Tours must be creative with cost management during economic instability

The Countrywide Classic in Los Angeles is one of a few tournaments seeking a new sponsor in 2009. Lisa Blumenfeld/Getty Images

Mark Baron has seen a lot of ups, downs and natural disasters in the nearly 20 years he has been director of the ATP tournament in Delray Beach, Fla., so he's not panicked over the current instability in the U.S. economy. But he's also a realist.

The Delray Beach event, held annually in February with a 32-man draw, is one of the first top-shelf professional events in North America, so Baron and his staff are dealing with the fallout as they gear up for the event. One sponsorship deal with a major car company has been held up by the delay in congressional passage of bailout legislation. Local real estate agents and brokers hit hard by the crisis in financial markets are not renewing their orders for box seats. Baron has decided to hold the line on ticket prices and, although prize money will increase by almost 25 percent next year across the tour, he's pretty sure he won't have quite as much cash to pay appearance fees to top players. "They're going to have to work with us," he said. "This hits home quickly.

"The next few weeks are a wait-and-see. The general public is a little nervous."

Overall, analysts and high-ranking industry executives say tennis is well-positioned to weather the current storm mainly because it is a global sport. The men's and women's tours and the International Tennis Federation have what an individual investor would call a diversified portfolio, spreading the risk with events and corporate sponsors located on multiple continents and rooted in different regional economies.

WTA president Stacey Allaster said she was "cautiously optimistic" about the financial health of the women's circuit, and ATP spokesman Kris Dent termed the men's tour "in pretty good commercial shape," adding, "of course, no sport is recession-proof." Both tours have streamlined their calendars and benefited from more than $1 billion in stadium improvements -- investments that came at a fortuitous time, as construction worldwide could stagnate if market volatility and trouble in the credit and loan institutions continue.

Juan Margets, ITF executive vice president and an economist by training, joked that people in his profession are far better at analyzing what has happened than predicting what will. But he said his organization's $45 million annual budget is stable. Its sponsorships are diversified both in terms of industry and geography, and its other important revenue stream comes from roughly 40 television contracts, many of which are with national networks that are financially secure. Attendance at Davis Cup and Fed Cup events could suffer, Margets said, but the ITF has made a policy of keeping enough liquid reserves to finance all its operations for a year. "We're reasonably safe," he said.

The most vulnerable link in the chain, particularly in the United States, might be sponsorships from the banking and insurance sectors. Those companies have long been big backers of the game because of its attractively affluent demographics and global exposure. The situation is apparently touchy enough that U.S. Tennis Association spokesman Chris Widmaier said no one in the organization was willing to go on the record to discuss it.

Wounded insurance giant AIG, which just received the largest federally funded rescue package of a private company in U.S. history, sponsors the U.S. Davis Cup team, the U.S. Open and this week's ATP event in Japan. (ESPN.com's request for a comment from AIG's corporate headquarters received no response.) The former Pacific Life Open at Indian Wells, which along with the Miami tournament is one of two high-profile combined men's and women's events that anchor the early-season U.S. calendar, has been working to secure a new title sponsor after the company bowed out last August for "mutual and strategic" reasons, tournament director Steve Simon told the Los Angeles Times.

Simon said this week that Pacific Life's decision to end its sponsorship was not a direct result of uncertainty in the financial markets. He said the tournament is involved in "positive discussions" with a potential successor, and added that ticket sales for the event are steady or slightly better than they were at this point last year.

Financial institutions and insurance companies have formed the monetary backbone of the eight-tournament summer U.S. Open Series. The 82-year-old Los Angeles tournament played at UCLA is seeking a title sponsor after Countrywide, which paid for that distinction for the past five years, elected not to renew its contract for 2009. The troubled mortgage company was bought out by Bank of America earlier this year.

On the flip side, longtime U.S. Open sponsor JPMorgan Chase appears to be committed to staying in tennis. In a recent interview with tenniswire.org editor Liza Horan, senior vice president Barbara Paddock said the 27-year-old relationship between the tournament and the banking behemoth is "perfect for our consumer and our wholesale interests. It transcends all of our businesses. It's part of the fabric of our bank."

Paddock said that marketing dollars are under intense scrutiny in these belt-tightening times, and JPMorgan has whittled its sports sponsorships down to tennis and running.

Internationally, the picture looks different. Barclays Bank just signed a five-year, $35 million deal to sponsor the ATP's year-end championships, which will shift to London next year, and three of the tour's top sponsors -- South African Airways, Ricoh and Enel -- just renewed their contracts. Just two weeks ago, the British Lawn Tennis Association -- Great Britain's national federation -- landed a $53.6 million sponsorship from the Dutch insurance company Aegon that will run from next year through 2013.

Horan said the grassroots infrastructure of the game in the United States is strong by several measures. Participation numbers, retail sales, tournament attendance, programming, facilities, sponsorships and teaching organizations are "at their highest point since the '70s and '80s," she said. "There's been a significant investment in collaboration between stakeholders."

There no doubt will be some shifts as working fans watch their budgets, she said, perhaps giving up club memberships and hitting on public courts, or forgoing expensive trips to faraway tournaments and staying closer to home. But recreational participation and racket sales have both withstood dips in consumer confidence in the past eight years, and Horan thinks people who have made tennis a regular part of their lives will keep doing so.

Horan does worry that the smaller pro tournaments in North America could be imperiled. "The bigger tournaments probably will be OK, because they have long-term contracts with sponsors," she said. "I'm concerned that the lower-level tournaments won't be able to ride their coattails."

Jeff Harrison, World Team Tennis vice president of league properties who serves as general manager of the Philadelphia and Delaware franchises, said high gas prices affected the league's events this past summer. "Fifty percent of our fans come from within a 25-mile drive," he said, but the other half are starting to balk. "I'm going to have to be very careful with ticket prices next year." One factor that helped the Philadelphia Freedom's season was a move to a temporary court at the enormous King of Prussia mall, which gave traveling fans a destination with lots of options outside tennis, Harrison said.

Allaster, who is Canadian, said tournaments might have to get more creative about cost management as they ride out this difficult stretch.

The WTA president recalled that when Canada passed legislation in 2000 banning tobacco companies from sponsoring sporting events, the Toronto tournament, then called the Canadian Open, found itself without a title sponsor. The next two years were a scramble as well, as two other sponsors went bankrupt. Tournament officials saved money by hiring university students to build a greenhouse and grow geraniums to landscape the grounds rather than buying them from a nursery and bought lumber to build tables instead of renting them. "You rely a lot more on volunteers," she said.

In the end, tennis might have some insulation from financial chaos because of a very simple principle. "The world loves to play," said Jonathan Blue, chairman and managing director of Blue Equity, a private equity firm whose sports holdings include the former SFX management company (now under the Best umbrella) and its large stable of tennis agents and players.

"Sports is resilient and inelastic compared to the economy," Blue said. "If you were around a watercooler in Chicago this week, despite all the turmoil, a lot of the conversation was about the fact that both baseball teams made the playoffs."

In other words, it might be a lot easier to watch the back-and-forth of a tennis ball's flight over the net than the roller-coaster ride going on in the real world.

Bonnie D. Ford covers tennis and Olympic sports for ESPN.com. She can be reached at bonniedford@aol.com.