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OK, so what's it worth?

Gi Business Editor Richard Gillis examines eight awkward questions the people who run the Ryder Cup would prefer we didn’t ask

The last Ryder Cup on this side of the Atlantic, at the K Club in 2006, generated revenue of some £50 million, of which just over £10 million was declared as profit. The European Tour retains 60% of the income when the tournament is played in Europe, with the remainder split between the UK and European Professional Golfers’ Associations.

It wasn’t always like this. For the majority of its existence, the Ryder Cup was a cost, not a money-earner: it wasn’t until Europe started winning, under Tony Jacklin’s captaincy, at The Belfry in 1985, that the event broke even, returning its first profit of around £300,000. The previous ‘home’ event, at Walton Heath in 1981, made a £50,000 loss, as did every other event running back to...well, to the very first match.

There is a considerable difference in the revenue split between the European and American golf tours, a source of irritation to the Europeans. The PGA of America owns the rights to the ‘American years’, and the European Tour controls commercial rights on this side of the Atlantic. The PGA of America benefits from being able to sell the property into its own huge domestic market and keep most of the profits. The money is divided on a ratio of 5:1 in favour of the Americans.

The event at Oakland Hills in 2004, at the peak of the banking and sponsorship boom, made an estimated $70 million in revenues for the Americans. By comparison, the US Open garners $50 million and the Masters about $45 million, though both must pay players’ purses. So, in commercial terms, the Ryder Cup is the European Tour’s ‘major’, but one that only comes around every four years.

Where does the money come from?
The main source of income is the European Tour’s television rights deal with Sky, which began in the 1990s and was resigned in 2006 to run through to the 2012 Cup at Medinah.

This is the single most important contract to the financial health of the game in Europe. The TV rights to the cup are bundled in with those of the European Tour as a whole. Other income streams include sponsorship, licensed merchandise, digital and radio rights and corporate hospitality. Tickets and hospitality are part of the packages bought by sponsors such as BMW, Emirates and Mastercard. In addition, the European Tour sells separate corporate hospitality packages to third party agents, who sell them on for anything between £800 to £10,000 a head or more. The money generated helps prop up the less profitable events on Tour. But even with this cash cow, some famous events have slipped off the schedules, notably the British Masters, the European Open and the English Open.

Is it getting too corporate?
The number of corporate guests at Celtic Manor will be a point of tension, given that tickets are in such demand from genuine golf fans (although tickets were still available this year well into August – surely a sign of the times). Of the 40,000 tickets sold for each day at The K Club in 2006, 7,500 went to the corporate sector, roughly 20% or 1 in 5. According to a sponsorship expert, each of these corporate tickets is worth around 10 times more to the European Tour than an ‘ordinary’ ticket, the bulk of which are issued by ballot to the public.

When questioned, a spokesman for one leading sports agency told Gi: “Why not make it 50% – the demand from business is there, so why wouldn’t you?”

When a governing body gets this equation wrong, it’s a public relations disaster – witness the empty seats at the recent World Cup semi-final as an example, when sponsors guests didn’t turn up. Ironically, the market for corporate hospitality has nose-dived, particularly among golf’s big financial supporters, such as the banks and car makers. As a result, the number of corporate tickets is likely to be less this time around and the word around the sponsorship market is that the European Tour has struggled to sell its full quota of hospitality boxes this year.

Should the players get paid?
The boom in the Tours’ fortunes created by the Ryder Cup has been noted by the players and their agents, some of whom have questioned why they are not getting a cut. When it was revealed how much money the PGA of America made from the Ryder Cup at Brooklinein1999, it caused considerable unrest in the locker rooms. The players, most notably Tiger Woods, demanded answers.

Mark O’ Meara,Woods’ best friend, acted as unofficial spokesman, raising the issue of player payment. At a press conference, O’Meara turned to the attendant journalists and said: “You should come and donate your salary to a charity that week, too. You guys don’t mind doing that, do you? Either that or they shouldn’t charge the spectators to come and watch.”

A compromise was reached whereby the PGA of America donates $200,000 per player, with half going to charity and the other half to a college development programme in each American player’s name. But Hunter Mahan stoked the issue again ahead of Valhalla last time out, likening the American team to ‘slaves’. “At some point the players might say, ‘You know what? We’re not doing this anymore, because this is ridiculous’,” said Mahan. “Mickelson and Tiger – their time is worth money. Is it an honour to play?Yes, it is. But time is valuable.This is a business.”

The spat was informative, revealing an area of conflict between players and the tours, bumping into the broader issue of how much promotional work is done by the players on behalf of the sponsors.At the pre-event dinner ahead of the BMW PGA at Wentworth, Dunhill chief Johann Rupert criticised the players and their agents for failing to support the European Tour’s sponsored pro-ams.

