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Uncertainty over corporate
sponsorship
The PGA Tour appeared to be blessed with good timing in July when it negotiated
a new television deal worth close to $1 billion. Now comes the hard part -- passing
along that increase to tournaments in a sluggish economy.
Over the next six months, the tour will try to get each tournament to sign
up for another four years at a cost reported to be anywhere from $5 million to
$8 million each year.
Almost every tour event relies on corporate title sponsors to carry the load.
But an economy that was sluggish even before the terrorist attacks has led to
financial uncertainty.
``We know the price of poker is going up. We're not jumping for joy,'' said
Jim McGovern of Buick, the oldest and largest sponsor on the PGA Tour, with four
tournaments.
In the past few months, Canon has said it won't be the title sponsor of the
Greater Hartford Open after 2002. Air Canada is pulling out of Vancouver after
next year, and Advil has decided to end its sponsorship of the Western Open.
``We're going to have some transition,'' PGA Tour commissioner Tim Finchem
said. ``We'll feel some pressure, and so will the tournaments. When companies
get in this position, they don't spend as much in corporate entertainment.''
In the PGA Tour's corner is the fact golf, driven by the amazing accomplishments
of Tiger Woods, has never been more popular. Only the PGA Tour and NASCAR have
enjoyed increases in television ratings in recent year.
Still, no one is sure what to expect.
The Western Open is looking for a title sponsor for the second time in three
years. Motorola ended its relationship with the tournament in 1999 and was replaced
by Advil. That search took about six months. Asked if this was a good time to
be looking for a sponsor, Western Open tournament director John Kaczkowski laughed.
``Take a look at the stock market,'' he said. ``How were your stocks doing
in '98? The economy has softened over the last year. It's hard to justify a sponsorship
internally when you're laying off people.''
Along with the Western Open, Vancouver and Hartford, tournaments that have
survived without corporate title sponsors also are searching. The B.C. Open tried
an online auction to find a sponsor. The Phoenix Open is contacting at least six
companies.
Is the tour asking for too much money?
``Call me in January,'' tournament director Scott Henderson said. ``Certainly,
the increased dollars is going to be a factor. But no one has told us they have
no interest because of that. We're not seeing folks run away because of it.''
The Greater Hartford Open is the biggest sports event in New England, bringing
in about 300,000 fans for the week. Canon will end its 18-year relationship next
year, and tournament director Dan Baker is optimist about finding a replacement.
``But you're always concerned until you get one,'' he said.
Of equal concern is the rapid growth of purses. Four years ago, the season-ending
Tour Championship was the only tournament with a $4 million purse. This year,
17 tournaments offered at least that much in prize money.
The burden falls to each tournament, which raises money for operations and
charity through title and secondary sponsorships, television revenue, corporate
hospitality tents, tickets, concessions and merchandising.
The PGA Tour kicks in money from its TV contract -- nearly 50 percent under
the current contract, a figure that will increase to 62 percent with the new contract.
The tour puts the rest of the money into a general fund for administrative costs,
retirement and benefits packages, scoring operations, fitness trailers, etc.
Henry Hughes, senior vice president and chief of operations for the PGA Tour,
said the rates were reduced a little from estimates sent to tournament about two
months ago, and several tournament directors said they were pleasantly surprised.
``Was it scary? Not really,'' Kaczkowski said. ``I think the tour has realized
they were pretty fortunate to finalize negotiations for the TV deal when they
did, and that it would be unrealistic to pass along huge costs to title sponsors.''
Turnover in title sponsors is nothing new.
During the four-year television deal that ended in 1998, seven tournaments
changed names when they had to fine a new title sponsor or failed to replace a
sponsor that left. With one year left on the current TV contract, seven tournaments
have changed titles.
``I don't anticipate it's going to be significantly higher,'' Hughes said.
Western Open and Greater Hartford Open officials are optimistic about finding
new sponsors by June, and Hughes said 10 to 12 major companies are interested
in sponsoring PGA Tour events.
Of equal concern is the second tier of sponsorship, especially corporate hospitality.
Discretionary dollars usually are the first to dry up when times get tough, and
Hughes acknowledges that it will be ``increasingly more challenging to secure.''
``But we don't have any signs that doomsday is coming,'' he said.
The question is whether the PGA Tour -- and ultimately, prize money -- will
continue to grow at the same rate. At the end of the previous television contract
in 1998, David Duval won the money title with nearly $2.6 million. Tiger Woods
has a chance for his third straight $6 million season with at least a second-place
finish in the Tour Championship this week.
There were 26 players who earned at least $1 million in 1998. This year, 55
players already have surpassed the $1 million mark.
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