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March 20, 2013

David Brewer

Dave Haggerty

Gordon Smith

CHRIS WIDMAIER:テつ Good afternoon, everyone, and thank you very much for joining us today.テつ Many of you I'm hoping have seen the press release regarding our announcement concerning US Open prize money as well as the US Open schedule, especially in relation to 2015 and beyond.
Joining me on this call today we have Dave Haggerty.テつ Dave is the USTA Chairman of the Board and President; we also have Gordon Smith, the USTA Executive Director and Chief Operating Officer; and we are joined by David Brewer, the US Open Tournament Director.
I'm going to just open it up to questions immediately.テつ I know there's quite a few questions on these topics, so without further preamble or further ado, why don't we start with the questions.

Q.テつ I guess this deal signals that there's a significant financial health to the US Open and thus the USTA, and the ability to increase the purse money would also suggest that there's ability to increasingly fund programs that you conduct across the United States.テつ Is that true?
DAVE HAGGERTY:テつ Well, I think that we know that this announcement is going to cost the USTA more money, and I think that we certainly know that it's going to affect some of what we do, some of our programs, so from an expense perspective, we'll take a look and be diligent at what we do there.テつ We'll also look at revenues and see if there are ways to improve what we're doing.テつ What we will not do is we will not drastically increase the ticket prices for our fans and spectators to pay for it.テつ Certainly inflationary increases over years may be what you see, but we're not going to put it to the fans; put it that way.
GORDON SMITH:テつ If I could add to that, it was important for us to get some long‑term stability in this important area because we've got some big things to do.テつ We've got to really get more kids on the courts playing tennis, and we've got a big job ahead of us in transforming the tennis center into the type of facility that we wanted it to be.テつ So that was a major impetus for making this move.

Q.テつ By giving increased prize money to the players and the deal that you strike with them, how does that ramp down to your tennis facility and for tennis across the United States?
GORDON SMITH:テつ Well, pretty clearly, we have been increasing prize money for some years, but we have done it on a year‑to‑year basis.テつ This discussion with the players that's gone on now for over a year really allowed us as partners to create a predictable future for both them and us.テつ Now we can go about our financial planning for the other significant items that we have to do.

Q.テつ Can I follow up then to say why is it important that they get more prize money?テつ I mean, are they threatening an action against you?テつ What is the certainty factor here?
GORDON SMITH:テつ No.テつ We've over the last year had some spirited discussions but nothing like a threat.テつ We knew that we would be going up on prize money, as our income increases and frankly as the needs of players have increased.テつ It's difficult for lower ranked players to make a living on the tour, and we realized that this needed to be done both for the Open and for the players.テつ We have to recognize that the players mean everything to the Open and they're incredibly valuable to the sport and valuable to the success of the Open, and we have to reward them accordingly.

Q.テつ So this is not so much about the stars maybe but the bottom 80 players who are coming to New York and having to bear the expense of being here?
GORDON SMITH:テつ It's about all of them, it really is top to bottom, and they're all important to us.

Q.テつ What have you guys learned the most from the success of the BNP Paribas Open and what can be done from terms of the loss of the two great heritage tournaments in Los Angeles and San Jose?
DAVE HAGGERTY:テつ Well, I think that certainly the BNP Paribas Open is a very, very good event.テつ I think that it shows that when you have an entrepreneur who is involved in an event and has a vision, it can certainly help that event grow and prosper.テつ You know, we want to make sure that the U.S. continues to have a good number of tournaments.テつ We don't want to lose any more tournaments, and again, as the governing body, our responsibility is to encourage and work‑‑ a lot of times these tournaments are owned by others, and we can encourage and support as best we can certainly the BNP Paribas Open is a great example of what it can look like.

Q.テつ And a few years ago there were like seven tournaments in California.テつ There may be two in 2015.テつ Any thoughts about that reversal and its impact on the game?
DAVE HAGGERTY:テつ Well, certainly from a‑‑ we would like that not to have happened.テつ We are where we are.テつ We are working with those events to grow visibility, to grow participation, to grow interest in those markets.

Q.テつ I was wondering, you talked about your spirited discussions with the players.テつ How do they balance?テつ Obviously they have an interest in your other goals, as well, in terms of increasing tennis participation and the state of the facility.テつ Was that part of the balance and the discussions?テつ It's like obviously you guys need the money for that, also, in addition to paying players.テつ I mean, how did that part of the discussion go?
GORDON SMITH:テつ Yes, clearly we discussed with the players the role that we have in promoting tennis through the Open, around the world, and certainly in promoting it in the United States and creating interest through recreational play and tournaments and leagues, and they clearly recognize that that's something that is appropriate for us to do and recognize that that's where a fair amount of our resources need to go.テつ And those were the discussions that we had back and forth.

Q.テつ In terms of‑‑ you said that the cost certainty in some ways helps you, so was that part of how you got to maybe a longer term agreement so you know what you're doing to try to balance all those interests?
GORDON SMITH:テつ I think that's exactly right.
DAVE HAGGERTY:テつ If I can just add to that, I would say that, again, we have set a milestone here with a longer term arrangement that really hadn't been done before by any of the Grand Slams and certainly not by the US Open.テつ We felt that it was the right thing to do so we could really focus on growth and participation, give us a chance to work on our other important areas that we need to.テつ So it gave us‑‑ it also gave the players certainty and an understanding of their futures and what the next five years will look like.

