Saudi Arabia Is Pouring Money in Sports. Is Tennis Next?

The U.S. Open has been as gripping as ever this yr, with the 19-year-old breakout star Coco Gauff set to face off towards Aryna Sabalenka in at the moment’s singles ultimate and Novak Djokovic searching for a twenty fourth Grand Slam win tomorrow. But as a enterprise, tennis has been struggling for years — and faces new strain to discover a sustainable mannequin as Saudi Arabia’s Public Investment Fund, often called P.I.F., has made main investments in sports activities, sloshing cash round in golf, soccer and combined martial arts.

Some deal makers wonder if tennis, which has already confirmed preliminary talks with Saudi Arabia, would be the fund’s subsequent goal.

Players are prepared for a change. “Of all the important sports around the world, I think tennis is clearly the one with the greatest opportunity for financial growth and the most unrealized value,” Maria Sharapova, the retired tennis star, informed DealBook.

Despite the recognition of tennis, the game brings in only one.3 % of earnings from international media sports activities rights. That’s partly as a result of tennis is made up of myriad entities — together with the Women’s Tennis Association; the U.S. Tennis Association; and impartial tournaments. The independently operated organizations make scheduling tournaments tough and diminish bargaining energy for sponsorship and media offers. Erratic scheduling and lengthy matches don’t assist entice broadcasters.

Financial missteps are mirrored in pay for gamers, most of whom earn short while having to pay for coaches, coaching classes and journey bills to play within the recreation.

That’s why Ms. Sharapova thinks the game ought to discover bringing in exterior capital, whether or not or not it’s a personal fairness agency or sovereign wealth fund. It’s additionally why many consider tennis may very well be susceptible to a rival sports activities league if P.I.F. had been to repeat the playbook it utilized in golf, the place its LIV golf tour ultimately struck a deal to companion with the PGA Tour to assist settle acrimonious litigation.

Could a merger resolve the issue? The personal fairness agency CVC Capital Partners purchased a stake within the girls’s skilled tennis this yr, in hopes of capitalizing on the game’s business promise. There has been hypothesis that CVC might merge the ladies’s and males’s excursions. But such a deal is complicated, requiring signal offs from a number of events that don’t all share the identical views.

Other personal fairness traders are circling with related goals, DealBook has heard. But it’s not clear any investor or fund might compete with the deep pockets of P.I.F., which has to this point proven little curiosity in returns.

Not everybody in tennis opposes Saudi cash. Most standouts argue that accepting funding from P.I.F. might assist the nation reframe its tarnished repute. But others say that tennis needs to be extra involved with its backside line: The girls’s skilled tennis tour’s choice to droop all tournaments in China after the disappearance of the tennis participant Peng Shuai, for example, dented the WTA’s enterprise — and in the end failed to strain China into granting a gathering with Ms. Shuai.

Some gamers say that Saudi cash might assist with pay fairness, a longstanding drawback within the sport. Outside the 4 grand slam occasions final yr, males earned about 70 % extra on common than girls did throughout tournaments. Though the ladies’s tour struck a deal for pay fairness this yr, the brand new construction gained’t be in place for one more decade. If Saudi Arabia “could help getting us to equal prize money, though there are negatives, there’s a lot of positives that can come out of it,” Jessica Pegula, the third-ranked participant, informed Reuters in July.

But there’s little consensus. As rumors swirled this week that the WTA would maintain its finals in Saudi Arabia, the previous tennis star Chris Evert pushed again. “I would be against it,” Evert mentioned, “but I don’t have a vote.”

Those who did have a vote apparently sided with Evert: The WTA introduced on Thursday it is going to maintain the occasion in Cancún, Mexico. — Lauren Hirsch

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The enterprise of gaming Spotify

This week, Universal Music Group — dwelling of artists together with Taylor Swift and Drake — struck a new licensing deal with the French streaming service Deezer. They promised it will be an “artist-centric model” that may profit skilled musicians.

In different phrases, much less cash can be paid to the form of content material that music label and streaming executives have more and more criticized, together with white-noise tracks and songs made by synthetic intelligence. Lucian Grainge, chief government of Universal Music Group, known as it a “sea of noise” — but it surely was nonetheless by some measures a virtually billion-dollar trade.

The quantity of content material on music streaming platforms is exploding. Last yr, 34.1 million new audio and music video tracks had been uploaded, in accordance with the analysis agency Luminate. That’s greater than double what was uploaded in 2018. (This yr could also be even increased: 20.2 million tracks had been uploaded within the first six months of 2023.)

