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Kosmos’ Davis Cup shake-up aimed at reviving ‘commercially undervalued’ competition

LILLE, FRANCE - NOVEMBER 25: President of Croatia Kolinda Grabar-Kitarovic, Goran Maric after winning the Davis Cup on day 3 of the 2018 Davis Cup final between France and Croatia at Stade Pierre Mauroy on November 25, 2018 in Villeneuve d'Ascq, near Lille, France. (Photo by Jean Catuffe/Getty Images)

  • Investment company looks to transform historic event after 25-year partnership with ITF
  • Rakuten owner will provide financial backing and help create new app to engage fans
  • Player participation and rival ATP World Team Cup may prove obstacles to success

Kosmos Tennis believes its structural revamp of the Davis Cup will make the apex of the 118-year-old competition more attractive to fans, sponsors and broadcasters, reviving its “undervalued” commercial fortunes.

An August vote of the 210 International Tennis Federation member nations approved the 25-year partnership with Kosmos, under which the two entities will jointly operate the Davis Cup and Kosmos will manage its commercial rights.

Kosmos will spend $80m (€70m) on the competition each year from 2019: a new $20m prize money pot, $16m to cover marketing and staging costs and $44m as a licensing fee to the ITF for all commercial rights surrounding the competition. An additional $45m has been allocated for other events the ITF and Kosmos may wish to stage in the future, such as a revamped Fed Cup, the equivalent women’s team tournament.

According to its 2017 financial statements, the ITF’s total commercial rights income – the majority of which derives from the Davis Cup – was $38.7m: $13.5m from media rights, $18.9m from sponsorship and $6.3m from events.

Kosmos will have rights covering all ticketing and corporate hospitality revenue, which was previously controlled by the national federations that hosted ties. Kosmos will take on responsibility for media and sponsorship rights sales – although all existing deals will run to completion – and retain all income from these sales up to a certain level, after which there is a revenue share.

The Davis Cup will be streamlined in a bid to make it more attractive to elite players – who often pass on competing for their countries because of their crowded schedules – and to the public. It is hoped these changes will, in turn, improve revenues from ticketing and corporate hospitality, commercial partnerships and media rights.

It is a calculated gamble that is not guaranteed to pay off. Some leading players – notably Roger Federer, Novak Djokovic and Alexander Zverev – have expressed reservations about the project. Meanwhile, a rival competition – the ATP World Team Cup – will be launched in January 2020, just six weeks after the first of the revamped Davis Cup finals.

Kosmos, though, is bullish about its chances of success. “The reality is the Davis Cup commercially today is in an undervalued position,” executive director Javier Alonso tells SportBusiness. “I think having all the nations together in one week, having 18 nations compete for one crown, will create huge expectation.

“We want to make it grow to a very high level. We think we can bring some new ideas…it is important to have new ideas because I think this is what the world of tennis needs.”

Gerard Piqué, Kosmos president and founder, and ITF president, Dave Haggerty together at the ITF AGM 2018 after the vote in favor of changing the format of the 2019 Davis Cup competition format.

Kosmos and its plan

Kosmos Tennis is a subsidiary of Kosmos Holding, the Barcelona-based sports and media investment group founded by FC Barcelona defender Gerard Piqué and whose principal financial backer is Hiroshi Mikitani, the chairman and chief executive of Japanese e-commerce giant Rakuten.

Additional investment in Kosmos Tennis has come from American billionaire Larry Ellison – owner-operator of the Indian Wells Tennis Garden facility in California and annual Indian Wells Masters tennis tournament – and CMC Sequoia, the sports investment fund set up in 2017 by China Media Capital and Sequoia Capital China.

Alonso, the former director general at MotoGP commercial rights-holder Dorna Sports, oversees the daily affairs of the company while, according to a spokesperson, “all Kosmos Tennis is inspired and powered by Gerard Piqué’s vision about sports and entertainment”. Fernando Soler, the former head of IMG Tennis, acts as a consultant.

At the heart of the company’s plan for the Davis Cup is a reimagined format aimed at making the tournament a more impactful event.

Under the old format, the 16-nation World Group was contested over four weekends throughout the year, culminating in a November final. From next year, after a round of qualifiers in February, 18 nations will compete in a week-long ‘World Cup’ of tennis each November. Matches have been shortened from a best-of-five format to best of three, with two singles and one doubles, to ensure finals matches can be completed in a single day.

