CAN THE USTA BE SAVED?
In-depth analysis of what led to Mike Dowse’s resignation.
Did the gross incompetence of USTA executives play a part in it?
By Rich Neher
CONTEXT: All points stated are based on insider information by current and former national and sectional staff, board members, committee members, and executives.
For me, this is for the most part a story of gross incompetence by people who have no business running a half-billion-dollar organization. I'll be focusing a lot on former CEO Gordon Smith and former CEO Community Tennis Kurt Kamperman because although both rarely saw eye-to-eye they were still overseeing the biggest decline in American tennis while creating a disastrous spending spree for the USTA. But I'm getting ahead of myself. One step at a time...
(I apologize for the length of this article but I needed to go into details of a lot of topics.)
HOW DID IT ALL START?
After the tennis boom of the seventies and eighties, which is when tennis matured as a sport, tennis pretty much stagnated. Nothing much happened in the nineties, either. The USTA was running and expanding the US Open and the 17 sections did much of the grassroots work. However, some bad apples began to show up and caused reason for concern about the real mission of the organization.
Since I worked on the USTA Tennislink Team from 2006 until 2010, I gained unique insights into the dealings around the Active Network, USTA’s technology partner, and the people in charge in White Plains. Renaming the term R&D to “Rip off and Duplicate” did actually not originate with Kurt Kamperman. He just reportedly tried to perfect it. The USTA had a Managing Director, Advanced Media who I was told became the master of R&D as far as technology and the internet were concerned. According to reliable sources, he plagiarized a proprietary program called TMS which stood for Tournament Management System and spent millions of dollars to create the USTA’s own system he called TDM (Tournament Data Manager).
The USTA started to look more and more like a non-profit trying to drive tennis for-profits out of business.
Kamperman had been hired in 2005. When Gordon Smith came on board in 2007, the spending began to intensify. It started with his salary that went up to 750K and eventually 1.3M (plus “other”). Other executive salaries went also up. Kamperman famously predicted in 2010 that the USTA would have 1 million members by 2015 but he obviously had no idea how to get there. Today, a dozen years later, they still are at the same level of about 655,000 members.
The below chart shows the USTA executive compensation in 2009.
Kamperman was overseeing Community Tennis and with it Tennislink which worked well for many years until he decided it was time for the USTA to re-take control over it. That’s where Deloitte came in and it became expensive again. Don’t forget, at this point money was really growing on trees for the USTA executives. They didn’t care that the organization was hardly making any money or lost money.
At about the same time, Kamperman was put in charge of negotiating with the governing body of Pickleball, the USAPA, to seek common ground. Little did he know that they really didn’t want anything to do with the USTA or him personally and laughed at his attempts to convince them to change their dimensions so that their court size would mirror ROGY Green, which could accommodate pickleball on existing full-size tennis courts.
It may look to some that Deloitte, a business consulting company that was (and still is) a BIG US Open sponsor, put pressure on the USTA to hire them for big tech development projects. Or was it the other way around? Did Smith or Kamperman promise large projects for Deloitte to stay on as US Open sponsor? Any way you look at it, it doesn’t pass the ethics smell test, does it?
2016 - HIRING OF CRAIG MORRIS
How it happened that someone at the USTA Board of Directors realized that tennis wasn’t growing, the enemy Pickleball was knocking on the gates, and the number of kids playing tennis was an embarrassing scandal for such a big country is unclear. Maybe someone found out that the 10M players the TIA postulates as "latent demand" for the past decade really hasn't changed at all because none of the executives knew how to attract them into tennis. Gordon Smith, a lawyer, seemed untouchable, so the real culprit was apparently identified as the CEO of Community Tennis. Kamperman’s hold over the board must have been significant because they decided to not fire him but look for his replacement and offered to transfer him (and his secretary) to Orlando to oversee the National Campus there as CEO. Nice deal!
How the extensive search that most likely had cost them hundreds of thousands of dollars resulted in the hiring of Australian, Craig Morris is a mystery to me. He didn’t come with any significant accomplishments. No one knows how a tennis coach who somehow became Tennis Australia’s “Director of Participation” got the big job at the USTA. At the time, I didn’t think it was foul play but rather the usual incompetency by the board, to be honest. Craig Morris came with the cure-all for all USTA woes: A program he coined Net Generation. Everyone, from the CEO to the board, must have been quite eager to buy into the dream of creating this big magnet for pulling kids into tennis. And with a name like Net Generation, how could they ever go wrong even though it clashed with “Next Generation,” which was heavily utilized by TV commentators to describe the up-and-comers?
