Sponsorship difficulties growing in USA

As Walt Disney World Classic Tournament Director Kevin Weickel piloted his electric golf cart past the 18th green at the resort's Magnolia Course last week, he pointed to the empty staging area where the massive sponsor's tent is traditionally erected.

It's empty now, of course, a flat and featureless stage of sun-bleached concrete. "Barring a miracle," it'll likely also be unoccupied Oct. 17-20 during the tournament.

It might be empty evermore, barring divine economic intervention. Even the self-titled "Happiest Place on Earth," where cartoon crickets croon about miracles and wishing upon stars, isn't immune to the sour financial news associated with the PGA Tour.

Facing the almost certain prospect of funding a pricey tour event for the second consecutive year because of sponsorship issues, Disney's run of tournaments conceivably could end when the final putt falls in the final round in six weeks, officials said.

As long as there has been a Disney World, there's been a tour event on the grounds. The 32-year-old tournament that has produced champions such as Jack Nicklaus, Tiger Woods, Payne Stewart, Ray Floyd and David Duval might be going down for the count, thanks to an economic downturn.

"It's part of the heritage and tradition, so nobody wants to see it end," Weickel said. "The theme park opened, the golf courses opened and the PGA Tour came to town, all within three months."

It could all end in a matter of weeks. Sometime before the tournament begins, Disney officials expect to decide whether the tournament will be mothballed, Weickel said. Because of an inability to find a replacement for former sponsor National Car Rental, Disney has not yet renewed its tour contract through the next signing period, 2003-06, hedging its future for now.

Last year, with the 2002 event remaining on its sponsorship pact, National Car Rental filed for Chapter 11 bankruptcy protection and failed to deliver $4 million in owed sponsorship fees. Facing the same void in its wallet again this year, Disney is understandably leery about signing a long-term extension with the tour with no title sponsor in place.

"Unlike all the non-profit tournaments out there," Weickel said, "we are a corporation that answers to the shareholders."

Disney is not alone

In what has become an increasingly distressing sign of the times, Disney is one of at least six PGA Tour events still seeking a sponsorship tie for next year and beyond, tour officials said. None of the approximately 50 potential sponsors contacted by the tour or Disney have agreed to sign on.

How slow is it?

Even the unique packaging of Tigger and Tiger is drawing a double-ought naught from the sponsorship world. Woods, far and away the top draw in the sport, has played at Disney every year since he turned pro in 1996 and the resort still can't find a buyer.

"It's a tough sell out there," said Bill Chipps, senior editor of the bi-weekly IEG Sponsorship Report. "Just because you have names like Disney and Tiger, that doesn't guarantee anything in this corporate climate."

If you thought "scramble" was a form of tournament golf, it has become a form of finding tournament funding. At PGA Tour headquarters in Ponte Vedra Beach, officials have been fighting for the past year to line up sponsors, handcuffed by the economy, collapse of the dot-com sector, sluggish stock market and the corporate-accounting scandal. Moreover, a new TV contract begins next year, pushing the cost of sponsoring a typical tournament to around $5 million, tour official Duke Butler said Wednesday.

With so many events in sponsorship flux, Butler said the release of the 2003 schedule, expected this month, has been postponed indefinitely. The tour hopes to use the extra time to reel in a few more corporations. As such, no deadline has been set for Disney to sign its 2003-06 extension, giving the resort and tour some needed 11th-hour wiggle room.

"Disney has been such a great partner for us. We're going to keep looking as long as possible," Butler said. "We're going the full nine innings."

The sponsorship problems are hardly endemic to golf, since other sports have been similarly affected. Still, golf's astounding rise in prize money -- purses rocketed from $53 million on 1990 to nearly $200 million in 2000 -- seems certain to level off.

"It's fairly obvious that golf had a meteoric rise when the economy was strong," said David Carter, a sponsorship consultant and professor at USC. "It's not the bigger they are, the harder they fall. It's grown so much in terms of money and exposure, it might look like its fallen on hard times, but it's a relative fall. You are seeing it across the board."

It seems worse in golf because team-sports franchises have deals with several sponsors; if one falters, it's not as noticeable. In golf, if the title sponsor bites the dust, the tournament can, too.

Then there's the naming roulette: Miami's venerable Doral Golf Resort & Spa is facing its third name change in four years in 2003.

"The business model of golf makes it more susceptible to the ebb and flow of sponsorship issues," Carter said.

South Carolina innovation

Consider the plight of the tournament in Hilton Head, S.C., which lost WorldCom as a sponsor this summer. The city this week moved forward with a plan that will add a 1-percent tax to restaurant and beverage sales, which will generate a projected $1.8 million annually to underwrite the sponsor-less event. If the measure is passed, the tour will become a subsidized sports venture, like a pro team playing in a public, tax-supported stadium.

"It's definitely new water for us," Butler said.

Phoenix, Doral, Disney, Hartford, the Pennsylvania Classic and a new event to be staged on Labor Day also need sponsors, Butler said. Sources said the year-ending Tour Championship, one of the most prestigious events of the year, is facing the loss of sponsor Dynegy. Butler declined comment on the event.

In the extreme, sponsoring a PGA Tour event in this climate could almost be viewed by shareholders as a flight of fancy, a vanity trip, an exercise in ego. But Disney is still swinging for the fences.

"It's understandable that a board of directors can't approve money to sponsor a PGA Tour event in this economic climate," said Lee Rawls, Disney's director of golf. "That's going to pass. Corporations are going to look for great advertising venues out there, and there isn't a better one than this tournament.

"I think it depends upon how quickly we perceive the economy to be recovering and corporate earning improve."

