more global sponsors who will invest in the promotion of this sport. Third, it will enable the Tour and the tournaments much more flexibility to create a common, easily recognizable look for this series of tournaments so that fans better understand what they're seeing. Finally, we're confident that this will ensure the ongoing financial growth of the Tour and the tournaments. The second agreement is that the ATP Tour and these tournaments have signed with ISL and Octagon a new agreement which gives ISL and Octagon an exclusive period to work with the Tour and the tournaments to create a marketing plan and to assemble this substantially increased bundle of rights. The new agreement represents a substantial increase in the rights that will be pooled, compared to the original partnership which we announced to many of you in our first agreement with ISL and Octagon at Wimbledon last July. In addition to what was announced then, the international television rights and limited event signage at these tournaments, the new pooling includes also their domestic television rights, international licensing, sponsorship and related hospitality rights. These new agreements make the strongest possible statement that our tournaments want progressive evolution, rather than revolution, in the development of the men's professional game. And we're convinced that ISL and Octagon bring the ideal combination of financial strength and marketing expertise to make this project a significant success. To hear from more than just me, and before we get to your questions, I'd like to ask our colleague Patrice Clerc to stay a word on behalf of the tournaments.

PATRICE CLERC: Thank you, Mark. Well, I just want to say that we, the tournament directors of the so-called Super 9, we are convinced that this is a strategy to follow, pooling our commercial rights. I mean, we are an international sport, and that requires a global approach with the appropriate partners and sponsors. It's not only for financial reasons; I think it's also the way to follow in order to better communicate in our sport on a worldwide basis and also to better promote.

MARK MILES: Thank you, sir. Just what Sergio Palmieri would have said. Now I'd like to ask Daniel Beauvois, who is Managing Director of ISL Television, to make a comment on behalf of ISL and Octagon.

DANIEL BEAUVOIS: I am not only representing ISL but also Octagon. As you know, I have signed a joint venture agreement with the ATP four months ago. The last four months we have worked extremely hard, together with the ATP and the Super 9 tournament directors to come to the stage we are in today, which is in the pooling of most of the commercial rights of these tournaments. We are extremely excited about this opportunity. We believe it's a very bold and very strong step and very strong signal that professional tennis is making today. We believe it's going to give the sport of tennis a new dimension and we're looking forward to a great partnership.

MARK MILES: I'd be happy to take any of your questions.

MARK MILES: We think it means that they are going to more clearly understand the structure of the sport, the structure of the men's professional circuit, the Grand Slams, the soon-to-be-renamed group of our elite tournaments, these nine, and the World Championships, and how they fit their premiere status in juxtaposition to the other tournaments on the Tour. We think it means that we can bring, as we said, more sponsors of a global nature, like Mercedes-Benz, to support these tournaments in common, with their financial resources and marketing abilities, do a much better job of projecting the game through our best product of these elite tournaments to the public.

MARK MILES: John, there are really two agreements. The first is intramural with respect to ISL and Octagon, between the Tour and the Super 9, which says, Look, in the past, and through Wimbledon, the tournaments had agreed to pool essentially their international television and one sponsorship through the Tour. Now we're stepping forward and collectively putting to the market all the rest of the important international sponsorship rights, which they've owned individually. The first agreement said, We're all going to do that together. As shareholders in this new structure within the Tour, we're going to come to terms with how we'll manage that process. That's ongoing. It's the formation of a corporation that doesn't expire. With respect to the ISL and Octagon agreement, the final term is not set, but I think that the expectation is it will be pretty long-term, could be something like ten years. With respect to other interested parties, I guess we would say that we've been not surprised by the level of interest in our sport. Our sport has enormous strength and popularity, and yet untapped potential. To any of those who think that they can add value, there may be a role to play. We think with ISL and Octagon we have the ideal partner to market the game in terms of their financial resources and their marketing expertise and their global abilities. But if there's a better idea, I'm sure that all of us are prepared to hear it.

