Monday, July 28, 2008

The 19th Hole: Win Some, Lose Some

The US economy is stagnant right now. Commodity prices – especially those for oil – are through the roof. Bank liquidity and credit markets have proven to be trillion dollar messes. The dollar is losing its value against global currencies because of our large national debt and artificially low interest rates. It is a difficult market for anyone to make sustain their financial well being, much less make gains.

It is in this economic reality that the LPGA is trying to grow its tour, its brand, and its purses. Since Carolyn Bivens has taken over as Commissioner of the Tour, she has been spearheading efforts to bring in sponsors that will commit to higher expenses, bigger purses, and larger ad buys. Bivens has been trying to increase the profile of the Tour by holding events in larger markets and taking significant portions of the Tour outside of the United States.

After taking over for Ty Votaw as Commissioner in late 2005, Bivens made immediate changes. Using her leverage as head of the Tour, she increased the annual sanctioning fee for each tournament from $18,000 to $100,000. She effectively forced out the Wendy’s event in Dublin, Ohio, because of the changes. Simultaneously, the Tour gained several international tour stops and large financial commitments from leading credit and banking companies, MasterCard and HSBC.

Looking for another stream of money, Bivens tried to amend the credential rules for the press such that the LPGA Tour would retain rights to photography to use for the Tour’s own purposes. She lost that battle, but did negotiate a contract with a photography firm that would pay off the LPGA Tour.

In her pursuit of larger purses, she cast aside some events that were not willing to compromise their long-standing dates on the LPGA Tour schedule in favor of new events with more money. The ShopRite Classic in Atlantic City was such an event. In exchange for the loss of such an event, she negotiated a very lucrative sponsorship deal with the Ginn Company – a real estate firm out of Florida – that would go on to produce two events with huge paydays: the Ginn Open and the Ginn Tribute.

Just this summer, the LPGA has taken steps to gain ownership over more of its events in order to generate revenue through merchandising, ticket sales, and the other sources of money that they do not see from events they do not own. The LPGA Championship will be owned by the LPGA Tour starting in 2010, go on without title sponsorship, and allow the Tour to flex slightly more muscle in negotiations with broadcast partners for the 2010 television contracts.

The point? For Bivens, she has won some battles and she has lost some. Despite the resounding criticism of her during the 2006 season, last season seemingly produced results for the Tour. This week, though, was another example of how Bivens may be having a losing year for many reasons out of her hands.

SemGroup, an energy company, filed for bankruptcy protection after the SEC conducted an investigation of the company. The Ginn Company also indicated this week that they would no longer sponsor the event hosted by Annika Sorenstam – the Ginn Tribute – because of financial difficulties attributable to a $25 million commitment to golf sponsorship. Both events boasted purses on the high end of those offered on the LPGA Tour schedule.

Other tournament sponsorship appears to be in question, as well. Earlier in the year, Safeway pulled out as sponsor of the Safeway International in Arizona. An extremely popular event with fans and players, the long-standing tournament is struggling to find a new title sponsor. Fields, the sponsor for an event in Hawaii, is also unlikely to remain a title sponsor and the status for that event is seriously in question. Speculation is rampant regarding up to a handful of other LPGA Tour events.

All of this comes during one of the most crucial seasons in the Tour’s history. Annika Sorenstam is stepping away from competitive golf at the end of the season to pursue other interests. The biggest draw in women’s golf – other than Michelle Wie – is leaving the game with a certain heir in Lorena Ochoa, but a significant gap for the way the Tour is marketed in the mainstream. The rise of Asian players and their increasing tally of victories may be leading to problems with an American sporting public that loves to root for the red, white, and blue.

The Tour is in the midst of a television negotiation that will dictate its viability for financial and fan growth in the next four or five years. It is yet to close a deal on a cable partner, but signs point to the Golf Channel. Bivens seeks a contract in which the LPGA Tour will be paid for broadcasting rights of its product – something the Tour has never enjoyed in the States. With the biggest draws in the game either leaving or dormant, though, that negotiation may prove to be more difficult than it was just a year prior.

In spite of all of the bad news, though, the Tour remains a strong brand overseas. The Tour announced a partnership with Grand China Air to present a limited-field event in October with a $1.8 million purse. There is talk of an event in Dubai. Grander still is talk of turning the LPGA Tour into a global circuit with more invitational events and rebranding the Duramed Futures Tour into a women’s golf version of the Nationwide Tour.

It is uncertain how the Tour will look after this season. With at least two events already declared dead or on life support, the schedule will certainly have a different feel. If more rumored struggling events fall, then the Tour may face serious financial difficulties in trying to present a full schedule – particularly with a $500,000 sanctioning fee for new events.

With a string of good news and sponsorship overseas, though, the LPGA Tour could evolve in the opposite direction of the PGA Tour. The PGA Tour has made strong efforts to become more Americanized in its presentation. Few official money events are contested outside of the United States, and just one out of North America and the Caribbean. The World Golf Championships are a mockery of the title in that they are played only in this country.

Meanwhile, the LPGA Tour may have to move significant portions of its operations outside of the United States in order to grow. Asia and the Middle East present a lot of interest and a lot of capital that the LPGA Tour may not be able to turn from in the coming years. At the risk of alienating a fan base that has been incredibly loyal the product over the years, financial realities may dictate to a Tour that seeks to grow will have to follow the money. In the end, tough, is financial growth worth potentially sacrificing the fan base?


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