NO ONE BUT ME CAN SEE THE ELEPHANT CALLED “DEBT” CRUSHING THE BABY BOOMER? By Javier Palenque

?I see a living room, a sofa, two tennis balls, and a baby boomer man being crushed by a gigantic elephant called “Debt,” somehow when I saw this picture an image of the latest financial report of the USTA came to my mind. I had the accounting person go over the last decade of USTA financials and wanted to know how Pat and his crew managed the growth of revenues led by the newest CEO. So, I then read the press release and it stated that record growth in tennis in the last two years, profitable USTA, and growth in revenues over the past decade. Since this is the organization that hides participation numbers from parents and coaches, gets charity breaks but it is not a charity, tries to shortchange the city of NY by not paying its full rent, is a for-profit company that only benefits from the nonprofit status and claims its mission to be what it does not do which is to “grow the game”, is constantly in racism/harassment lawsuits, etc.?Somehow (unbeknownst to me) they issue bonds in the millions of dollars and are never questioned about how they are going to pay as the amounts they owe are staggering ($726M) and rely on two things: Broadcasting rights and gate receipts.

Broadcasting rights are soon to be renegotiated by ESPN who is losing subscribers in the millions and dumped all tennis events that are not grand slams, which means no one watches tennis, plus now Disney (ESPN’s parent company) is pushing streaming which will only undress the once-profitable ESPN business model.

Gate Receipts are also low, last year was the worst in attendance and the whole decade receipts have been going down, the reason is that the fans are too old.

For those who do not know the bondholders are guaranteed payment before payroll, so it means that your jobs are on the line, you just do not know it. So just as they lie about participation to investors (parents, kids, coaches, clubs, cities) they are just as conveniently deceiving with the truth to their employees. This where I come from is not called integrity it is called dishonesty. Hard to build a business with that nonvalue.

USTA CLAIMS REVENUE HAS INCREASED OVER THE PAST DECADE

This is accurate; in fact, it has gone from $306M to $477M from 2012-to 2022, (In thousands). What we need to know is how much of that increase is due to ESPN’s $70M per year contract that will soon expire, because if it is part of it, then the increase is not very much. Remember in any business what matters is how much money it makes, not how much money it brings in. Unless of course, you are a business-like Amazon wherein the first years it just burned money until it penetrates a market and then dominates it and now it prints money. In the USTA’s case since executives are stuck in 1954 then revenue growth matters truly little.

USTA CLAIMS THAT A RECORD NUMBER OF PLAYERS NOW PLAY

This is not accurate, ball sales deny the absurd claimed increase in new players and the USTA records filed to the IRS claim the lowest revenue ever recorded in membership. This means that if there are new players (they are not) none have anything to do with the USTA or membership numbers would be higher. In other words, USTA is claiming that it has no idea what it is doing and takes credit for growth that is not possible and with which it had nothing to do with. (Table below is in thousands) The drop in revenue means that people are leaving the USTA as whatever it offers, people do not care for. This is also bad for business.

USTA CLAIMS IT IS PROFITABLE AND THAT IT INVESTS ALL PROFITS IN TENNIS

This is blatantly false, unless, of course, they have different systems of accounting, like Enron did, one for the government and one for investors. Who knows? I certainly don’t understand their financials, either the financial people are geniuses or fools, you be the judge. In the past 10 years, USTA has lost money in 5 or 50% of the time of the years in the decade, the total losses for the decade are $75M. Some of you will say Covid was responsible, to those I say if you think spending in Player Development $240M in the decade, paying Patrick McEnroe, Higueras, Kamperman, Smith millions for nothing, Deloitte ($30M), Laver Cup ($6M), Lake Nona ($80M), Net Generation ($30M), marketing only for US Open, not the sport, $200M, and many others absurd sums of money for nothing of any value to the sport. Then compare to how much was spent in community tennis and then your whole argument falls apart. Not buying insurance is neglect, Wimbledon did.

Notice the $54M in 2021, and compared to all other years, 2021 is when only vaccinated people were allowed to the US Open, and the year it had the lowest attendance in the decade, yet it made 4X the average of the last 7 years. This is an alarm for the auditors and forensic accountants.

USTA DOES NOT TELL YOU WHAT IS THE MOST IMPORTANT PIECE OF INFORMATION

When the worlds’ best-funded sports nonprofit that has the honor of having the least number of kids and oldest adults, tells you everything is good and does not tell you what you need to know, it means that they deliberately try to control the misinformation in the marketplace to hide how poorly run it is. How does a board approve this nonsense I do not know? someday we will find out with the help of Leticia. This kind of deception is usually the M.O. of failed states like Russia at this moment in time. They claim they are winning the war and it is obvious that they are not. How important do you think it is to know the tables and numbers above before you buy one bond from this USTA organization that claims to be a not-for-profit? I have no idea what you think, all I know is that in the business world, the executives would have been fired long ago for deception, to say the least.

CONCLUSIONS

• ??????In any business trust and confidence are part of the goodwill of the organization, you decide if you can have trust and confidence in the organization described above.
• ??????Imagine if you are an investor in the bonds what do you think now? are you calling the bonds?
• ??????Imagine you are an employee who feels secure in your job and just got a mortgage or moved?
• ??????What if you are a parent and decide to invest the next 10 years in your kid’s tennis?
• ??????Maybe you are a young coach who takes on debt to work in tennis and spends your valuable youth thinking it is all going to be great based on the information you believe?
• ??????What you read above are the facts. You judge them as you wish, it is a free country.
• ?????If it were me, I would ask for the immediate resignation of the board, and every executive who deliberately deceives the public, but then again, I just look after the sport for the benefit of all. In the image of the article, I see that the old man cannot overcome the elephant called “Debt.” It is simply morally repulsive what has been done to the sport for years by the same people entrusted to guard it and grow it. I cannot stand it. Read the press release again and then judge me. It is not right.

I can be reached at jpalenque@yahoo.com, if you have information that contradicts the one presented in this article, please send it my way, I will issue the corresponding “fe-de-errata”, if not, worry, be very worried, they killed the sport, while being the best-funded sport in the universe, go figure! There is a term for that ?_ _ _ _ _ _ _ _ _ _ _ E .