But simply over 3 % of the tracks uploaded this yr got here from major-label artists. That has left many within the music trade worrying about what they name spam. Spotify has sought to crack down on producers of such content material on a number of fronts, together with each audio tracks and, extra not too long ago, podcasts. But platforms have additionally sought to crack down on A.I.-produced content material, amid allegations that bot exercise is artificially boosting their listening numbers.

“These things are growing at a terrifying rate,” Rob Jonas, the C.E.O. of Luminate, informed DealBook.

How a lot cash is at stake? Though huge labels produce only a fraction of the content material on these platforms, they accumulate most of streaming’s money: About 95 % of Spotify’s royalty checks final yr went to roughly 200,000 skilled or aspiring skilled acts, analysts at Goldman Sachs calculated this summer season. But the remaining 5 % left for so-called lengthy tail content material nonetheless amounted to about $900 million.

Executives say that’s nonetheless an excessive amount of. “It should be obvious to everyone that the sound of rain or a washing machine is not as valuable as a song from your favorite artist streamed in HiFi,” Jeronimo Folgueira, chief government of Deezer, mentioned this week.

Critics of the present system, in place for a few decade, say that it incentivizes the creation of spam, forces streaming platforms to handle more and more unwieldy content material caches and leaves much less cash to be paid to precise artists.

The Universal-Deezer deal is supposed to alter that. It pays twice as a lot in royalties for tracks by skilled artists, outlined as these with a minimal of 1,000 streams a month from a minimal of 500 distinctive listeners. Those tracks would get an additional enhance in the event that they had been actively looked for by customers.

The impact is more likely to be restricted for now — Deezer had 9.4 million subscribers as of Dec. 31, in contrast with Spotify’s 220 million — although Universal has mentioned it’s in talks with different platforms.

The counterpoint: Mark Mulligan, an analyst on the analysis agency Midia, questioned whether or not worries in regards to the “sea of noise” are overblown, noting that the streaming enterprise had grown to almost $18 billion final yr.

To him, the push to devalue these tracks is a type of snobbery and gate-keeping by music labels, meant to make it more durable for brand spanking new types of content material to emerge. (It’s additionally value noting that streaming platforms are engaged on creating basically their very own royalty-free, long-tail content material.)

Mr. Mulligan warned that if streaming corporations make it more durable to seek out, say, white-noise tracks, customers might as an alternative flip to different platforms like YouTube and TikTookay. “If you want to find underground artists or weird sleep noises, you’ll turn to other options to meet that need,” he informed DealBook.

Mustafa Suleyman is without doubt one of the world’s main synthetic intelligence entrepreneurs, and is a co-founder of not one however two start-ups on the slicing fringe of probably the most transformative know-how for the reason that web.

Mr. Suleyman is the chief government of Inflection AI, a chatbot firm he began final yr with the LinkedIn co-founder Reid Hoffman, which was reportedly valued at $4 billion in its funding spherical that closed in June, elevating $1.3 billion. And Suleyman can be a co-founder of DeepMind, an A.I. pioneer that was acquired by Google in 2014.

This week, Mr. Suleyman, now a companion on the enterprise capital agency Greylock Partners, launched “The Coming Wave: AI, Power and the 21st Century’s Greatest Dilemma.” He spoke with DealBook in regards to the guide, which requires an pressing shift in how we take into consideration and “contain” A.I. The dialog has been condensed and edited for readability.

Why do you describe the guide as a “love letter” to the nation-state?

We have invented a system of noncommercial checks and balances, which holds centralized energy accountable within the public curiosity. That system has developed over a few years away from monarchy, dictatorship and authoritarianism towards free and open liberal democracy. It implies that we will do smart taxation and redistribution to forestall inequality. This is the most effective instrument we’ve got so we should always keep it up and hold attempting to defend it.

How have your friends responded to your concepts?

There are a lot of totally different clusters in Silicon Valley. People like Satya Nadella, the C.E.O. of Microsoft, are very forward-thinking about these items and positively lean into the accountability that the businesses should do the correct factor.

But there are positively skeptics. Marc Andreessen, the enterprise capital investor, simply thinks that there’s not going to be a lot of a draw back. It’s all going to be superb and dandy. I’m as a lot of an accelerationist as Andreessen however I’m simply extra wide-eyed and cozy speaking in regards to the potential harms, and I feel that could be a extra intellectually trustworthy place.

How do you see the state of relations between democratic governments and Silicon Valley?

Tech corporations are meaningfully participating, and governments are beginning to get proactive. This hasn’t at all times occurred, so we’re already getting into the correct path. Truth is that is solely only the start — much more arduous work is required — however the foundations are beginning to come into sight.

Thanks for studying! We’ll see you Monday.

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