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US Open retains sponsor portfolio with fee discounts and transparent communications

The VIP Lavazza Lounge at The 2019 US Open at Arthur Ashe Stadium. (Photo by Eugene Gologursky/Getty Images for Lavazza)

The United States Tennis Association confirmed in June that the US Open would go ahead on August 31, the last Monday of the month as originally scheduled, but without spectators because of the Covid-19 pandemic.

Since then, defending men’s champion Rafael Nadal has pulled out, citing the increasing cases of Covid-19 worldwide, while others have expressed a reluctance to travel Stateside, where the virus is still on the rise.

New York City, once a global pandemic hot spot, appears to have gained a level control of the outbreak, and for Lew Sherr, USTA’s chief revenue officer, the ability to host the US Open at all this year is “a tremendous accomplishment”.

An elder statesman in US sports sponsorship, Sherr’s perspective veers off the purely commercial into areas of civic responsibility that are not always matched by today’s politicians.

He wants the tournament to mark this moment in time, not just deflect attention from difficulties, and to strengthen partner relationships in adversity. The staging of the US Open, even behind closed doors, is “terrific for New York, sponsors, broadcasters, everyone,” he says.

The USTA’s perspective has evolved over the last six months, with the current upbeat mood contrasting with earlier in the year when the pandemic first hit. “If asked how it would feel to put on a US Open with no fans [earlier this year] everyone would say the US Open is the largest spectacle in tennis, it would not feel like a celebration. Somehow, all of us now think of it as a great opportunity to bring sport back. Our corporate partners, broadcasters and sponsors have been very appreciative of the unique situation.”

In terms of the presentation of an event that relies so much on the New York crowds for its spectacle, the organisers will cover a significant part of the lower-level seats in the main arenas with tarpaulin showing graphic imagery of the US Open, the city of New York as well as messages to mark this point in history – “a once-in-a-lifetime occurrence”.

The designs were created by USTA’s in-house graphic teams, with several agencies involved in the logistical processes. There will be no new ad positions on the tarps – “we have always tried to adhere to a very clean look,” says Sherr – but stadium video boards will show some rotating advertising.

(Photo by Tim Clayton/Corbis via Getty Images)

‘Ask Us Anything’

Sherr included the tournament’s sponsors and broadcasters at every stage of the tournament’s planning process, with a weekly series of video calls called ‘Ask Us Anything’ involving the USTA marketing team, the tournament director and the medical director.

Sherr says: “When this started, we challenged ourselves to come through with stronger partnerships than when we went into this. Adversity tests partnerships; we can control the way we engage with our partners and emerge even stronger and have more loyalty than when we started.

“Of course, there is a risk in transparency in that things get out, but everyone has been incredibly responsible and appreciates the access. We’ve not had any negatives.”

Sherr also worked closely with each individual sponsor, analysing what assets could still be delivered and what new elements could be added to their agreements. There have been no “contentious situations”, while fee reductions have been negotiated to compensate for lost or neutralised assets.

“In every case, there has been a significant change in [rights fee] even for those with visibility and signage valuations. There is still value from signage, but everyone associates the US Open premium with hosting and fan engagement opportunities.”

Sherr said the 12 official sponsors, all of which have signage rights, will pay between 30 and 40 per cent of their contracted fee this year. Official suppliers like Coca-Cola, Kim Crawford Wines, Lavazza and Heineken will pay greatly reduced fees – more than 50 per cent smaller.

Wine partner Kim Crawford Wines, for example, would normally pour about 17,000 glasses of wine from a dedicated brand bar during the tournament and has no signage rights. Assets include rights to make promotional offers to win tickets to the US Open, IP rights and digital rights

Not one sponsor has dropped out. “They did not take this as an opportunity to exit even though many industries like travel and hotels are in trouble. The intent is to remain associated for the long term and do what’s best for the long term.”

For broadcasters, the situation may appear more straightforward – “the tournament is either on or it’s not” – but Sherr describes a more complex evolution: “In March, we didn’t know if we’d change the date, move the tournament to Florida or California , with a reduced draw or not, so there’s been a significant impact. The early discussions were to play or not to play and in what conditions. By mid-June, the focus was on our operating plan, and the safety protocols.”

(Photo by Tim Clayton/Corbis via Getty Images)

Looking ahead

The sponsorship revenue impact of Covid-19 has been mitigated by USTA’s strategy of staggering main partner renewals so that they are negotiated two years out from their end date.

“The current economic conditions are not impacting on renewal conversations, and if we’re not back to normality by 2022, then there are bigger issues in this world,” says Sherr. “Right now, nothing’s been impacted or stood down, although in some cases, sponsors have agreed to extend deals for one year as part of the conversation.”

Another positive is that Sherr has not had to reduce staff, partly because the US Open does not have an in-house team dedicated to sales.

This year, the CAA Sports agency was contracted to take care of USTA’s sponsorship development after more than half a decade with the CSM agency. The partner services team, on the other hand, is run in-house and remains intact, despite USTA cutting 110 jobs in June.

Sherr says he speaks with the other Grand Slams on a regular basis, but those conversations have changed. “It used to be all about small things like vendors and agencies, now it’s about bigger issues, with the French Open and Australian Open in similar positions.”

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