Australian Open – Turning into an economic and spectating juggernaut

Examining the economics behind the Australian Open and how do they hold up against the other Grand Slam tournaments

The first Slam is upon us in Down Under

Tennis is ramping up to its first big highlight of the season, the Australian Open (AO, no affiliation) in Melbourne. More than 900’000 spectators will descend on Melbourne Park to watch the world’s best tennis players duel it out for the first Grand Slam of the year, with millions more tuning in all around the world. In the next 2 weeks the men and women competing will lay it all out in the gruelling Australian summer heat, regularly reaching above 35˚C, to crown the men’s (okay, who are we kidding, it is probably going to be the guy who has already won it 10-times, is the defending champ and is coming off winning 3 Slams last year, Novak Djokovic), women’s individual and doubles (incl. mixed) champions.

Let’s get ourselves geared up and ready for the tournament, looking at how the Australian Open has evolved of the years financially, becoming a favourite amongst players and spectators alike. Focus is given to the attendance figures, prize money, domestic and international media rights, as well as a look into the next few years for the tournament.

Source: APP

Bigger, better, bolder

Attendance

The State of Victoria has invested nearly AUD 1 billion in a major redevelopment project of Melbourne Park, the Australian Open venue, over the past decade (2010-2022), which has been pivotal in fostering the tournament's growth, mirrored in the attendance evolution since 2001 (as can be seen in the below chart). Notably, the 2021 and 2022 tournaments were significantly affected by government-imposed restrictions on large gatherings due to the COVID pandemic. Overall, between 2001 and 2023, they tournament experienced a CAGR of 2.3% in its attendance figures, growing from 544k to a whopping 902k spectators at Melbourne Park.

The investment in enhancing and enlarging the facilities and courts coincided with a golden era in men's tennis. The 'Big Three'—Federer, Nadal, and Djokovic—have been dominant forces, winning every Australian Open since 2004, except for 2005 (Marat Safin) and 2014 (Stan Wawrinka), and collectively claiming a staggering 66 of the last 84 Grand Slam titles. Concurrently, we also had an all-time great on the women’s side in Serena Williams (2^nd on the all-time Grand Slam list with 23, only 1 behind Margaret Court and her 24 singles titles). The marketability and global appeal of these four players have significantly contributed to the sport's popularity and, by extension, the tournament's attendance figures.

With both Federer and Serena already retired, it will be interesting to see if there is a fall-off in the coming years when also Nadal and Djokovic will eventually have left the game.

Surprisingly, when compared to the other three Grand Slams, the Australian Open sits comfortably in second position, outperforming both Wimbledon and the French Open, and only trailing behind the US Open with its gigantic Arthur Ashe Stadium. This achievement is largely attributable to the strategic investments in Melbourne Park. In contrast, space constraints have limited expansion opportunities at Roland Garros in Paris and at Wimbledon in Southwest London. Additionally, Wimbledon's attendance figures are based solely on the two-week main tournament, excluding the qualifying week.

Prize Money

Naturally, with increased on-site spectators and the sport being dominated by absolute global icons for two decades, one would expect prize money increases as well, which is spot on. In 2001, the prize money for the winner in both the men’s and women’s single draw stood at AUD 13.9m, growing all the way up to AUD 86.5m (~USD 58m) for this year’s edition of the tournament. On an annual basis the average growth in this time has been a healthy 8.3%.

The focus in prize money figures from 2001 onwards is deliberate, marking the year the Australian Open finally followed in the footsteps of the US Open and for the first time implemented equal prize money pay on both the men’s and women’s side of the draw. The US Open had implemented this already in 1973, so it took more than 25 additional years for the Australian Open to catch up on that front (still better than the French Open who took until 2006 and the All England Tennis Club unsurprisingly changed last in 2007). Tennis stands out in the world of sport in that sense, with equal prize money pay at Grand Slams for both men and women, a rarity among major, financially powerful and lucrative sports. This is also reflected in the yearly rankings of the highest paid female athletes, which is regularly dominated by tennis players. In 2023 alone, 7 of the top 8 highest earners were professional tennis players (Coco Gauff, Iga Swiatek, Emma Raducanu, Naomi Osaka, Aryna Sabalenka, Elena Rybakina, Jessica Pegula), with only Eileen Gu slotting in at #3 as a freestyle skier.

In terms of total prize money pool, the Australian Open actually comes out with the lowest figure out of all the Grand Slams in 2023, though in a rather similar ballpark to the French Open and Wimbledon, especially when considering currency fluctuations (for the purposes of the analysis throughout for 2023 figures, the OECD annual average exchange rates of 2023 were used; USD to AUD = 1.505082, USD to GBP = 0.8045214, USD to EUR = 0.9248353).

