Economy has major golf scrambling to keep sponsors
By Carl Prine
Published: Sunday, February 22, 2009
Professional golf is stuck in the rough of the worst economy in nearly eight decades.
A plummeting stock market, fizzling TV ratings following injury to superstar Tiger Woods, a tidal wave of bank and brokerage buyouts and the slowing growth of the ranks of weekend golfers continue to bedevil the circuits.
And bad news continues to batter the tours:
• Hard-hit U.S. Bank is ending its sponsorship of the Professional Golfers' Tour's Milwaukee championship after July.
• Imploding luxury real estate giant Ginn yanked sponsorship of Ladies Professional Golf Association, PGA and Champions stops.
• No sponsors emerged to save an Atlanta tournament, on the PGA schedule since 1967.
• The LPGA is still seeking sponsors for October's Kapaulau Classic in Maui and the LPGA in China.
On Tuesday, federal agents raided the Houston headquarters of long-time PGA Tour sponsor Stanford Financial, seeking evidence of $8 billion in fraud. The Securities and Exchange Commission placed the company in receivership. PGA Tour commissioner Tim Finchem vows to play June's Stanford St Jude Championship, but the LPGA's season-ending Stanford Financial Tour Championship in Houston remains in doubt.
What's not in doubt: The American taxpayer increasingly underwrites professional tournament golf. Eight of the PGA Tour's 2009 events feature primary corporate partners that combined to receive $105.2 billion in federal bailout funds tied to the Troubled Assets Relief Program that benefits reeling banks and automotive manufacturers. Overall, about 8 percent of all published primary and lower-tier sponsorships at the three major circuits are held by corporations combining to take $185.3 billion in TARP assistance.
The Champions' Principal Charity Classic Presented by Wells Fargo pairs cosponsors receiving $27 billion in taxpayer help. Defunct Wachovia bank remains the primary sponsor of an April PGA Tour stop after being absorbed by Wells Fargo in a deal arranged by federal regulators.
So far, federal regulators have hesitated putting restrictions on taxpayer funds flowing to sporting events.
"While we have implemented new restrictions on executive compensation and luxury perks, we will not get involved in individual companies' marketing decisions," said Treasury spokesman Isaac Baker.
Although 22 PGA title sponsorships are slated to expire in 2010, officials remain upbeat. Last year, PGA and Champions revenues rose 9 percent to nearly $1 billion and generated a record $120 million for more than 2,000 charities, according to federal tax filings and Tour spokesman Ty Votaw. All sponsors are held to their contracts through 2009, and the PGA Tour is on pace to sign deals that pair title sponsors to tournaments through 2012, with Travelers Insurance and other firms extending their relationship through 2014, according to the circuit.
"We take a long view. Remember that from 2000 to 2002, we had to deal with the tech bubble bursting. Then we had 9/11. We came through those events stronger than ever. We're in uncharted territory, and admittedly past performance doesn't guarantee future results. But we're optimistic. A lot depends on how long the recession goes on. If this is just a down cycle, we've dealt with those. If it's a long-term, systemic problem, then it's another proposition. But then, everyone is hit by that," said Votaw, also a former commissioner of the LPGA tour.
LPGA officials express tempered optimism -- probably a tough 2009, but a good 2010 due to the rising popularity of winless rookie phenom Michelle Wie and recent lucrative deals linking the circuit to cable's Golf Channel and South Korea's JoongAng Broadcasting Corp. LPGA presses on with four fewer tournaments and nearly $5 million less prize money than offered last year.
"I definitely think that we'll take a hit. Everyone will. It won't be a plummeting number. Our goal is to get through 2009 without being down too much. In 2010, we'll take a significant step forward. The unprecedented TV kick-ins will be put into place, and they will be helpful. So, we'll maintain what we've earned and adjust with what comes our way. We'll be nimble," said LPGA spokesman David Higdon.
Most tour players might not be harmed by tournament golf's sponsorship snafus, and could in the short run make more moolah from their misery.
"I don't think many players are worried about the situation with primary sponsorships. In fact, I think they're looking the potential movement away from them by corporations as an opportunity," said Jeff Chilcoat, an agent with Columbus, Ohio-based Sterling Sports Management with dozens of pro golfers under contract.
Adorning a professional golfer's uniform with logos is cheaper than sponsoring a tour stop. To Chilcoat, a company can build "brand awareness" with logos, equipment and other visual cues tied to squeaky-clean athletes who saturate TV and other media every week, not just over a long weekend.
IN THE GREEN?
U.S. professional tournament golf is dominated by two nonprofit corporations headquartered in Florida -- the PGA Tour, Inc. and the LPGA.
PGA Tour, Inc., which split off from the Professional Golfers' Association of America in 1968, is the circuit featuring the world's best players, the guys like Tiger Woods, Phil Mickelson and Vijay Singh. It owns the Champions' tour for pros over the age of 50, plus the minor league Nationwide circuit. Television and radio broadcast money linked to other stops for nearly a third of its earnings.
The PGA Tour derives no revenues from the Ryder Cup or the four "Major" tournaments -- U.S. Open, British Open, The Masters and PGA Championship. Two of the Majors feature as top sponsors the Royal Bank of Scotland -- nationalized by the United Kingdom in October -- and credit card giant American Express, earmarked to receive $3.4 billion in TARP funds.
The women's tour never left the LPGA, the oldest American female sports association. The LPGA supports female club and teaching professionals. LPGA and its junior league, the Duramed Futures Tour, rake in more than $67 million annually, according to federal tax filings. The LPGA returns 67 percent of what it earns to players in the form of prize money. The PGA Tour puts a third of its revenues into purses for players.