The $20m prize fund has been introduced to help attract elite talent and puts the Davis Cup on a par with the grand slams: the Wimbledon men’s tournament prize fund was approximately $21.6m in 2018.

The first two finals under the new format – 2019 and 2020 – will both take place in Madrid. Kosmos had wanted the inaugural finals to be held in Asia – partly because of its Far East backing – but the ITF insisted on a European venue, mainly to help reduce travel for players after the season-ending ATP Finals in London.

Cities in France, Germany, Russia, Spain and Turkey made applications to host the finals. Lille and Madrid made the shortlist, with the latter emerging the winner from a joint decision by Kosmos and the ITF.

The plan is to take the tournament around the globe, with the United States a likely destination for 2021. This directly follows the investment of Ellison, who is hopeful of bringing the event to Indian Wells.

“We don’t have to be in one place for a number of years. Now we start with two years [in Madrid], maybe the next time we go to a place we may stay for three years. We want to move the World Cup of Tennis to every continent of the world,” says Alonso.

Under the previous format, host federations kept most ticketing revenue. Kosmos will now keep all the finals ticketing income, including corporate hospitality. According to Alonso, around 200,000 fans will travel to Madrid next year. In order to capitalise on this expected influx of supporters, Kosmos will look to put on a series of events alongside the tennis in order to create a festival atmosphere and gain further revenues.

“We are defining what to do around the tournament with some agencies who are helping us,” Alonso says. “Our vision is that the people who come to Madrid will enjoy the experience, not just with tennis but with all the experience they have from when they arrive and when they leave.

“We are working on which hotels we want to work with, we are working with the tourism board to prepare an agenda of events for fans to do. We are also asking sponsors how they want to activate. New sponsors can activate in a different way and create a fantastic experience for the public.”

Kosmos is working closely with Rakuten to develop an app that will maximise fan engagement at the ‘World Cup’ event.

“We are working with Rakuten already in how we develop the app, how we sell tickets, how people book hotels, airplane journeys, restaurants, how to interact with young people in terms of sending them content,” Alonso says.

“The objective with Rakuten is that they help us with the digital side of the business. We have 25 years [in the ITF partnership]. Of course, we have to generate money but what we want to create added value from the start on the digital side.”

LILLE, FRANCE – NOVEMBER 25: Team Croatia with captain Zeljko Krajan, Marin Cilic, Borna Coric, Franko Skugor, Mate Pavic, Ivan Dodig celebrates winning the Davis Cup during the trophy ceremony on day 3 of the 2018 Davis Cup final between France and Croatia at Stade Pierre Mauroy on November 25, 2018 in Villeneuve d’Ascq, near Lille, France. (Photo by Jean Catuffe/Getty Images)

Media and sponsorship

Despite its long history, the Davis Cup’s commercial revenue has lagged behind the grand slams due to its staggered format and the regular absence of top players. The ITF reportedly generated just over $14m in sponsorship income for the event in 2017, a far cry from the estimated equivalent earnings of the US Open ($86m) and Wimbledon ($45m) in the same year.

The Davis Cup currently has three main sponsors – title sponsor BNP Paribas, Adecco and Head – after partnerships with Rolex and Betway ended this year. Seven or eight principal sponsorship partners are being sought for the 2019 event, while deals with Rolex and Adecco are being renegotiated.

Kosmos has no plans to rename the competition via a true title sponsorship deal. The existing deal with BNP Paribas names the event the ‘Davis Cup by BNP Paribas’.

With the first two events in Madrid, Kosmos has already received several requests from Spanish companies regarding commercial partnerships, though Alonso says: “We don’t want to focus on Spanish companies only – we are targeting international companies also, including some companies that will speak to the Spanish market.”

Kosmos will not be able to take over the sale Davis Cup media rights until 2021 because these are held by beIN Media Group, under a seven-year deal with the ITF that began in 2015. The deal – which also includes the Fed Cup rights – is worth an average of just over $15m per year. This compares to annual media-rights income of approximately $160m and $120m for Wimbledon and the US Open respectively.

However, Kosmos is seemingly free to seek additional deals or deals in territories where beIN has not sublicensed the rights, with the media group’s permission. “When we see there is a possibility in one market…then we will try to [take it],” Alonso adds. “It is important we take opportunity of the change of format.”

