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SBJ/20090223/This Week's News
Tournaments hungry for details about LPGA’s new TV deal
Published February 23, 2009
The LPGA’s announcement of a 10-year TV deal with Golf Channel left tournament operators last week wondering whether their finances would be better or worse off under the new agreement.
“I’d love to be excited about this, but we don’t know the aspects of the deal,” said Linda Hampton, tournament director of the Wegmans LPGA in upstate New York.
LPGA officials are still working on the specifics and expect to brief tournaments in early March, said a tour official. One thing is known: Individual television production costs will increase for most events due to the structure of the new deal.
In its current deal with the tour, the network keeps most of the advertising inventory and subsidizes the production costs. The new deal provides inventory to the LPGA and its sponsors but no production subsidies.
Events now pay in the low to mid-six figures to cover production costs under separate five-year deals with ESPN and Golf Channel. Two-thirds of domestic LPGA events pay about $250,000 for production on Golf Channel, while the others on ESPN pay $350,000 or more.
Weeks before the Golf Channel deal was announced, tour officials told tournaments that production costs would likely be around $400,000, and a tournament source briefed last week by the LPGA said that costs could rise into the mid-$400,000s.
There were no details available about how, or if, any of Golf Channel’s rights fee would be disbursed to tournaments. Neither the network nor the LPGA would confirm the exact value of the rights fee, but a source involved with the deal said it was less than $100,000 per event.
The LPGA now shares its television revenue by making a lump sum payment to tournaments. The LPGA cleared $5 million in television income in 2007, according to tax forms, and shared $1.6 million, or about $50,000 per event. That amount is expected to go up in 2010 because of a new Korean deal with the network J Golf, but it is unknown whether it will increase enough to cover the spike in domestic production costs.
“We anticipate that the share of the TV revenue will be increasing in 2010,” said Mike Nichols, vice president of LPGA-sanctioned events.
Tournament directors were concerned about the increased production costs, given that their revenues are already being hit by lower pro-am and hospitality sales.
Starting in 2010, the LPGA will also charge tournaments an additional $50,000 to cover the costs of operating the weekly scoring system.
“The reality is the expense to a tournament is going to go up and that each tournament needs to decide how that factors into their bottom line and how they can make it work,” said Gail Graham, president of the LPGA’s Tournament Owners Association. “We want it to be a win-win, but with the economy affecting sponsorship dollars, meeting any increases poses a challenge.”
Ten of the 19 LPGA events in the U.S. and Canada in 2009 have title sponsorships that expire this year.
Aside from costs, programming windows were another concern among tournaments and sponsors. One goal of the new deal was to get consistent TV windows, where today there is a mix of live and taped delay in varying time windows.
Golf Channel now airs a mix of weekend coverage from the European Tour, PGA Tour, Champions Tour, Nationwide Tour and the LPGA. Tournament directors fear they will be relegated to live morning coverage or late afternoon tape delays.
“I’m not paying twice as much for tape delay,” declared the head of one tournament.
There was also confusion about what level of exclusivity was in the deal.
One sponsor with an event on ESPN was unaware that the tournament would not have the option of continuing on that network. Another event, the Kraft Nabisco Championship, has its own cable contract with ESPN through 2010 and is under the assumption that it will continue to control its own cable rights after that deal expires, said business manager Gabe Codding.
Kraft Nabisco’s ESPN contract will stand in 2010, but Golf Channel and LPGA officials said the event will have to move to Golf Channel in 2011.