Why are you doing this USTA? by Javier Palenque

Doing what? the USTA board may think. Taking the game to the cliff and burdening it with the US Open problems and massive financial obligations and poor leadership. They are two separate things. One is the US Open, an entertainment venue at the end of its business cycle and the other is the game, which given the pandemic and the poor decisions of the board over time is now in its infant stages if looked at it from the right perspective. The game can grow if it understands what problems to solve for the customers. Why is this so hard to comprehend? and why do you mix them up to your advantage USTA?

THE US OPEN

Why do I say it is at the end of its business cycle? Let me explain quickly in bullet points so you don't have to read much. If you disagree, please send me the data with which you would have the basis to disagree.

1.??It is overstaffed at the wrong staff salary levels, with the wrong staff (it wastes resources daily). $80M per year or the daily waste is $308K.

2.??????It gambles $23M per year in player development that produces nothing but jobs for people that do not grow the game and all they produce is expenses. Somehow now the financials of 2021 claim the expense is $13M and the staff was not cut 50%, this is a question for the financial director to explain the inconsistency from 2019 for the noteholders? The waste per day is $65K

?3.??????Has to pay this year alone in principal and debt $106M plus $26M interest out of total revenue of $477M or the equivalent of 28%, this is massive. (please see page 29 in the financials) waste per day $508K

?4.??????It has losses as of 2020 of $181M when on an average year the US open loses $10M, so it is carrying 18 years of losses going forward. This is brilliance at work.

?5.??????ESPN is losing money and subscribers in the millions, ESPN is USTA's largest and most secure customer who will not pay, upon renewal time, the premium paid in 2015. Expect a drop in revenues of $30-$50M in the next few years.

?6.?????To put perspective to this madness, the USTA will spend this year roughly per day $575K to pay the banknotes and Player development. This amount per year is $155M. Now of course compare this figure with what they spend on programs to grow the sport? sections get $56M yearly. In other words, USTA only in banks and player development spends 2.75X more than in sections. The problem does not end there the problem compounds because the sections spend 95% of the grant money on payroll. Only $3M is not payroll, but that is still not all, out of this money, not all of it is for programs, so it is more like 1/3 is for programs if not less. The approximate figure is $1M for 42,000 zip codes and 60M kids in one year. In other words, nothing. This is also brilliance in full display, and to think the CEO makes over a million dollars and can't figure this out.

I hope the top sales guy understands the message a $20K Rolex conveys to the public. The false nonprofit dresses the top salesperson with a Rolex to impress people so they think the US Open is a good vehicle for them? If he walked in my office and I spotted a Rolex in his hand, I would ask him if the USTA is a nonprofit and how many people it helps, then since he could not answer this, I would send him packing and on the way out my youngest assistant would explain the non-profit designation to the salesperson.

What a blatant level of arrogance and ignorance to do business this way in the name of tennis.

?7.?????If it is not clear let me repeat the exercise, the USTA spends $155M on banks and Player development (neither do anything for the sport) and $1M on programs. So, if we take this number and divide it by gender and age (boy, girl, 10's,12's,14's,16's 18's), we get $1M/12 per year or a total of $83,333.00 per gender and age group per year ( this has to cover 42000 zip codes and 50 states). Daily this amounts to $231.00 per age group per gender. Compare that with the $575K spent on banks and player development. $575k/231 = 2,489 times more money for banks and a gamble on a pro. For a not-for-profit, this makes no sense. You would think given the high-income audiences that at least half the money needed for capital improvements would be raised by donations, right? wrong, not a penny. How on earth does the CFO justify his lack of knowledge?

?8.??????To make you cry now consider our 42,000 zip codes, each zip code gets per day $0.0005, and banks and player development get $430,555.00. Then you wonder why no one wants to watch a tennis match on TV? Where I come from this is repugnant.

?9.??????To make matters even worse, the USTA passes the cost of learning to parents who have never heard of tennis, and do not know it and expect them to engage in it somehow? This will never happen.

?10.??So, the coaches that have families to support must focus narrowly on what makes the most money, and usually, it is the competitive lane, which is the one segment decreasing at fast speeds. This is in my opinion, irresponsible of the USTA to let the dynamics flow like this.

?THE GAME

11.??Now with this level of debt who thinks that tennis will be funded appropriately if when the USTA had money it did not fund it, and now it does not have money it cannot fund it? So, who cares for the game at the USTA when they have an $80M payroll? and executives cannot figure out the most basic of math. This is a joke of incompetence.

?12.??This is called kicking the game off a cliff, who is responsible and will be held responsible! The board? The CEO? Who? Good old boys are good for nothing and no longer boys.

?13.??Now you understand why the USTA needs to be transformed? The status quo has effectively killed the sport and the attraction of playing tennis, yet they appoint as CEO a salesperson from the status quo.

?14.??Please board and USTA executives explain, why would you do that to the sport?

I say we need to act in the best interest of the game, it is not very complicated. But at some point, the board must realize just how old the fans are, and how unattractive that demographic becomes since its age is so high. It takes a vision and will to take the non-profit out of where it is. What is worse is that the executives have no idea what to do.

There is nothing you can do to change the speed of the aging of the public or the change in sports consumption habits of the new generations. So, what is left to do?

The only thing that needs to be done is what is responsible for the game, to manage the decline appropriately, to fund the sport that was never funded in a way that produced fans and new players, and to use the resources while they are there to grow the game. That is responsible, yet that is precisely what they are incapable of doing.

?I can be reached at [email protected]