MARK MILES: There are still, at some level, ongoing discussions about the possibility of the year-end events being combined as a first step. I think that there is the possibility of combining one or two more of the tournaments behind this in the next couple of years. There's no announcement to make in that regard, but both with respect to the individual tournaments and the WTA Tour and ourselves and the WTA, those conversations at some level are ongoing.

MARK MILES: We're going to have much more to say about that with them later this week. I don't want to steal our own thunder for later in the week. At this point, I would simply say I think we've tried to make it clear over time that we believe one of the essential elements to promoting our sport is to work together in the promotion of this sport, to see it as our common property, and to get past the days when it appeared that we had more differences than consensus about moving forward. I'm sure that we have a common agenda in that regard now. I think we'll have some specifics for you at the end of the week.

MARK MILES: With respect to the period, it will take as long as it takes. These guys each have over the years made their own commercial arrangements. So at any one of the tournaments, they might have any number of sponsorship and licensing agreements and/or television agreements which have different terms, at each of them. Noow multiply it by all of them. It's a complex undertaking to go tournament-by-tournament and to understand exactly what can be sold in which years, how far we can go, how fast, and to put values on that. I think you're talking about taking into the beginning of next year to have all that information and that marketing plan done. What was the second part?

MARK MILES: With respect to the other tournaments, that's something that we all as a group with ISL and Octagon will discuss. Without question, there is a role for the ongoing promotion and exposure of the other events on the Tour. Our thoughts are generally to have something like the same number of tournaments at all levels of the Tour involved in our packaging as we currently have.

MARK MILES: It is right we are in lock step, and there are ten of us, the Tour and the nine. That is indefinite. It is not with a limit as to the term.

MARK MILES: We're not to the point of bidding. One of the things we've got to finally reconcile before we can get into the marketing detail is the extent to which we'll bring the sponsors to that party, to that final event, or they may have some opportunity to exploit sponsorships. You have to have a handle on that before you can actually bid. I can tell you almost on an unsolicited basis we have what I think are very interesting prospects from two major European Capitals, two important US Capitals, and at least one active prospect that's pursuing us in South America.

MARK MILES: I think at this point our view is as it was the last time we talked, that it will either be every year or every couple of years. That's something that we'll finally arrive at as we get into the detailed discussions in the marketplace. We think it's important to find a way to move it from region to region. So whether that's every year or every two years, I think it remains to be seen.

MARK MILES: It means all of that.

MARK MILES: Especially with Octagon and Frank Lowe and their branding expertise, and the considerable international event expertise of ISL, we're looking at it from top to bottom. But you will come to the event, you will turn on the television, and you'll know this is part of a brand, that this is the elite class, and that all of them have that in common. Obviously "look" - broadly defined - is one way to establish that. There may be other possibilities with respect to what Octagon calls visual imaging systems, from music - not on court, but on television - as kind of a theme, much as you see in the Champions League, and other elements: maybe even some differentiation in format of the competition. That's possible. I'm not going to say much about that now. We've got until 2000 to finally decide about changes like that. But we will make it as distinctive as possible so that the fan knows that the whole group is the highest level of tennis.

MARK MILES: It will be changed. Exactly to what, we'll get back to you on.

MARK MILES: Talk to one of these guys? Well, Mr. Tiriac had his shots today, so you ought to be careful about approaching him. No, here they are.

IAN TIRIAC: You can bite me even if you have rabies. There's a week in front of me; a lot of people are going to bite me.

MARK MILES: I think they're accessible without filter.

MARK MILES: One of the things that we are looking at is the question, from a broadcaster's point of view, how do we make our sport as important as possible, as user-friendly as possible, while protecting the integrity of the competition and the traditions of the sport? One of the issues that you hear about from broadcasters, particularly the most major national broadcasters, is the variable length of the match; not knowing whether the match is going to take 50 minutes or two hours and 50 minutes makes it tough to program. Insofar as we're determined to make our sport as appealing and powerful in the marketplace as possible, we'll look at that, and there may be some way to address it, again consistent with keeping the values and traditions of the sport.