Q.テつ The movement of the final, it seems like we've seen that coming for a while.テつ Was there any last‑minute issues or anything that came up in finally deciding to do this officially?
DAVE HAGGERTY:テつ No, I think that certainly with the physicality of the game, the players, on the men's side especially, with the long five‑set match, perhaps in the semifinals, they need a day of rest, and we have had a day of rest these last couple of years.テつ We had told the players last year that we would do that.テつ The only way that we can do it now and for the next two years is to have it on Monday, and I think they appreciate the day of rest in between, and I think that in 2015 they look forward to a Sunday final on the men's side and a Friday semifinals.
DAVID BREWER:テつ I would just add and echo what Dave has just said, and that is we've had conversations for the past several years frankly with the players about the advisability of playing back‑to‑back on Saturday and Sundays for the semis and finals, and it's simply taken us some time to get to the point where structurally we could provide that promised day of rest, and the day of rest is now locked and loaded going forward, and as we have noted before, we will be playing the men's final on Sunday beginning in 2015.

Q.テつ You already announced back at the end of the year right around the Australian Open that you were going to increase more or less what the Aussie Open did, which was around $4.1.テつ So can you kind of take me through the decision‑making process to just double that for this year coming up?
DAVE HAGGERTY:テつ Well, when we made the announcement in December, our announcement really was to talk about a schedule change, a Monday final.テつ After that announcement, there was feedback from the ATP about the Monday final and the prize money.テつ We began discussions‑‑ we really had been discussing with both tours for the last year prize money.テつ After December we had a chance to get together at the Australian Open in meetings with various players, with the Player Rep Council, and begin the dialogue to where we've come to now with our announcement.
So I think it was certainly a number of factors that went into mind.テつ We understand the importance of the players, what they bring to the US Open, the importance of the players, the importance of the lower ranked players being able to make a good living, also the stability of the US Open and a nice long‑term arrangement.テつ So that's really what's happened since the Australian Open.テつ We've really had a chance to meet, understand each other's points of view, listen, learn and come up with something that really works for both parties.

Q.テつ Were negotiations equal between you guys and the ATP and the WTA, or was it just primarily the ATP?
DAVE HAGGERTY:テつ It was a combination of discussions with both the ATP and the WTA, as well.

Q.テつ I know that there's a Grand Slam committee and all the Grand Slam officials see each other all the time.テつ Can I make the assumption that you guys have discussed these issues with Wimbledon, Roland Garros and the Aussie Open, and can I just throw that out there and ask whether you expect similar increases from Roland Garros and Wimbledon?
DAVE HAGGERTY:テつ I think it's really important to be clear that each of the Grand Slam events makes their own decisions on prize money, and in fact, our Grand Slam colleagues were not informed of this until the announcement went out.テつ So again, each Grand Slam makes their decision on what they think is right for their individual event.テつ So again, there was not any conversations about that.テつ Conversations about lots of other things that might be of mutual interest but not prize money.
GORDON SMITH:テつ If I can just follow up, the December announcement was of course a '13‑only announcement, and what has happened since then is discussion about how both the players and the Open can get long‑term certainty and stability, and in those discussions it became clear that it made sense to front load some of that prize money into the early years, or into the first year, and because we were able to have the long‑term discussions, it led to this second announcement.

Q.テつ Gordon, the players have clearly been concerned about distribution and you've spoken about low‑ranked players plenty.テつ Am I to assume there's been some type of agreement around that, or are you guys close to what they want, which would mean more of an increase to the low‑ranked players?
GORDON SMITH:テつ No, where we are is the Players' Council has asked if they could be involved in discussing with us what the distribution we decide on might be.テつ We've agreed to take their input, and that process will be going forward over the coming months.

Q.テつ Is this some sort of a written agreement between you and the two associations?テつ If so, is this the first time that there had been such an agreement, and are you the only Grand Slam that has such an agreement?
GORDON SMITH:テつ The answer is there's no written agreement, and so although it is the first time we have ever entered into an understanding like this with the players and the ATP and the WTA, of course‑‑ and by the way, just to make it clear, we'll also be getting the input from the WTA on distribution, as well, so that will be taking place.

Q.テつ Let me follow up on the fact that the increase in prize money could have an impact on your programs across the United States; is this correct?
GORDON SMITH:テつ I think the answer is of course, when you have to balance what money you have for what reasons.テつ Obviously there were going to be prize money increases.テつ Now we know what they are and now we can go out and do the borrowing we might need to do to transform the tennis center, and now we'll have a much better ability to predict what we might be able to spend on our community programs.テつ We think it's a very positive development for what we really need to do that's important.

Q.テつ But you could also‑‑ couldn't it also be fairly said that you could just say what the prize money is from year to year without the necessity of a full‑fledged three‑ or four‑years‑ahead plan?テつ I mean, you provide the prize money and then take what you need to build your tennis center.テつ Why is it so important that there be a prize money certainty here?
DAVE HAGGERTY:テつ Well, I think one of the imperatives, one of the reasons why we felt it was really important is we all need to focus on our business and what we do.テつ This allows the US Open to really focus on our mission, on the US Open and doing what we need to do, growing participation, growing tennis, doing what we do, making sure the US Open is a fantastic event.テつ It also allows the players to focus back on what they do best, which is play on the court.テつ We've had discussions for the last year, and rather than just continuing discussions in the same manner over years and years and years, I think this allows us both to focus back on the ball, so to speak.

Q.テつ It stands to reason that you will not in 2015 have the first round played over the three days, or is that something that's still under consideration?
DAVID BREWER:テつ Good question, because it would be the logical follow‑on.テつ We will be playing the first round across three days in 2013 and 2014.テつ We will then go to the first round of men's singles across two days, Monday and Tuesday, beginning in 2015.

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