A look inside the business of the Australian Open
A look inside the business of the Australian Open
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With the Australian Open (AO) tournament less than a week away, here’s a look at things beyond the baseline.
Article includes: AO’s financial performance and economic impact, new and renewed sponsorships, the changing sponsorship landscape for tennis, media rights and partnerships, non-traditional revenue streams, the future of the Australian Open.
The Australian Open is a $500m+ tournament and wants to become a $1b tournament
The AO currently generates around $500 million in revenue per year and is aiming to reach $750 million revenue within 5 years.
The CEO, Craig Tiley believes that:
“…this organisation can be a $1 billion company in the future”
Like any other sport, the tournament relies on traditional streams such as broadcast, ticket sales, merchandise and sponsorship which provides substantial revenue.
Key to this are recent deals AO have secured, such as their lucrative 5-year, $107 million sponsorship agreement with Kia, and their 5-year, $425 million media rights renewal with Nine.
In addition to its traditional revenue streams, the AO has introduced several new innovative programs and projects that generate new revenue streams - more on this below.
It’s costly to host a Grand Slam tennis tournament
Although the AO’s revenue’s are high and generally increasing YOY, so are its expenses, and the event has faced financial battles over recent years due to the pandemic.
AO’s recent financial performance summary:
2020 & 2021: $100 million+ loss (combined)
2022: $4.4 million profit
2023: $62 million profit
2024: TBC
In 2020 and 2021 the tournament was significantly impacted by the pandemic and major losses were suffered. The exorbitant covid-related biosecurity costs contributed greatly to Tennis Australia having to spend all of its $80 million of savings during this period.
In the following year, they only managed to post a modest profit of $4.4 million from massive revenue’s of $505 million, and only after it was granted $20 million in covid-related government grants.
More recently, it was revealed that they achieved a record profit of $62 million in 2023. The larger profit was largely thanks to the Victorian Government who forgave a $43 million covid debt.
Although profits have been slim, Craig Tiley has indicated that this is partly due to choice when he stated:
“We have made a conscious decision not to deliver a surplus”
This indicates that Tennis Australia is committed to future-proofing the tournament and sport more broadly by investing (sacrificing large profits) in strategies designed to fuel its ongoing growth both domestically and globally, such as:
Project funding to boost participation
Extending events at Melbourne Park in the lead-in to the tournament
Introducing initiatives to attract sponsorship and tourism from Asia
Grand Slamonomics: The tournament’s positive impact on the local economy
The Australian Open is the the biggest sports event in the world in January. In a study conducted by Nielsen Sports, 99 per cent of Victorian residents surveyed said that it’s important for Victoria to host the Australian Open each year and this is likely because it provides a strong platform to showcase Melbourne to the rest of the world.
Not only that, but the tournament also fuels the local economy and in the same survey, 99 per cent of Victorian residents recognised the support from Australian Open 2022 for local businesses and communities.
NAB estimated that the 2023 Australian Open injected $400m+ into the Victorian economy
A report from NAB revealed that the tournament’s record-breaking 2023 crowd collectively spent eye-watering amounts of money on things such as accommodation, hospitality and tourism, with $300 million (72%) of this spent on Melbourne’s bars, restaurants and fast food outlets.
In the same report above, Nielson Sport found that…
Between 2010 - 2020, the Australian Open contributed $2.71 billion to the Victorian economy
Here’s the breakdown:
2022: $267.3 million
2021: $138 million
2020: $387.7 million
2019: $347.2 million
2018: $293.2 million
2016: $278.1 million
2014: $245.5 million
2012: $239 million
2010: $160 million
Although the AO has managed to impact Melbourne’s local economy in such a positive way, a recent study claims that the Melbourne Cup Carnival contributed more than $3.6 billion to Victoria’s economy, nearly $1 billion more than the Australian Open reported for the same period. It’s suspected by some that gambling revenue is a key driver.
New and renewed sponsorships
The Australian Open has a portfolio of blue-chip sponsors that they generate large revenues from in return for exposure, association and engagement opportunities.
