The Sports Professor Rick Horrow reviews the five key questions facing the golf industry as we celebrate golf’s first Major – the 2006 Masters in Augusta.
Last weekend was arguably the most frenzied weekend of the sports calendar year – men’s and women’s Final Four, Major League Baseball opening, Major League Soccer kickoff (and World Cup preview), the NASDAQ-100 (the first “electronic replay” tennis tournament), the season debut of the AVP. After the sports business community catches its collective breath, it’s on to Augusta for the golf season’s first Major.
Since the dawn of the new millennium, the golf industry has grown by inches rather than yards. Retail sales and participation dropped dramatically after September 11, 2001. Yet, over 594 million rounds of golf were played in the United States last year at approximately 15,827 courses. Internationally, the golf market nears $40 billion and comprises over 40,000 golf courses. As the industry stabilizes and grows, the PGA TOUR shakes up its tournament and playoff format, while grass roots marketers try different methods to bring golf to the masses.
Five questions lead the way to Augusta.
Will the new television deal and playoff format be a long term success?
While the previous $850 million television deal created a relative windfall at the beginning of this decade, the industry soon realized that a shakeup was necessary. Since 1966, the PGA TOUR led all sports in television ratings increases (up 13 percent) – the only other sport with any type of comparative increase was NASCAR’s six percent rise.
The new six-year package of television deals with CBS, NBC, and The Golf Channel is reportedly worth over $2.5 billion – or about $500 million annually (compared to approximately $250 million annually under the old deal).
CBS and NBC are the bedrock players; ABC steps back after more than a decade of intense coverage. The Tour has also put many of its eggs in The Golf Channel basket. That network will televise the early rounds of most tournaments, and the new deal is expected to increase market share from 70 million to 90 million homes.
Key date changes include moving the Players Championship to later in the schedule, moving the Tour Championship to early September, and creating the new FedEx Cup as a grand season-ending playoff system. Early results seem positive, though the system will continue to be tweaked until its formal debut in 2007.
Commissioner Finchem notes that the deal will allow player prize money to increase by $600 million, from $1.6 billion during the last six-year deal to $2.2 billion through the life of the new arrangement.
While a season-ending playoff will take some getting used to, every other major sport save college football seems to get it. History suggests that such change is met with initial skepticism, and then rapid acceptance over the first two or three years – note NASCAR’s Chase for the Championship. Following suit, the LPGA has unveiled its new “Playoffs at the ADT.” After 32 tour events and a record $47.2 million in prize money, the LPGA playoff features eight players staging an 18-hole shootout, with a million dollar top prize.
Will Corporate America continue to embrace and support the economics of the game?
The love affair between Corporate America and golf remains critical, as corporate sponsorship provides over 65 percent of the prize money for the PGA TOUR. According to SRI International, the average golfer is a 39 year-old male who makes over $66,000 a year, owns 2.5 automobiles, has more than $75,000 in stock and $500,000 in life insurance. These demographics are the major reason why corporations spend over $609 million annually in golf advertising – fourth of all sports (behind NFL, Olympics, and college basketball). This “average golfer” also surfs the Internet 14 times a week – twice the national average. No wonder SportsLine.com will provide live streaming video from Augusta National’s “Amen Corner” this week, with advertising paying the freight.