But what exactly does this mean for each player financially? How much money does the winner take home and how much can you make just by qualifying? No worries, the below figures for 2024 in AUD will provide clarity. A first round exit will net each player a good AUD 120k (total field size for men’s and women’s draw is 128 players each). The champion however will take home a whopping AUD 3.15m. Needless to say, it might be worth investing in a racket for your toddler and see if they display any sort of talent.

Media rights, the lifeblood of any sport

Domestic media rights value

You might start seeing recurring theme here: star power draws attention, which in turn attracts financial investment. In Australia's domestic TV landscape, the Seven Network had held the Australian Open broadcasting rights for over four decades, paying AUD 40m annually from 2015-2019. In 2018 a minor industry earthquake occurred, when Nine Entertainment swooped in an snatched the rights away on a 5-year AUD 300m deal from 2020-2024. Nine also just recently re-upped for another 5-years, this time at eye-popping AUD 425m deal, taking them all the way to the 2029 Australian Open. The average annual fee of AUD 85m on that latest deal does not even include contra (advertising dollars spent by Nine on the tournament), which are expected to add another AUD 10m annually to the cost.

So far, the media rights value domestically has only known one direction, upwards. The next cycle of TV deals will be the litmus test, particularly when the sport transitions beyond the era of the 'Big Three.' It will be intriguing to observe how this change is reflected in the value of media rights and whether a new generation can propel the sport forward with similar success.

Once again, stacking up the Australian Open to the other Slams, shows it lagging behind a bit in the domestic tv deal value to the likes of the US Open and Wimbledon, though comfortably sitting ahead of Rolland Garros. The US Open being played in the largest media market in the world, propels it easily to the top spot. Wimbledon benefits from its historical allure and a passion for tennis and sports in general in the UK. The value the Australian Open can extract in the local tv market is quite stunning, considering its population and GDP are roughly half that of France and the UK.

International media rights value

In 2023, the Australian Open generated around USD 80m from selling international broadcasting rights, twice the value it could extract domestically (USD 39.9m). The tournament has particular appeal in the Asia-pacific region, due to its geographical proximity and the relatively convenient time zone. Key media rights deals include partnerships with Wowow in Japan and beIN Sports in Southeast Asia.

Europe, as the most lucrative international market for the Australian Open, just recently saw a renewal of the deal with Warner Bros. Discovery in 2021, reinforcing their long-lasting relationship for another decade, from 2022-2031. The United States ranks a close second in media rights value, with ESPN as the preferred broadcaster. They just signed a new nine-year deal, maintaining this partnership all the way to 2031.

Other major media rights deals the Australian Open has globally are with ESPN in Latin America; beIN Media Group in the Middle East and North Africa; pay-television broadcaster Sony Pictures Networks in India; sub-Saharan Africa with SuperSport; and New Zealand with Sky New Zealand.

As already alluded to throughout this piece, we are coming to the end of the greatest era in tennis, a time when the sport has to reinvent itself and find new global faces to carry it forward. Carlos Alcaraz, Coco Gauff and Naomi Osaka all look promising both from a sporting success perspective, but also market coverage wise (large media markets of Europe, US and Japan). It is a very big ask to expect this new generation to match the extraordinary achievements and rivalries that have graced the sport over the past two decades.

The decline in viewership during last year’s finals could be an early indicator of this shift. Domestically, viewership on Nine fell by 40% (from 1.6 million to 1.3 million viewers), while in the US, ESPN saw a 36% drop for the men’s final and a 21% decrease for the women’s final. This downturn is partially attributed to the record-setting numbers in 2022, buoyed by local favourite Ashleigh Barty's victory and Rafael Nadal's comeback win. Nonetheless, this could also signal a broader trend that warrants close monitoring in the coming years, as the sport transitions away from its longstanding icons.

Increasing financial pressures and larger trends in the sports media landscape add further hesitation on the ability to maintain the revenues that come in from rights deals, sponsoring and ticketing. It will be fascinating to see how the coming years unfold with regards to the economics of the sport and the Australian Open more specifically.

Facts & figures: Australian Open

• Margaret Court has the all-time most singles titles at the Australian Open with 11, followed on the women’s side by Serena Williams with 7

• On the men’s side, Djokovic has the all-time most wins in Down Under with 10, followed by Federer’s 6 victories

• The main court at Melbourne Park is named after Australian tennis royalty, Rod Laver, who to this day remains the only man to win the Grand Slam (all 4 Slams in one calendar year) in the open era, and has a capacity of 15k

One random fact

Melbourne Park will remain the site of the Australian Open at least until 2046, so at least the ROI on that 1bn should be looking a bit better

We are all ready and set now!

You should now be all set and ready to enjoy the next 2 weeks of tennis at the highest levels and hopefully have a better appreciation of the economics behind the Australian Open as a whole.

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Source: AP