It’s common for sponsorship rights deals to be kept confidential however the founder of Bondi Sands, (who is a sponsor of the tournament) previously noted that:
‘To open the door you need $1 million’
To provide some further insight, in a 2023 article the Sydney Morning Herald also reported the AO sponsors’ “estimated” annual spend:
The excessive rights fee’s haven’t stopped the demand for AO partnerships however, and many brands clearly see the value in a partnership with the AO because they’ve recently been announcing a string of new and renewed sponsorships including Canadian Club, Life-Space Probiotics, Campari Australia (makers of Aperol), and Weetbix, and there’s potential that they may announce more between now and the start of the tournament.
A full overview of AO sponsors can be found here.
In addition to the above, below are some notable Australian Open Sponsorships
Last year, Kia signed a $107 million deal to extend its 22-year partnership for another five years
This deal is the biggest sports sponsorship deal in Australian history and enables them to have mass exposure across the tournament.
In addition, last year Kia supplied 130 vehicles (which included their all electric fleet) which enabled AO officials to zip around the city, showcasing their association.
The AO sponsorship has been a key part of Kia’s local and global marketing program and previously, they used the Australian Open to unveil their new logo and purpose using a 3D out of home billboard. The giant LED digital cube display featured animations of Rafael Nadal in action, and KIA’s new EV vehicle range.
“I’ve never seen that logo?” Luzhou Laojiao Guaojiao 1573
The Luzhou Laojiao sponsorship that has recently been renewed is one of the AO’s most lucrative sponsorships but its a rare one that has created a lot of conversation over recent years because no one has known what it is - Its brand has featured so heavily across the Australian Open but it doesn’t actually include Australians within its target audience.
Luzhou Laojiao Guaojiao 1573 is a type of baijiu (a strong liquor made from grain) that has virtually no brand recognition in Australia (maybe minimal now thanks to their AO sponsorship) but it’s the world’s most consumed spirit due to the sheer amount it’s drunk in China. The Australian Open sponsorship aims to enhance their premium image within the the Asian market.
New Balance 3-year sponsorship
The privately-owned American apparel company, New Balance entered into a new sponsorship agreement with AO recently which will see it release a co-branded line of apparel and footwear.
This is a first-of-its-kind sponsorship for New Balance who’ve never sponsored a grand slam tournament before, and they’re hoping that it will deliver a major return with the support of their brand ambassador and US Open Champion Coco Gauff, who has a growing global cultural influence and is well-known as a fashion icon.
Tennis is becoming trendy
The new partnership with New Balance is reflective of a shift in the sponsorship landscape in tennis, which is becoming less reliant on the giant athletic brands such as Nike and Adidas and more attractive to non-traditional ones.
Over the last few years, brands such as Lululemon, Vuori, J. Lindeberg, Greyson, Sigrun, Original Penguin, Free People, Alo, Hugo Boss and Armani have entered into the tennis world, via player or tournament sponsorships.
These brands have noticed that tennis is becoming trendy, and the AO is now looking to compete more and more with the Melbourne Cup, an event renown for fashion.
Media rights revenue growth
Broadcast revenue is key to the financial growth and sustainability of the AO tournament and importantly, the AO have a long-term deal locked in domestically. They have a current $60 million deal with Nine which ends this year, and they’re due to begin reaping the benefit of the new and upgraded deal that they struck with Nine that’s worth $425 million over five years - $125 million higher than the current deal and a heap more than it received annually during it’s 40-year broadcast partnership with Seven.
In addition to its domestic rights revenue, SportBusiness also estimated that the AO generated about $80 million in 2023 through its international rights, and through deals such as with Warner Bros. Discovery (Europe is the most valuable market) and ESPN (US).
oOh! Media out-of-home partnership
Tennis Australia recently entered into a multi-year partnership with outdoor media and advertising company, oOh! Media that will allow the AO to deliver live scores, fan moments and video highlights across their nationwide digital network.