MARK MILES: Well, I think there are a number of constituencies. One of I think the important developments symbolized by this group assembled today is that they, with the Tour, are prepared, I think, to be more outspoken inside the Tour's decision-making process, and to really be stronger advocates for change. Obviously, players play this game. They've got a lot at stake with respect to how the game is played; they'll have a lot to say about it. That's appropriate. But I think we found nobody's interested in change for change's sake. Frankly, for most of us, and certainly for players, abolishing the let is an example of that, which has been knocked back, because we don't see it as making a difference. To us, it's without impact, so why change the way we play that part of the game? But I think with respect to player commitment, the race, ranking, things like that, I think potentially other adaptations which will help with the presentation and marketing of the sport, players can be persuaded.

MARK MILES: I think that's true, Rino. You can't reinvent a system every year or two years, or you never have a system. But I think we feel confident that with the commitment of the group to provide the media, the resources, the sponsorship, the promotion, to convey what we want to do to the public, and with the expertise of Octagon and ISL as branders with enormous success and credentials in that regard, we will come up with a comprehensive set of nomenclature. Frankly, today who knows what is World Series and what's Championship Series and what's Super 9? Nobody. We will come back with a scheme, a nomenclature, a system that you and the public will understand (snapping fingers), and that will stand the test of time.

MARK MILES: I think if you read the transcript of what I said, we won't be so far apart. We want to see if we can address the concern, which is real and which affects the number of people who can watch tennis on television at some point. We want to address that concern while maintaining what we think of as the inherent strengths and character of the game that brought us as far as we've come.

MARK MILES: I don't think we've really had that full-blown discussion yet. I think among this group, that's one of several topics that they're considering and working on developing a point of view about. I'm sure that if you ask for a show of hands, you'd get some yea and some for nay with respect to the possibility of no ad. It is something with the ITF is being tried next year as a kind of demonstration at satellite tournaments, so there's certainly some interest in seeing how much it is heresy. I suspect among this group it's a mixed bag at the moment. We haven't even begun really to call the question more broadly. Again, with respect to 2000, we feel like we have a bit of time for that.

MARK MILES: No, I don't think we've gone beyond the point, again, with the ITF of addressing any aspect of the game. I mean, at the moment, recognize that there are limits. You may wish to see them rolled back. That's another issue. But it's not to say that a player can go out there with any length racquet.

MARK MILES: Specifically with respect to racquets, I don't think that's a front-burner issue, to be direct with you. I think that's something that, again, with the ITF, with feedback from the sport, you look at in due course, over time.

MARK MILES: Actually I think just the opposite. I'm glad you asked the question. One of the things that this says is that we are rejecting the idea that no other tournament counts, that every other tournament in tennis in addition to the Slams and the nine and the final are meaningless or minor league or exhibitions. These gentlemen I think, and lady, feel responsibility to the whole game. And we believe that you can clearly differentiate the elite level, as the Slams are differentiated at the moment, and in fact raise the importance of the entire game and create more fans for players wherever they play. We can do that without destroying the fabric of the game and the tournaments around the world. To the extent that others have proposed ideas which we think are not protective of the bottom of the pyramid, I think that's an important difference between our philosophy and others'.

MARK MILES: Yes, I think you can expect that, with the possible exception of the difference between indoor and outdoor. I believe you're likely to see 64 and not 56.

MARK MILES: We agree on that one.

MARK MILES: We certainly hear that from top players who are upset in their first match after having a bye.

