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SBJ/April 4 - 10, 2005/SBJ In Depth
Why a big shakeup may be in store for the PGA Tour’s schedule
Published April 4, 2005
Later this year, the PGA Tour could enact the most radical changes to its schedule in decades. Or, it just might stick with the schedule that now boasts more than 100 tournament title sponsors and tour marketing partners, many of them signed through 2010.
It’s not simply a matter of tweaking the schedule that runs from the first week in January to the third week of December. It’s a matter of building a schedule that gives television networks more assurance of profits on their investment in golf — by injecting more drama into the sweep of the season; or by eliminating, rescheduling or even relocating tournaments that suffer low ratings; or some combination of these.
Any such action would be for the sake of rights holders, who saw aggregate network golf ratings drop 25 percent between 2001 and last year and who have said they are losing money on the deal they signed in the summer of 2001.
But any schedule also would have to consider the desires of players (the tour’s actual constituency), the viewing habits of fans, and the needs of tournaments and title sponsors.
This is going to be a complicated year for the PGA Tour.
The PGA Tour’s current television agreements conclude at the end of next year, and sometime this year the tour has to reopen negotiations with six incumbents — NBC, CBS, ABC, ESPN, The Golf Channel and USA Network. The tour also likely will talk with Fox and Turner, who have expressed interest.
But unlike four years ago, when the tour reopened negotiations in the spring, shortly after Tiger Woods won his fourth straight major, and netted a 40 percent higher fee than before, this year it has decided to wait.
For one thing, there are major negotiations going on for other properties — the NFL and ABC/ESPN, NASCAR and NBC and Turner — and these are expected to be settled before the winter. When they are, everyone will have a better idea who’s most interested in the PGA Tour and how much they have to spend.
Sizing up the schedule
The PGA Tour is one of the top TV sports properties, but it doesn’t have the rights-fee clout from ratings that the NFL and NASCAR have. This is one reason why it will delay its negotiations.
There are other reasons. One is that after three years of slipping ratings and network losses — coinciding with Woods’ relative slump, the economy’s real slump and golf equipment makers’ gradual preference for print, The Golf Channel or nothing at all — there’s suddenly hope for a stronger ratings season in 2005. Woods, Vijay Singh, Phil Mickelson and Ernie Els — now called “The Big Four” — are all playing excellent golf.
Another reason is that the tour is going through its regular review of the schedule — except that this time there’s a feeling something might get changed.
It’s not just the wishes expressed recently by Woods and Mickelson that the schedule be shortened by roughly a quarter, to ensure that the top players are matched up in a higher percentage of events. For this doesn’t take into consideration that the tour consists of 150 voting members, and its purpose is to provide enough outings for all of them.
There’s also television’s concerns, thanks to an average network ratings drop from 3.6 in 2001 to 2.7 last year. The 10-week Fall Finish, ending the first week of November, is increasingly an anticlimax: Many of the top players skip parts of it, and it competes against NFL and NCAA football during their first two months. The Tour Championship in Atlanta, the tour’s concluding event, is easily the least significant season-ender of any major sport.
The PGA Tour is taking a serious look at changes to the schedule that would appeal to television partners and in turn produce higher rights fees.
The tour is seriously considering about six more scheduling options, including essentially no changes, Commissioner Tim Finchem said at last month’s Players Championship in Florida.
What else is it considering? Tour executives were vague in interviews during that tournament, but here are some that are under consideration, according to them and other golf executives:
The tour could sanction new events overseas, replacing weaker U.S. events, especially in the fall. The tour has done a stellar job of attracting foreign companies to U.S. shores as sponsors, such as European-based UBS, Allianz and Barclays. But there are many more companies — especially in Asia — that would pay top dollar for the right to brand themselves alongside the PGA Tour and entertain their clients while watching PGA Tour pros compete on the companies’ home soil.
PGA Tour network
|*ABC, CBS and NBC|
|Source: Nielsen Media Research|
|Turnkey Sports Poll|
|PGA Tour events and their sponsors|
|PGA Tour television coverage|
Finchem talked tough when asked if the PGA Tour were cannibalizing other tours. “That’s the real world. This is where the strongest players want to play.” But he also suggested new partnerships among the world’s various tours. “In 1996 [we all formed] a federation, and now we’re on the verge of it becoming even closer in terms of being able to do things, coordinated more around the world.”
This sounds like new, co-sanctioned foreign events, with new income streams not dependent on domestic TV production.
Alastair Johnson, co-CEO of IMG, said the PGA Tour operates under a philosophy of “If you can’t beat them, join them.” He elaborated: “They see that the European Tour goes to five continents … and they know that there’s very little [TV] network [viewership] in the late third quarter and beyond. That’s the part of the portfolio that’s dragging everything else down.”