No doubt, many of the AO’s sponsors have plans to activate their sponsorships across outdoor media, and this partnership provides them with the option to integrate commercial messages alongside dynamic sport content within seconds.
During the US Open, Infosys activated the below 3D billboard in Times Square. Will we see them attempt to do something similar during the Australian Open?
Non-traditional revenue streams
Although traditional revenue streams such as broadcast rights, sponsorship, ticketing and merchandise currently underpin the majority of AO’s revenue, over recent years they’ve steadily introduced several innovative programs and projects that generate new revenue streams, forming part of their quest to grow revenue to $750 million over the coming 5 years.
Finals Festival
The AO have been continuously improving the fan experience at Melbourne Park and the annual Finals Festival has played a big role in this - the more time fans spend at Melbourne Park, the more $ they’re likely to spend.
In 2023, more than 13,500 people attended the Finals Festival at Kia Arena, selling out each session.
In 2024, the AO is partnering with Australia's largest independently-owned music and events company, Untitled Group to deliver another attractive line up of music artists.
AO Metaverse + AO ArtBall
Technology continues to alter how fans can interact with their favourite sports and there is a generational shift taking place - from older passive fans who engage through traditional and linear means, to younger and more active fans who seek out more ways to meaningfully connect with athletes and teams.
The AO tournament continues to remain at the forefront of the sports x Web3 intersection via it’s AO Artball program (all ArtBall owners are provided with complementary tickets) and presence in the Metaverse via Decentraland and Roblox.
AO Start ups
Tennis Australia previously launched an accelerator program called “AO start ups” as part of a multi-year partnership with their capital fund, Wildcard Ventures. This program gives tech start-ups the opportunity to introduce technological innovations at the AO, in exchange for TA having the opportunity to invest in the company.
In August 2023, Tennis Australia announced that 7 x new companies had been selected in the mid-year intake, with all the businesses set to pilot their cutting-edge technology during the 2024 Summer of Tennis.
Break Point - Netflix
Major streaming platforms have increasingly been recognizing the power of up-close-and-personal, sports content. For years, Netflix have resisted the urge to follow their competitors and bid huge $$$ for live sports rights, and instead have pursued a strategy focused on building a portfolio of prestige sports documentaries that includes The Last Dance (Michael Jordan), Drive To Survive (F1), and Full Swing (Golf).
Break Point is tennis’ version of this and season 2 is due to drop on January 10, in the lead up to the tournament.
Documentaries like these can have multiple benefits for the rights-holder - they can provide a direct revenue stream, and draw new fans to the sport.
The future of the Australian Open
Tennis Australia has proven to be more than capable of delivering a world-class Grand Slam event, and moving forward it’s clear that they’re focused on continuing the tournament’s growth domestically and globally.
By sacrificing large profits they’ve managed to continuously invest in new projects that draw new fans to the sport, generate new revenue streams and improves the experience for all stakeholders, including the athlete’s - e.g. player prize money is increasing in 2024.
Although all future signs are positive, the risk of private-equity swooping in to steal the event remains, and recently top-ranked US tennis player Jessica Pegula suggested that a Saudi-backed LIV-style tournament is inevitable, thanks to their infinite amounts of money.
Craig Tiley acknowledges the external threat of private equity and that the sport is ripe for it because it delivers such a great return. In order to counter the threat, he believes that the governing bodies of the 4 x grand slams need to collaborate more, and that ongoing government support is required to ensure the relevance of Melbourne Park and the tournament is maintained. The Victorian Government has invested $1 billion since 2010 on revamping the precinct.
Not yet a subscriber? Discover specialised sports marketing insights, tailored for sports industry professionals within Australia and across the globe. If you work in sports for an agency, brand or rights-holder then this is for you.
Great read on the economics of the Australian Open, particularly the partnership deep dives! Funnily enough, I wrote about the Aussie Open myself as well, contrasting the figures more against the other Slams. Actually, works quite well as a companion piece to here :)
Looking forward to your next post!