Does anyone have any doubts that the other purpose of Net Generation was to take over and control the teaching jobs in this country?
Turns out that Net Generation was just another boondoggle like so many USTA programs before. The times when things were being tested in the sections, like the adult league program, were way behind us.
No, the mantra was “our way or the highway” which was reflected in other ill-conceived measures like getting rid of the backbone of every good sports organization, the volunteers. The man who concocted the silly notion that USTA national was much more capable of stimulating tennis growth than volunteers, was also the man who oversaw the decline in the number of League players. How Jeff Waters got that job is another mystery to me. When he was finally relieved of his duties, they allowed him to become Managing Director Section Support and Services, an area he was already responsible for.
In a for-profit corporation, when leaders are underperforming and turn out bad gatekeepers of the shareholder money, they’re fired. At the USTA, they are being moved or allowed to retire without consequences.
The spending frenzy continued and the Deloitte adventure cost the USTA members, the sections, and the taxpayer about $30M. For some obscure reason, the USTA nominated a former pro player and coach as the go-between to Deloitte while that company farmed most of the development work out to offshore developers.
When it dawned on the USTA executives that Deloitte wasn’t able to finish the job as expected, instead of asking for a million-dollar refund from the US Open sponsor, the USTA went to the UK and hired ClubSpark, a company that had never done any job of the magnitude the USTA required. Millions more were spent. It's entirely possible that former USTA President and now ITF President Dave Haggerty had a hand in this. Maybe helped by ITF Board member and former USTA President Katrina Adams?
At about that time, Mark Leschly, the CEO of Universal Tennis, went to Orlando to persuade the USTA to work together for the good of the sport and create a big community with lots of new programs. Unfortunately for all of us and the entire tennis community, he had to deal with people whose “Rip off and Duplicate” engine immediately went into overdrive. I can imagine that the plan to rip off UTR and plagiarize it as a USTA product began to form before Leschly even had a chance to close the conference room door behind him.
ClubSpark had to come to the rescue. They again put a lovely woman in charge who was a good product manager with Tennislink customer service background but had no idea what she was doing when it came to migrating a project to a new developer. And then the disaster with ClubSpark and Serve Tennis evolved while the company was tasked with a new project: Create the World Tennis Number (WTN). The USTA project manager and liaison to ClubSpark wanted the WTN project to succeed no matter what. NTRP was being badmouthed and the National Oversight Group (NOG) disbanded. The NTRP year-end ratings for 2020 were canceled while Covid was conveniently blamed. We are still waiting for WTN to come out in the USTA after the 2020 and the 2021 launches were postponed.
THE SHIP BEGINS TO SINK
Whether the idea of building Lake Nona while constructing the roof at the US Open was initiated by the board or by a CEO who wanted his ‘legacy’ preserved is unclear. What we do know is that spending was in a free fall while the organization still lost money year after year and executive salaries and perks kept climbing. The warning signs should have been there but neither the Board nor the executives seemed to care. Why should they? If their own CFO didn’t care, everything was all right. No?
Let’s be very clear on the issue of financial losses, folks. According to tennis friend and USTA critic Javier Palenque, in the last 5 years, all the profits reported were due to the investment of the reserve funds and its corresponding returns. If those were excluded from the income statement, the average loss of operation from 2015-2019 was $10M per year (a cumulative $40M), and the 2020 losses a horrific $181M. In the previous 5 years between 2010-2015, some years had small profits others had similar losses. Overall though it is clear that the operations lost money.
While the house was already on fire, the roof over Arthur Ashe stadium cost between $150 M and $200 M. I wonder if the battle-hardened USTA executives had the foresight to combine the investment of the roof with a long-term commitment from media partner ESPN.
If ESPN does not renew the contract the USTA is saddled with the debt and has to turn to the only broadcaster still interested in taking the job: The Tennis Channel, a company with little or no cash for such an undertaking.
In the meantime, The USTA National Campus at Lake Nona in Orlando had been built and when it was finished, the 100-court facility with lots of expensive PlaySight installations nobody wanted had cost $80 M and produces annual losses of about $3M. At the same time, Player Development grew to a staff of 75 and $23M annual expenses.
I can’t imagine the USTA’s Chief Financial Officer is sleeping well at night. Why is he still in office? Why he hasn’t been fired is one of my many questions.
