Where the Australian Open's A$44 million purse fits in sport's global prize battle

Game, set, cash?

Sport is a big and complex business these days, and for many organisations that means the pressure is on when it comes to handing over the winners’ cheques.

The 2015 Australian Open tennis tournament drew some pretty big numbers: more than 700,000 courtside spectators, 13 million viewers across the country and countless fans tuning in from all over the world. The most impressive figure of all, however – and the one that surely captured the attention of players as much as the ball – was the A$40 million purse. 

The Australian Open now offers the richest prize money in tennis history – a sum that has effectively doubled since 2007 and one that has been boosted again to a staggering A$44 million for the 2016 Open.

Part reward for sporting excellence, part enticement for players and their entourage to make the long journey to Australia, the huge figure is also a consequence of gender equity in prize money and signals the willingness of business to back the popular sporting event. Major sponsors include Emirates, Rolex and ANZ, as well as Korean car company Kia. (Full disclosure: CPA Australia is a sponsor of the 2016 Australian Open.)

Eyes on the prize

Sport can be just as competitive for international federations as for the players on the court or field. This plays a role in how prize money is calculated.

In events such as the US PGA Tour, individual tournaments compete to raise the most enticing reward for golfers and also receive a significant leg-up from the tour’s organising body. All the while, golfing events around the world shell out appearance fees for big-name players that can boost spectator numbers and the interest of sponsors.

Tennis also faces tough competition. Jeff Borland, sports economist with the University of Melbourne, says the Australian Open’s lavish prize money helps to attract the best players and gives them an incentive to perform. That ensures the tournament stays cemented in the international majors tour, a long and proud tradition. Borland also notes that Asia’s development inevitably leads to suggestions of an Asian Grand Slam tournament outside Australia.

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“I think the Australian Open felt a bit of pressure to get to the top in terms of prize money,” he says.

Craig Tiley, Tennis Australia CEO and Australian Open tournament director, explains that the prize money has increased by 5 per cent to 15 per cent annually over the past few years, depending on factors such as the Australian dollar and the cost of travel for players.

“In the past three years, there have been substantial increases and the Australian Open has led the way,” he says.

“I’m of the belief that for professional tennis to be really healthy, you have to pay players well.”

Finding the numbers

The calculation of prize money for major sporting events varies according to the sport and, in some instances, the country in which it’s played.

About 60 per cent of the prize pool in the US PGA Tour, for example, is derived from broadcasting deals. Much of that comes from sponsors, with some paying as much as US$8 million a year for events that are televised on NBC and CBS. The US PGA Tour then hands out more than half of the prize money for each individual tournament.

The 2015 Players Championship in Florida had a purse of US$10 million, with winner Rickie Fowler taking home a handy 18 per cent – or US$1.8 million.

In contrast, Australia’s premier golfing event, the Emirates Australian Open, must raise its A$1.25 million prize money on its own.

“When you see prize money of US$5 million on the US tour, the PGA Tour is supplying about 65 per cent of that,” explains Trevor Herden, championship director at Golf Australia.

“It would be great for us to play for A$4 million, but we’ve got additional costs to those in other parts of the world.”

Herden explains that Golf Australia must pay for its own television coverage, which eats into the prize money budget.

“The cost to do a four-day live broadcast is well over half a million dollars,” he says. “When you start adding up the other expenses like venue fees, catering for players and appearance fees, the bottom line gets depleted.”

Tennis Australia’s Australian Open, on the other hand, derives its greatest source of revenue from media rights. It sells rights to international broadcasters such as ESPN and Eurosport, as well as to domestic broadcaster the Seven Network, which pays more than A$40 million a year for free-to-air, pay television and most digital rights.

“When you start adding up the other expenses like venue fees, catering and appearance fees, the bottom line gets depleted.” Trevor Herden, Golf Australia 

At an elite level, Tiley sees Tennis Australia as primarily an entertainment and production company. In addition to sponsorship dollars, the organisation raises funds through hospitality and ticket sales and invests the money back into the game and the ever-growing prize pool.

“It’s a significant amount,” says Tiley of the prize money, “but we think it is a deserving amount.”

Equal pay for play

The Australian Open introduced equal prize money for all rounds in 1984, some 11 years after the trailblazing US Open. Wimbledon and the French Open followed suit in 2007.

Pay equity in tennis remains controversial, largely due to the fact that men can play up to five sets while women play up to three. This controversy may account for the Australian Open’s policy reversal from 1996-2000, when men were again awarded the greater share. 

Dr Michael Burke, sports ethicist at Victoria University, sees little logic in the argument for paying women less prize money than men.

“Arguments are that women’s sport isn’t as entertaining, women don’t work as hard in their sport, women aren’t as popular and they can’t get endorsements and sponsorship,” he says. 

“The history of indirect discrimination has prevented the development of a market and of patronage for women in sport.”

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Burke adds that the endurance argument doesn’t stack up.

“You don’t pay a marathon runner 420 times more than a 100m sprinter,” he says.

“Entertainment in sporting events is not related to the length of an event. It’s a stupid argument that’s easily broken down, and thankfully the world tennis associations have realised it.”

Tennis Australia CEO Craig Tiley notes that women represent half of all tennis participants and that equal pay is important to the game.

“I think that the argument against equal pay is often disguised in self-interest,” he states.

“We’re very happy that we run a global event with the best female athletes and the best male athletes. Whether competing for three sets or for five sets, they will be paid the same for winning their match.”

The bucks don’t stop here

Sporting prize money represents a fraction of the earning potential for some of the world’s most talented and popular players. The big bucks come from endorsements and sponsorships.

Tennis superstar Roger Federer knows this better than most – he earned US$9 million in prize money over the past year, but his endorsement deals with premium brands such as Nike and Rolex added an extra US$58 million to the coffers.

Serena Williams, on the other hand, has earned US$11.6 million in tennis winnings and US$13 million from sponsorships and endorsements over the same period, despite having four more Grand Slam titles to her name than Federer.

Sports economist Jeff Borland says top players can command greater endorsement fees and sponsorships because their global stage is now so much bigger.

“It’s largely due to the explosion in broadcasting in the past 20 years,” he notes.

“Now you can watch the NBA or the Premier League from anywhere in the world, and this means that players in these competitions are recognised around the world as the best.

“Nike doesn’t just use a [NBA] basketballer to advertise shoes in America; it uses them to advertise in Asia, Australia and everywhere in the world.”

This article is from the December issue of INTHEBLACK

Tennis is a lucrative sport, and not just for the prize money!

Tennis is a lucrative sport, and not just for the prize money!

December 2015
December 2015

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