Although LPGA expects earnings will rise because of the latest links to U.S. and South Korean networks, the circuit's TV take of $9.5 million pales compared to that of the PGA Tour. While that supported about a fifth of the LPGA's bottom line, about 80 percent of revenues are tied to tournament earnings, making fans who travel to tournaments very important.
The typical follower of both the male and female circuits is a married, college-educated white man approaching or ensconced in middle age. About half work as professionals -- lawyers, doctors and the like -- or managers. For those who travel to events, two out of five boast an annual income of $100,000 or more, according to surveys released by sponsors and the PGA and LPGA tours.
Companies drawn to these fans -- financial services, luxury brands, resorts, hotels and manufacturers turning out consumer goods and cars -- cater also to the PGA and LPGA Tours. For the PGA Tour, that's meant two of five title sponsors are either in the hard-hit domestic financial services or auto manufacturing sectors. At its satellite Champions' circuit, three banks seeking federal financial help are title or presenting sponsors.
"The traditional golf demographic is older, white males, 35 to 65, which fits the marketing for all these categories. We'll see if the banking shake-up means less spending of money on golf tournaments. One thing is certain, they're in those tournaments because they have found a demographic that's good for them," said Webster University economics professor Patrick Rishe.
Rishe's canary in golf's coal mine is the college football bowl games, which attract many of the same sponsors. He said if the bowl partnerships start to "tumble, corporate sponsors will be looking at how they're spending their marketing dollars in this environment. It will probably affect golf, too."
"Title," or "presenting," patrons are especially important to the tours because they invest so much money in exchange for naming rights, product placement and hospitality tents that wed their marketing forces, vendors and customers with elite golfers. The title sponsorship of a large PGA Tour event runs into the millions of dollars.
"The cheapest you could do any tournament would be $2 million or $3 million," said Randy Watkins, director of September's highly successful Viking Classic in Mississippi.
Its chief sponsor is luxury kitchen appliance giant Viking Range Corp., which is nearing the end of a four-year deal with the PGA Tour. The secondary sponsors include the Canadian National railroad, Entergy, Bank Plus and the State of Mississippi's tourism department, with more than 100 other local and national companies -- and 1,500 volunteers -- chipping in. The pricetag for a second-tier corporate partner is set in the hundreds of thousands of dollars.
Viking Range told the Trib the title sponsorship deal was good for the brand, largely because it marketed the event as more than a golf game. The company imported celebrity chefs to hobnob with PGA Tour players, fans and customers, a strategy designed to wed an upscale audience to golf and gourmet appliances.
"It's been a very good way to build relationships," said Dale Persons, a Penn Hills native and Vikings' vice president of corporate development.
THE WORST TRAP
The financial problems plaguing the three largest US golf tours don't occur in a vacuum. Growth in golf's popularity as a pastime has slowed. An estimated 28.8 million Americans played at least a round of golf in 2000, according to the National Golf Foundation. In 2007, 29.5 million teed off. Initial Foundation research showed that the number of rounds played last year dipped 1.8 percent, and equipment purchases toppled 10 percent.
Some critics say the tours' wounds have been self-inflicted, especially by the women's circuit. They worry the LPGA runs the risk of expanding too far into South Korea, Thailand, Japan and China -- moves that cut U.S. TV time and speed the influx of Asian players difficult to market to American audiences.
"The Tour faces an uphill battle. As it expands internationally, it dilutes its presence and importance in the United States," said Nancy Berkley, a Florida-based industry consultant.
This year, 15 of the 21 rookies joining the LPGA Tour are international players. An attempt over the summer to force LPGA tour pros to speak English backfired. The LPGA and Berkley have no doubt that more top-flight Asian stars will keep arriving, boosted by strong government support in their home nations that helps youngsters defray the costs of expensive equipment, lessons and greens fees.
"If TV viewers aren't attracted to the stars, then it's hard to sell the sponsorships, which in turn help keep the game on television," said Berkley.
LPGA disagrees. Executives point to Asia as a means to diversify sponsorships so that they don't fall into the same problem as the PGA Tour. They say U.S.-based corporations want to advertise their products in the fast-growing Asian and South American marketplaces, where tour spots increasingly land.
"It's been a growth opportunity for us. It's pretty exciting. The Tour remains primarily U.S.-based. Two-thirds of the events still take place in the U.S. The question is, 'Is that going to change?' Maybe, but not much. Diversification by design has been good for the game," said LPGA spokesman Higdon.
Higdon points to one LPGA rule the PGA Tour should copy: Prodding pros to visit all venues. LPGA players can't skip a tournament four years in a row. That means even big stars such as Paula Creamer and Mexican great Lorena Ochoa eventually play smaller stops, hiking attendance and TV ratings across the board.
PGA's Finchem asked athletes to consider adding a non-Major event or two they typically might skip in this era of high purses and lofty endorsement deals. The idea is to put bigger names at smaller stops such as Mississippi Viking Classic, which offers about $3.7 million in purse money -- about a third less than the typical tourney -- but toils to bring fans and stars together. At Viking, organizers have learned to count on players signing autographs, attending cocktail parties and playing a few rounds with locals and sponsors.
"They're great young players. Some older, but many of the younger, rising players. They appreciate the efforts of Viking and the other sponsors and they enjoy the spotlight they get in Mississippi. Players come to me saying, 'I will be available for any function.' That's been good for us," said Viking's Watkins.
"It's also good for the Tour."
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