MARK MILES: The question was, Let's talk money, what's the value of all this? There's been a lot written about $25 million a year, $55 million, $1 billion, $1.3 billion. You can't have an informed discussion about money unless you're sure you're talking about apples and apples. In the past, what we've been talking about was a much more limited exploitation of rights or pooling of rights, which I hope by now is understood. If we look forward and we calculate ultimately what the total value to the Tour and the nine and the finals and the additional tournaments that would be included in the commercial exploitation, what those values are as they're sold individually today, if you added it all up, it's somewhere in the neighborhood of $100 million a year. If, for example, this became a ten-year deal, in sum you're talking about in that ballpark of $1 billion over that period of time. You're right, our expectation is it's more valuable done collectively than it is individually, so we expect growth. You can't put an annual price tag on that if you're serious, unless you know exactly in what year, which of those rights can be pooled and what existing contracts which must be honored until they expire, what they are, what they restrict, and when everything is ultimately free. So part of this process in the next several weeks is to in great detail understand each arrangement and then pull that together in a coherent marketing plan, then you can put a final value on it.

DANIEL BEAUVOIS: As much as it takes.

MARK MILES: I love that answer. Daniel said, "As much as it takes." You can't have a final price until you have a final detail on the complexity of how to pull all those rights together over the years.

MARK MILES: That's one of those, what, anomalies for sometime we've been aware of that is being addressed in this rebranding exercise.

MARK MILES: No. I think that's part of this conversation about maximizing the power of the presentation.

MARK MILES: I'm not going to give it to you in detail at this point. I can assure you under any circumstances, the system will continue to provide a coherent ability to move from the first satellite to future, to challenger, to the lowest level, first level of Tour events, to Grand Slams, in a coherent way for players. There must be mobility in the system so that young players can move up, and we can do that in a way that the public can follow.

MARK MILES: If they're good enough to get into the event. They've got to earn their way up through the stair steps of categories of tournaments to get that opportunity. But, yes.

MARK MILES: Happily, to create this company, it did not require any significant investment on our parts because the nine and the Tour represent established valuable assets. What it is, is the pooling of those rights, making them available, so they can then be exploited in the marketplace. Doesn't require writing checks to us to get started.

MARK MILES: I meant to say that with respect to how the circuit is going to work, that decision has been made, and there isn't any doubt about that with respect to the Tour and these tournaments. With respect to adding value in the merchandising of those rights, as pooled by this group, on this group's agenda, and put to the market in a way we wish to put it to the market, if there are other opportunities to add value to this team, then we're open to hear it.

MARK MILES: I can't speculate what form it might take because it's not a real conversation. But, sure, in some way, investor, partner, exploiter. I want to emphasize that we think ISL/Octagon have all the attributes, financial, technical expertise necessary to do this job.

DANIEL BEAUVOIS: Well, we have signed an agreement, so we have made the decision collectively that we want to work together. As Mark explained, we don't really know what we're buying because the other party doesn't really know what they're selling. This is the process we're going through. We have made the decision that we're going to do something together for the exploitation of these pooled rights, but we need to define very clearly what the pooled rights are and as of when they will become pooled before being able to fix a price on this package. Now, I fully share Mark's view that these rights are going to increase dramatically in value by the very fact that they will be pooled. We think that having ten tournaments, the Super 9 and the World Championship, competing against each other for sponsor money is detrimental to the value of the contract that is signed, or for television money. And by pooling, we really think we can bring a whole different type of sponsor, global sponsors, offering them a property which is going to be of interest to them. That's not enough the case in tennis today.

DANIEL BEAUVOIS: We will either do it for a long time period or not do it at all. My feelings, my intimate conviction is that we will do it together for a long time.

MARK MILES: That's a question that is being answered as we work out the first agreement, the joint venture agreement; in other words, how this group as a corporation within the Tour will allocate revenues. Clearly, none of them are in this to take less than they're getting today. The question is, how do you share growth? Exactly how that works will be addressed in the final shareholders' agreement. I think it is likely that in the initial years, allocations will be made in a way that largely reflects their individual values today. So when there's growth, it's more likely to be shared on a kind of pro rata basis based on their relative values today. Over time, as you get to higher and higher levels of revenue, I think there will be distribution changes where they're treated more like equal parts for purposes of distribution. Thank you, very much. To the tennis.

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