Annals of the University of North Carolina Wilmington International Masters of Business Administration http://csb.uncw.edu/imba/ PORTFOLIOS OF ATHLETES: SECURITIZATION OF TENNIS PLAYERS Pedro E M Mol A Thesis Submitted to the University of North Carolina Wilmington in Partial Fulfillment of the Requirements for the Degree of Master of Business Administration Cameron School of Business University of North Carolina Wilmington 2014 Approved by Advisory Committee Peter Schuhmann Adam Jones Joseph Farinella Chair Accepted by Dean, Graduate School TABLE OF CONTENTS ABSTRACT ...................................................................................................................................... iii LIST OF TABLES ............................................................................................................................ iv LIST OF FIGURES ............................................................................................................................v 1. INTRODUCTION ..........................................................................................................................1 1.2 Purpose of Thesis ......................................................................................................................2 1.2.1 General Objective ......................................................................................................................2 1.2.2 Specific Objectives and Research Questions .............................................................................2 2. LITERATURE REVIEW ...............................................................................................................3 2.1 Securitization ............................................................................................................................3 2.2 Finance needs in professional tennis.........................................................................................4 2.3 Financing in other sports ...........................................................................................................6 2.4 Determinants of success in professional tennis ........................................................................7 2.5 Crowdfunding .........................................................................................................................11 2.6 Lead to the research questions ................................................................................................13 2.7 Other business models ............................................................................................................15 2.8 Conclusion of literature...........................................................................................................16 3. DATA AND METHODOLOGY ..................................................................................................16 4. RESULTS .....................................................................................................................................21 4.1 Back testing portfolios ............................................................................................................21 4.1.1 Portfolio I: Top 20 ITF Juniors 1998 .......................................................................................23 4.1.2 Portfolio II: ATP500-600 under the age of 26 in 1998 ............................................................25 4.1.3 Portfolio III: Top 50 ITF Juniors 2004 ....................................................................................29 4.1.4 Portfolio IV: Top 50 ITF Juniors 2005 ....................................................................................31 4.1.5 Portfolio V: 20 College Players Who Turned Pro ...................................................................34 4.1.6 Comparing Portfolios ...............................................................................................................37 4.2 The relationship between ranking and earnings in men’s professional tennis ........................38 4.2.1 The relationship between singles ranking and earnings in singles ..........................................39 4.2.2 The relationship between doubles ranking and earnings in doubles........................................42 4.2.3 The relationship between earnings and rank in singles and doubles ......................................44 4.2.4 The change in impact of rank on total prize money over time ................................................47 4.3 Future prize money in tennis...................................................................................................53 5. CONCLUSION .............................................................................................................................60 5.1 Portfolios .................................................................................................................................60 5.2 Impact of ranking on earnings in men’s professional tennis ..................................................61 5.3 The change in impact of ranking on earnings in men’s professional tennis. ..........................62 5.4 The benefits of creating portfolios of tennis players. .............................................................63 5.5 Topics for new research ..........................................................................................................63 7. REFERENCES .............................................................................................................................65 8. APPENDIX – SLAMSTOX .........................................................................................................66 ii ABSTRACT The following thesis gives an insight in the financing needs, prize money structures and determinants of success of professional tennis players. It will provide an analysis on how combining tennis players into portfolios and selling shares of these portfolios to investors could be beneficial to the players, the investors and the sport of tennis in general. The results of the thesis are divided into different sections. The first section examines the profitability of portfolios that could have been created in the past and what players could have been selected for these portfolios. These portfolios will be analyzed and compared to each other in terms of prize money and profitability. It will give an insight in the earnings of junior players, active professional players and former college players. The second section examines the relationship between ranking and earnings in men’s professional tennis and how this relationship has changed over the period of 1998 until 2013. It provides an analysis on how to predict prize money by ranking in tennis for singles, doubles and the combination of the two. The formula that is created by this analysis in combination with prize money during past editions of Grand Slam tennis tournaments will then be used to predict the future income of professional tennis players. In addition, an appendix will show information on the company that has been started out of the idea of this thesis: creating portfolios of athletes and selling shares of these athletes to investors. The name of the company is Slamstox and more information can be found on www.slamstox.com. iii LIST OF TABLES Table Page 1 Portfolio Top 20 ITF Juniors 1998 ................................................................................... 23 2 Earnings Portfolio Top 20 ITF Juniors 1998 .................................................................... 24 3 Portfolio ATP500-600 under the age of 26 in 1998 ........................................................ 26 4 Earnings portfolio ATP500-600 under the age of 26 in 1998 .......................................... 26 5 Portfolio Top 50 ITF Juniors 2004 ................................................................................... 30 6 Earnings portfolio Top 50 ITF Juniors 2004 .................................................................... 30 7 Portfolio top 50 ITF Juniors 2005 ..................................................................................... 32 8 Earnings portfolio Top 50 ITF Juniors 2005 .................................................................... 33 9 Portfolio 20 ex college players who turned pro ................................................................ 35 10 Earnings portfolio 20 ex college players who turned pro ................................................. 35 11 Results of regression ranking on log singles prize money ................................................ 41 12 Results of regression ranking on log doubles prize money .............................................. 43 13 Results of regression singles and doubles rank on total prize money ............................... 46 14 Regressions of ranking on prize money over the years 1999-2013 .................................. 48 15 Singles coefficients of regressions over the years 1999-2013 .......................................... 49 16 Regression of time on actual coefficients ......................................................................... 52 17 Prize Money Wimbledon; past 3 editions and expectation for next 2 editions ................ 54 18 Prize Money US Open; past 3 editions and expectation for next 2 editions..................... 55 19 Prize Money AUS Open; past 3 editions and expectation for next 2 editions .................. 56 20 Prize Money French Open; past 3 editions and expectation for next 2 editions............... 57 21 Expected