Alonso is convinced the new format – a round-robin tournament followed by a knockout stage – will lead to bigger and better TV deals. “If you compete in the new format, you will play until the Thursday in the round robin. Even if you don’t get through [to the knockout stage] you will create an interest that will ensure that a number of people will continue to watch the event they have been watching for four days until the final. It is more connected and easier to follow,” he says.

Another significant change from 2019 is that Kosmos, and not the host broadcaster, will produce the finals. “When you are working that way, it is a cost for the host broadcaster so sometimes you don’t get the best product,” Alonso says. “We want a high level of production, so we agreed with beIN that this responsibility will be on Kosmos and not the host broadcaster.”

Alonso believes that within the first two or three years of the new format, incomes from ticketing and corporate hospitality, commercial partnerships and TV rights will be similar. “In the future this will probably change as it will be difficult to make much more from ticketing, but with TV rights and sponsorship there is the greater possibility of an upside,” he adds.

“It is a 25-year deal, which was very important for the ITF and for us. What we want is to build a relationship that lasts forever, this is our objective,” Alonso says. “Once you start a long-term relationship like this, it is going to be very difficult to stop it in year 25. I’m sure before year 25 we will be discussing how to extend it because it will be something positive for everybody. It is a very long run and if we work on the day-to-day the numbers [revenue] will come.”

(Sylvain Lefevre/Getty Images)

Player participation remains major challenge

Kosmos faces two principal challenges to make its projected $3bn investment work: the rival ATP World Team Cup and player participation.

The ATP World Team Cup – a partnership between the ATP Tour and Tennis Australia – was approved in the summer and is planned for a January 2020 debut, just a week before the start of the Australian Open. It features 24 teams, $15m in prize money and, unlike the Davis Cup, ATP ranking points.

It is unclear how the ATP World Team Cup and Davis Cup will co-exist, especially as they take place so close in the calendar. “It doesn’t make any sense to have two team events. Personally, I think that would be insane,” ATP executive chairman Chris Kermode said in May 2018.

Many leading players have expressed unhappiness with the Davis Cup revamp, which was backed by national tennis federations without consulting the players. A number are unhappy at the prospect of extending their campaigns to play in another event immediately after the season-ending ATP Finals. “I just feel like the date of the Davis Cup is really bad, especially for the top players,” said Djokovic.

There is also some self-interest at play. Federer said it was odd to see a footballer “meddle” in the tennis calendar, before warning: “Be careful: the Davis Cup should not become the Piqué Cup.” The Swiss, it must be noted, is keen to secure the position of his Laver Cup event – another annual team competition which began in 2017 and pits European players against a world team – in the schedule.

“All the changes we have implemented are changes that the players were requesting. For them to participate in the Davis Cup is much easier as before they would have to dedicate six or seven weeks to the tournament before and now it is a maximum of three,” Alonso says. “It is important that we are able to explain the tournament to the players, we will be at all the tournaments next year to talk to them and [tell them] why their life is going to be easier.”

Alonso is planning meetings with the captains of the 18 teams who reach the finals following February’s qualifiers, to try to persuade the top players to participate.
National federations could aid his cause by making Olympic qualification dependent on Davis Cup participation. It is also hoped the $20m prize money will help encourage players to take part.

“The increased prize fund is important,” says Alonso. “Right now the problem is that the players were not getting the same amount of money, as each federation was deciding how much money would go to the players.

“Of course, the rich federations had the advantage and players from rich countries were happy and players from poor federations were treated in a different way. Today the beauty of the model is that the federations are going to get more money from the ITF and the players are going to get a fixed amount that is defined…which is a huge change to their lives.”

Alonso believes the history and tradition of the Davis Cup will give it a huge advantage over the ATP World Team Cup, ahead of their looming battle for market share and talent.

“There are a lot of tournaments out there. The beauty of the Davis Cup is [that it is] the only place where a player can officially represent their nation [outside of the Olympics]. Yes, there will be teams of players from the ATP Cup from the same nation, but the format is different. It’s not nation against nation, it’s a group of players from one nationality competing against another,” Alonso claims.

“Our competition is 118 years old, there is a tradition and a heritage that is there. For the sake of tennis, we will have to find a solution where Tennis Australia, the ATP and ITF is more or less happy.”

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