Making Sense of the WTA’s New Sony Ericsson Deal

Most tennis observers saw the positive news this week for women’s tennis with Sony Ericsson staying on as a major sponsor. Some of the news reports on the extension with the WTA left me wondering what the “same level of profitability” meant. It also wasn’t clear to me if the tour could go ahead and sell title rights before the current agreement ends in 2012.

The answer to the latter is no. By renegotiating the last year of the six-year deal that ends this year and extending an agreement to 2012, Sony Ericsson is taking its name off the WTA but not its position as sponsor kingpin. As the tour’s leading global sponsor, any other company seeking title sponsorship can’t sidestep Sony. The upshot: The WTA will have no title sponsor through 2012. “The agreement specifies that we will not sell above them,” a tour spokesman told me.



In the case of profit margins, which the tour has said will essentially remain the same, one must keep in mind that the $88 million Sony ponied up six years ago is a gross number and does not reflect all the goods, services and other benefits the tour delivers. Under the new terms, Sony is paying the tour less – 40% less than the $14.7 million annual average, according to Sports Business Journal – but also getting less in return. Thus, the tour’s profit margin is about the same, even though it is receiving less gross sponsorship money from Sony than before.

As reported, the tour has a free hand to re-sell the title sponsorship at its year-end event the through 2012. That includes the final year in Doha (2010) and two of the three years when it relocates to Istanbul from 2011-13.

 

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