Gordon Smith must have seen what’s coming and decided to retire effective at the end of 2019. He knew the USTA-loyal media that relied on hundreds of thousands of advertising dollars from “Mother U” would praise and celebrate him. Instead of reporting that he oversaw the biggest decline in U.S. tennis and instead of growing the sport grew salaries and spent hundreds of millions of dollars, they kept writing about the great things he’s done with the US Open and with the “Home of American Tennis” in Orlando.
The search for a new CEO began.
I don’t want to repeat how much organizations like the USTA spend on hiring executives. It’s obscene in my opinion. I could have done this for a fraction of that and probably would have still come up with Mike Dowse on my shortlist. Here’s finally a man with industry experience running for-profit tennis businesses like Wilson Sporting Goods. Not some lawyer or tennis coach coming up in the nonprofit world.
The below chart shows the USTA executive compensation in 2019, Gordon Smith's last year.
MIKE DOWSE BECOMES THE KNIGHT IN SHINING ARMOR
Whether Dowse fully knew about the financial situation of his new employer or not, we’ll probably never find out unless some board members decide to talk. If he knew, he must have been pretty confident steering the ship into calmer waters. After all, how tough can it be? You trim your payroll, stop the spending, and do what Pickleball does, build an army of enthusiastic volunteers to start growing tennis again. If he didn’t know, I would have to change my opinion about his business acumen. I mean, if a new CEO is not doing his due diligence and looking through the books for the last 10 years, there’s something wrong with him. Don’t you think?
Others think he was blended by the fat carrot the media and the Board were dangling in front of him: Grand Slam organization, 100-court National Campus with Florida office, the big salary of $1.3M, travel to other Grand Slams, and his own suite at the US Open.
And then the Pandemic hit us with all the nasty consequences that came with it. Unfortunately for Dowse and for tennis, none of the USTA sections (and national) were really prepared for it. Tennis players, fans, most USTA sections, and districts are notoriously bad at advocating for our sport. It seems beneath us to get in front of cities, counties, Parks & Rec Commission and advocate for tennis like Pickleball, Football, Baseball dads, and soccer moms do so well for their sports.
It took a long time for the industry to start reacting but it took little time for Mike Dowse to jump into action. The born Chief Executive took charge and created “Tennis Industry United” which “developed educational, downloadable and customizable resources and information to help our local tennis advocates promote the benefits of tennis, attract new players and re-engage past players.”
At the same time, Dowse started to cut expenses by reducing staff by 110, even from Player Development. It appears to me that the move to put Player Development at the same time under Community Tennis may have been designed to further obscure the obscene spending for this highly unsuccessful department. Little did he know that PD is a sacred cow for the USTA Board of Directors that are infatuated with the idea they need to find the next Grand Slam champion. Cutting down their PD? They would not have it!
To everyone’s surprise, 2020 was also the year Kurt Kamperman decided to retire by the end of December. In another surprise move, he left the United States for a CEO job at Tennis Nova Scotia in Halifax, Canada, home of the new USTA Customer Service team outsourced to defense contractor Blue Ocean. Carefully worded media praise called his tenure at the USTA “During his 14 years as the USTA’s chief executive of community tennis, Kamperman oversaw the USTA’s efforts to increase tennis participation in the United States.” The emphasis here is the word “efforts” because it appears he never accomplished that task. Not even close.
One has to wonder what Kamperman's goals at Tennis Nova Scotia are and why he was hired. It smelled like another quit pro quo deal and we're currently investigating it. The organisation is tiny with a staff of 2 and a board of 12. I wonder whether some of them are readers of TCB.
DOWSE HAS HAD ENOUGH
So the Dowse-initiated cuts did not work for reducing overhead because everything seems back to normal today. I assume he ran into the combined opposition of "good old boys" board and executives. Spending is also back up and we’ll soon find out where more millions were being wasted for more useless projects nobody wants.
On December 5 I heard the first rumors that Mike Dowse’s job was on the chopping block. Then I heard that the USTA “Gang of 51” (Section ED’s and Delegates, national board, and executives) were planning an unscheduled meeting in New Orleans the following weekend. That group normally meets twice a year at both the annual and semi-annual conferences. On December 8, USTA President Mike McNulty informed everyone of Dowse’s resignation and the press release went out the same day.
My informants are telling me about turmoil during that New Orleans meeting. Executive Board vs 8 sections led by Southern that demanded more money for them and less for national. Complaints about abysmal Net Generation performance. Long overnighters to reach some sort of a compromise. There are rumors that the board lost all confidence in Craig Morris whom one of the participants described to me as “BS artist on steroids.” The sections also rejected signing on to the new “Dashboard” with updated metrics they are expected to hit in the future. Seems to me there is no love lost between at least some of the sections and “Mother U.” There is also a persistent rumor that the USTA has plans to completely take over Pickleball. Too far-fetched if you ask me. Or is it?