Unless Disney wants to gamble on signing a contract extension with no 2003-06 sponsor in place, the economy better turn around in the next six weeks, before the tour pros tool into town. The loss of the event would leave a major hole in the schedule, not to mention the hearts of fans. Since 1982, when the event reverted to an individual stroke-play event, 16 of 20 Disney tournaments have been decided by one stroke or less, equaling the tour high in that span.

Fingers in many pies

In terms of selling its tournament, Disney has far more variables to address than most. For instance, around 40 percent of the average $4 million-to-$5 million sum paid by a title sponsor goes to the broadcasting network in the form of advertising time, which is how TV makes up for the fees it pays the PGA Tour for the broadcasting rights. Not only does Disney stand to lose its share of the sponsor money that is applied toward the purse and staging costs, it will lose the network ad proceeds, too. Disney also is the broadcast network, since the parent company's holdings include ABC and ESPN. No other network essentially "owns" a tournament.

"We're all cousins, brothers or sisters," Weickel said. "It doesn't really complicate it, but it can be a positive if there is a positive to be had. It's all for one and one for all."

In other words, where Disney once reeled in all of the profits from sponsorship, it now faces a unique double whammy. ESPN/ABC must offset about $1.5 million in guaranteed, sponsor-derived ad revenue.

Moreover, Disney has theme-park corporate ties that make the pool of potential sponsors smaller. For instance, Doral is talking with the Ford Motor Company about taking over its sponsorship, a corporation Disney can't approach. The park has a long-standing alliance with General Motors, not to mention Coca-Cola and several other major entities.

While Disney's lower-level sponsorship packages are on the rise, nobody wants to be on the hook for the full amount. Not at the moment, anyway.

"I think the business world is extremely cautious with their spending," Weickel said. "I don't think people are as excited to spend the big numbers. Corporations have to be accountable."

One other possibility emerges. With an average sponsorship price tag rising to $5.5 million next year -- Butler called published reports setting the figure at $7.5 million to be "way, way, way too high" -- the cost-effectiveness of sponsorships can be called into question. Witness Hartford, which lost Canon after 18 years. Most of the sponsorship falloff, though, has come in the computer-related sector.

2 tiers of events considered

Carter predicted the tour might some day separate into a two-tiered entity, with prominent events selling sponsorship fees at twice the level of the rank-and-file events. He said $5.5 million or more for a pedestrian tournament seems steep considering Woods only plays in around 20 events per year.

"Maybe what we're really seeing is that there are premier events in sports, the Grand Slam and a few others, where a lot of the secondary tournaments suffer," Carter said. "Some just don't have the sizzle. In tennis, the Palm Springs event may be great, but it isn't the French Open."

In reality, for the rank-and-file PGA Tour events, sponsorship packages fall into three major cash tiers, or what Butler called "three flavors."

Events with two days of network coverage, which run from the third week of January through August, average $5.5 million for sponsorship next year.

In the fall, when football begins, most events receive three days of cable coverage (such as on ESPN or USA Network) and one day of network airtime on Sunday. Disney falls into this category. Those events fall into the $4 million-to-$4.5 million range.

The tour has five tournaments that are completely televised on cable: the season-opening Mercedes Championship and Sony Open in Hawaii; and in the fall, the Canadian, Pennsylvania Classic and Texas Open. Sponsorship of those events costs about $3.5 million.

As it stands, the tail end of the 2003 tour schedule looks like a string of Your-Name-Here Not-So-Classics. Of the tournaments tentatively set for the period after the PGA Championship, Disney, Las Vegas, Vancouver, Reno-Tahoe, Callaway Gardens, Ga., and Williamsburg, Va., are either folding up their hospitality tents or still seeking sponsors. Las Vegas and Reno-Tahoe, cobbling together local sponsorship packages, plan to play in 2003 nonetheless.

In theory, the tour could back off on its asking price and purses if demand doesn't improve.

"There's some flexibility on the entitlement fee, which is the naming rights and privileges that go along with it, and there is some flexibility on the prize money," Butler said. "We're still optimistic that 2003 will be a growth year in all elements -- prize money, stature, places we play, charity."

As it stands, Butler said the tour projects to have a full schedule next year.

Typically deep-pocketed Disney isn't exactly well-situated to contribute $4 million or so toward the wallets of the PGA Tour professionals. The company stock is down by $10 a share from last year and hovering around the $15 mark, CEO Michael Eisner is under fire, and the turnstile count has fallen between 5-10 percent at the company's theme parks.

Even play at the resort's golf courses is off, which could become a permanent issue if Disney loses the cachet of staging a tour event. The tournament is staged on the Magnolia and Palm courses, which command peak-season fees of well over $100 per round, partly because of the prestige associated with being a PGA Tour track. Minus that distinction, demand and recognition in a course-saturated golf market could suffer.

How about the LPGA?

As proof, look no further than Orlando's Rio Pinar Country Club. Never heard of it? By all accounts, it's a nice course. Rio Pinar was the home course for what is now the Bay Hill Invitational, Orlando's springtime stop on the PGA Tour.

Butler all but predicted that several new sponsors will be signed by the end of September, which might shake something loose for Disney. Asked if anything whatsoever was cooking in Disney's case, there was a long, awkward pause.

"Well, we're still looking," Butler said.

As it stands, Weickel said a panel of on-site resort officials is expected to meet before tournament week to discuss the Classic's future, since it's sure to be a media and community issue once the event is under way.

If the future still looks bleak, other alternatives could be considered.

After all, even beer king Anheuser-Busch, which sponsored the soon-to-be defunct Michelob Championship at Kingsmill, Va., will defect next year to the LPGA, where sponsorship fees are about 75 percent cheaper.

Think it couldn't happen here?

As Weickel tooled through the Disney grounds in his cart, a question sprang to mind.

"So," he said, "what do you know about the LPGA Tour?"

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