Does the captain get paid?
Not directly,but it’s still a very lucrative job.The official line is that the captain is paid ‘all reasonable expenses’ incurred while carrying out his duties. But since Tony Jacklin transformed the role in the early1980s, the job of European captain has grown into one of the highest profile in sport. Along with this profile come many business opportunities, and recent skippers have taken full advantage. During his time at the helm, Nick Faldo became brand ambassador for adidas/Taylormade, luxury car maker Maybach and signed deals for newspaper and magazine columns. The European Tour viewed this money as a leak and has tightened the amount of commercial deals Colin Montgomerie is able to do as captain. But it remains a great platform to take to market after the event, raising his course design fees,media deals,etc, further down the road. Jacklin told Gi “There’s at least a million in it now” if it’s worked right, adding that he received no more than £50,000 “and a crate of Johnnie Walker whisky” for his troubles.

Why is it not live on free-to-air television?
Money. The European Tour, along with governing bodies for cricket, football and rugby union, successfully lobbied government to prevent them being forced to sell the biggest events to terrestrial television. They were worried that this would reduce the rights fees they could earn. But this is seen as a short-sighted strategy by many, including the English Golf Union, who complained to the DCMS: “This lack of exposure directly impacts on new people taking up sport. It is clear that when golf appears on television about the time of the Open Championship it creates an influx of new players to municipal courses and golf clubs and par-3 courses. I understand Wimbledon has a similar effect on tennis. The loss of the Ryder Cup from free-to-air had a damaging effect. It is high-intensity, edge-of-the-seat golf; the best advert for the game. Viewing figures on Sky are woeful and golf loses a vital audience.”

The viewing figures for the 2006 Ryder Cup peaked at 4.6 million in the US, 1.1 million in the UK and 600,000 in Ireland, the host country. This represented a fall on previously reported figures, and well below the billion viewers that the Irish government touted when seeking to justify using taxpayers money to support the event. Similar figures are being touted this time around. The Welsh Assembly is quoting a study suggesting the cup has a potential audience of two billion people.

By contrast, the R&A has just extended its deal with the BBC for the Open Championship for a further five years. Peter Dawson admitted that Sky offered more, but as the money made from the Open would go to develop the game’s grass roots, he says “it’s hardly consistent, is it, to then show the Open to a restricted audience?”

Food for thought there.

Why is it not played at the best courses in the country?
The selection of the venue has become a big money-maker for the European Tour. Celtic Manor’s owner, Sir Terry Matthews, has invested around £50 million in bringing the Cup to Wales, a figure that includes committing to sponsoring the Celtic Manor Wales Open for ten years, building the course and developing the hotel facilities in time for one week in October. The Ryder Cup creates “publicity we couldn’t buy” says Gareth Rees- Jones, head of marketing at Celtic Manor, who points to a 58% rise in green fee income at the hotel’s three courses as evidence that golfers “want to say they have played the course”. But the longer-term benefits of hosting the event are uncertain. Accounts for The K Club in 2007 showed losses of €5.5 million and green fees at the course have fallen from (a totally ridiculous) €400 in the summer before the Ryder Cup down to €90 earlier this year. It feels like a long time since Tiger Woods stayed at the €3,800-a-night Viceroy suite and Bill Clinton was seen eyeing up a €1.2million duplex (now going for €380,000), while Lehman Brothers bankers coughed up €900 a head on the 12-minute helicopter ride from Dublin to the K’s own helipad.

Where will it be played in the future?
Despite the experience of the K Club, there is a queue of countries keen to host the event in 2018 (after Gleneagles in 2014). France, Germany,Spain,Portugal and Netherlands are in the frame. France and Germany are favourites. “Golf is not a major sport in France,” says Christophe Muniesa, executive director of FFG, hoping a Paris based Cup would raise the 410,000 registered golfers in France to 700,000 by 2020. An agreement to levy a charge of three euros a year on every registered golfer in France is aimed at raising the necessary funds in what has turned into a high-stakes game. The budget for the French bid is €700,000 says Mr Muniesa, a figure he calls “the price of transparency”.

He adds: “We are very comfortable with the new bidding process because before there was no process and so we didn’t get the chance to bid.” In addition, the government of each country is expected to support the bid and help provide a fund for infrastructural and event costs. The total bill is expected to be in the region of €18million. The greatest threat may come from the German bid,which is led by former Ryder Cup captain Bernhard Langer and backed by private money, most notably that of car maker Audi, which has committed to paying for a new course to be built. The biggest obstacle to a German win is whether the European Tour, which is heavily supported by BMW, would allow its prized asset to be played at an Audi- branded course. Like many things to do with the modern Ryder Cup, the golf is just part of it.

Reproduced with kind permission of Golf International Magazine

 

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