Dowse had to face the realities of an organization with $710 M of debt, a "B" credit rating, huge principal/interest payments due in the coming years, revolts from the sections, no end in sight for the ClubSpark money pit, questions about the ESPN renewal of its US Open commitment, executives used to enormous salaries and out-of-control spending.
Most of these things a “normal” organization with smart business executives doesn’t have to deal with.
It is likely that Dowse finally gave up seeing that the board would not go along with further cuts which were even more drastic. I cannot imagine the Board fired him because his cuts were not drastic enough.
I'm going out on a limb assuming that Dowse realized that though he was hired by the board he later understood that the way the voting works and the governance of the organization is so counterproductive to being efficient and logical that he thought this is nonsense and said, "F-u, I quit." As an experienced businessman, this entire organization and its board were just too political to handle and impossible to fix.
Unless Mr. McNulty and the board members come to acknowledge that the old ways will not work anymore and that the problem is the governance structure and the board, the problems will only get larger and the cost of fixing them will increase at a time when the revenues will decrease. It is time to sincerely acknowledge the limitations of the board and executives and the dire financial situation the organization is in. A new management team is needed and it should not include the executives who caused these problems.
Here are my questions for Mike McNulty:
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Why has the board not resigned yet?
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Why does your CFO still have his job?
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Why does your CEO of Community Tennis still have his job?
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Why do so many USTA executives make over a half-million dollars a year?
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When are you starting to hire executives with BUSINESS experience?
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How many millions are you planning to spend on the new CEO search?
What are the chances Mike McNulty would ever reply? One thing is certain, "ignoring the noise" is not getting USTA critics off his back.
It's also a moot point anyway. McNulty has become a lame duck in his 2nd year as USTA President. An insider called this "the perpetuating insanity of the USTA structure as the Presidency is just a figure-head position for someone whom they think has paid their dues and deserves recognition." They don’t really do anything, except state what their platform might be, like “grassroots tennis” or “Hispanic initiative” which is just a regurgitation of what Franklin Johnson’s platform was. No one cares.
Oh, one more message for the current USTA President: Gordon Smith, Kurt Kamperman, and recently it seems also Mike Dowse had bought into the fairytale story of bogus high participation numbers provided by the TIA, and based on questionable data provided to them by SMS in my opinion. I understand that you all want to believe in high participation numbers obscured by terms like core vs casual players, latent demand, registrations vs unique players, etc. It helps you hide the true numbers that I have last year conclusively proven (with ball sales data) to be much lower. Folks, when they tell you they counted 22 million players, just ignore it. It's called pulling the wool over our eyes.
Whoever put those numbers on paper didn't care to check whether ball sales correlated to participation numbers since I don't think players all of a sudden stopped buying balls.
Y'all should be ashamed of yourselves. My advice: stop that nonsense and face the realities. Tennis has lost millions of players under your watch and you are under the current conditions not capable of bringing them back.
The headline of this article is CAN THE USTA BE SAVED? I'm not sure we can answer this question with a degree of certainty. The country and the entire tennis family need to know about a governing body of tennis that is being led by the most incompetent executives and board members. I feel sorry for the many hundreds of USTA staff members who are working their butts off trying to grow tennis while watching their executives raking in the money and giving them ever-changing directives. I've personally met hundreds of them and know the quality of their work and their attitude. I can tell you all one thing: Unless the top executives and the entire board resign, and make room for business-savvy professionals, nothing will change and the good ship USTA will sink.
I wish you all the best, Mike. I know you've tried. Mind you, there may be an opening at Conga Sports next year...
Latest update:
My sources are telling me that 8 out of 9 past USTA presidents have written a letter to the section heads a few days ago in regards to section demands for more money while the USTA's financial situation is precarious. If investors lost faith in their bonds it would be a disaster for the organization. They felt that there were many people in sections who just were not informed or intelligent enough to understand what they were voting for and how much that would jeopardize the future of the USTA.
Of course, those $710M in guaranteed notes can be recalled at any time. I am calling on the section chiefs to stand their ground. Force big changes from USTA national. Make them give you their checkbooks and stop writing checks. Fire all executives, the entire board, and half the staff. Close Player Development and all non-essential functions. Appoint Mike Dowse to oversee a restructuring and start fresh.
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