But Johnston warned, “If they take their eye off the ball on America with a view towards sanctioning overseas, that will be seen poorly [by American players].”
Executives at most of the tour’s current TV partners declined comment on the schedule and upcoming negotiations, citing the sensitivity of the issues.
When tour executives are asked about specific schedule changes, their response is rarely “That’s not likely.” Whether they’re being honest or trying not to anger any constituency before they have to isn’t clear. But Finchem spoke of moving some events around to accommodate weather or television — such as the tour’s own Players Championship, which it feels has achieved “fifth major” status but has had rain-altered schedules three of the past six years. It could move to May or June, Finchem said, away from rain and March Madness.
In not dismissing most possibilities, tour executives even allowed that some current PGA Tour events could become Nationwide or Champions Tour events, if the sponsors were agreeable. But the tour is hesitant to suggest that it might follow the recent suggestion of Woods and Mickelson to shorten the season by fully a quarter or more, from the current 44 official-money events.
“We don’t have to keep the current number of events the same, but I don’t know if we want to significantly reduce the number of player starts,” said Ed Moorhouse, the tour’s co-COO. “We want enough starts for our players out of Q school and the Nationwide Tour, and we have tournaments, sponsors and charities that we feel a responsibility to.”
Close observers have suggested that a combination of the various changes could result in more distinct, concentrated television packages. Currently, for example, ABC televises events throughout eight different months, often with several weeks in between events. If networks had packages based more on seasonality and geography, they could promote the schedule’s new drama more effectively and produce events more economically.
Of course, there’s the flip side, which is simply getting better players to play in a more diverse group of events, thus improving some of the lackluster tournaments. An incentive system is already in place, which rewards players for starts and cuts made and for playing in many events in each of the three “thirds” of the season. Payment is made into the players’ retirement funds. Singh effectively tacked on more than $2 million to his $11.5 million in winnings this way last year.
The PGA Tour has considered requiring players to make one appearance at every event in a four-year period, but tour executives now downplay that strategy. However, several sources said they’re reconsidering the incentive system.
Effect on rights fees
So for the next six to eight months, the tour will be taking a pencil to its own schedule — and its operating principles — while it watches several high-profile rights negotiations play out in other sports. The purpose is to present a schedule that the networks not only can live with but can profit from between 2006 and 2010 — and, ideally, that won’t require a significant dip in rights fees.
It’s not just prestige that’s at stake. TV rights fees help fund 62 percent of PGA Tour purses for most events and contribute to myriad factors that attract players and sponsors. Those sponsors, in turn, account for roughly 40 percent of the network’s television revenues from the moment they sign their contracts.
“Does anything need fixing? It’s a great sport and a great TV buy, but everyone has a different opinion. Our TV [ratings] are not what we would want for our title sponsor,” said Judy McDermott, tournament director of the Chrysler Classic of Tucson (Ariz.), played in late February the same weekend as the WGC-Accenture Match Play Championship. “The ratings haven’t been what a lot of tournaments have wanted.”
So the next PGA Tour schedule has a lot riding on it. It has to make a lot of people happy, and it will have to make the networks money. Golf was always a consistent moneymaker for the nets, and they ponied up a record $850 million for the current quadrennial, a few months before 9/11 and while Woods was at his peak. They have acknowledged losing money on the deal, and they are waiting, along with the tour, to see what the Big Four (and the other 146) can do this season.
The tour points out that PGA Tour ratings have been more consistent over the past seven or eight years than any sport besides NASCAR. And observers suggest that the drop since 2001 is minor, because it represents mostly fringe viewers whom advertisers weren’t targeting to begin with. The tour also points out that it brought $45 million worth of advertising to its TV partners beyond sponsor commitments, and it will bring $50 million this year, out of the $300 million to $350 million the networks generate each year.
But there is a feeling that if the tour wants to match or exceed its current rights fees, it will have to take on a much greater role in selling for its partners, along with some downside risk, not something anyone contemplated four years ago. “We might see the tour in almost a revenue-sharing or joint-venture position for some of the inventory,” said one veteran marketer with numerous corporate clients in golf.
If so, many of the possible changes being considered could require the tour to provide additional subsidies — to players, tournaments, network partners — as new paradigms are put into place.
The tour is prepared for that. “The tour has been planning for this since Deane Beman’s days,” Johnston said of the former commissioner, who stepped down in 1995. “They’ve been salting money for the last 20 years. They can continue to support prize money, so their players aren’t going to be harmed.”
And this will give the tour the leeway to make changes, in the schedule it presents to the networks late this year and in the deals that emerge. Johnston expects them to be significant. “I guarantee you, at the end of the day, the tour will come back and make this TV deal so different that you won’t be able to compare it,” he said.