Wednesday, March 26, 2008

Economic Impact on PGA Tour

Geoff Shackelford found this one and I thought it was pertinent in light of the posts I have done recently about the health of LPGA Tour events. I also mentioned that some of the PGA Tour stops could be considered in trouble for various reasons. But, Gary Smits takes a look at the PGA Tour as a whole and asks whether or not the economic downturn will have an impact.

"I don't know if we're impervious," Finchem said recently. "We have a lot of long-term stuff with fundamental building blocks at the tournament level. Ads and TV ratings are on a shorter leash, but so far we haven't seen any falloff."

Finchem said the economic outlook for the Tour is not as dire as in 1999 and 2000, during the bust. For example, the Tour had to fill nearly 10 title sponsorships within a year, including an umbrella sponsor for its developmental tour to replace

Currently, the only events without title sponsors are in Tampa and Atlanta. Umbrella sponsors such as FedEx (the FedEx Cup, the Tour's season-long points race), Nationwide (the Nationwide Tour), and Charles Schwab (the Charles Schwab Cup on the Champions Tour) remain in place on a long-term basis.

In addition, Northern Trust recently signed on as title sponsor to the Tour's stop in Los Angeles and MasterCard renewed its presenting sponsorship contract with the Arnold Palmer Invitational, through 2012. Barclays, which already is title sponsor of the first PGA Tour playoff event, signed Mickelson to a sponsorship deal last week.

Joe Ogilvie, one of the player-directors on the PGA Tour Policy Board, said the standard six-year title sponsorship contracts and the six-year television contract with NBC and CBS (and 15-year deal with The Golf Channel) are proving to be a saving grace for the Tour.

"We have long-term commitments in place, and companies were able to budget," he said." When some of the title sponsorships begin running out in 2010 and beyond, there might be some softness, but so far, I don't see it."

It is times like these that makes Tim Finchem appear very smart. That 15 year deal with TGC locks up a price for broadcasting the Tour for a very long time. The arrangements with major sponsors in the form of long-term deals will always help sustain in economic tough times.

If you consider the sponsorship mix of the PGA Tour, there are way more sponsors that are marketing to demographics that are largely above the fray of any recession: the upper middle class to the upper class. Seriously, when will BMW ever be in trouble? Still, I noted in other posts that some events are in trouble because of weak industry activity. Here's some proof:

Ginn Resorts, which is title sponsor of a Fall Series event and this week's Champions Tour event in Palm Coast, is experiencing financial problems.

And the Tour is top-heavy in title sponsorships in financial institutions and auto makers, which could have long-term effects.

"Anything to do with residential development might be a problem pretty soon," Ogilvie said.

"You look at retail, like cars, which would be a problem, but we have a great relationship with Buick, and they have Tiger on their team. They're one U.S. car brand that is doing well."

Smits is right that if many of the Tour's financial industry sponsors experience some part of the subprime and credit crunch fall out, that they may be less likely to back the Tour. But, most groups with the PGA Tour are generally out of that mess. Thank God there is no Countrywide Open.

1 comment:

Hound Dog said...

Great. Over the last two years, Ginn jumped in headfirst with two high-dollar LPGA events (in the process, enticing the Tour to give ShopRite the boot) and now they are showing signs of having to bail.

It wouldn't be the first sporting venture Ginn has overextended itself on. They sponsored a couple of Nascar teams for about two years before they sold out.