SBJ/August 22-28, 2011/Leagues and Governing Bodies

In a tough spot, PGA Tour nails title sponsor challenges

Heading into an unsettled 2010 season, when corporate spending was tight and Tiger Woods was absent, the PGA Tour faced the unenviable task of filling more than one-quarter of its title sponsorships. Prospects, it’s safe to say, were grim.

Now, a little more than 18 months later, the tour has emerged from those turbulent conditions nearly sold out of its title sponsor inventory, putting it in prime shape to negotiate its next TV contracts with CBS and NBC.

“For the tour to have the success they’ve had after the financial meltdown, it’s just remarkable,” said sports marketing veteran Gary Stevenson, who at one time worked for the PGA Tour, OnSport and Wasserman Media Group.

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Cadillac is among the new sponsors that have come aboard since early in 2010.
In the past 18 months, the tour has closed 17 title sponsorship deals, eight of which represented new money and nine that were renewals. Close to three-quarters of the tour’s tournaments have title sponsors locked in beyond 2013.

“Think about it: There isn’t a traditional FedEx Cup event that’s for sale right now,” said Billy McGriff, president of Florida-based MG Sports Marketing, which brought in Zurich Financial Services and Farmers Insurance as title sponsors.

The only event whose title deal is not locked in for 2012 is the Viking Classic, an opposite-field event in July the same week as the British Open. The tour is in talks with Viking Range Corp., an appliance maker, to extend, but the tournament is not in jeopardy, the tour’s chief marketer, Tom Wade, said.

Title sponsorships for events on CBS or NBC range from $6 million to $8 million annually on most tournaments, with roughly half of the money going to a media buy with the network and the other half going to the tournament to cover purses and other expenses.

“We’re in great shape, sponsor-wise,” Wade said. “We have several deals in place long-term, and those deals have significant escalators in pricing. That’s a huge contrast to 2009, when all the predictions were doom and gloom for the PGA Tour. Not that we weren’t concerned — everybody was concerned — but now we’re in a great place.”

Such a solid base of title sponsors ensures that the tour can maintain its base of 43 tournaments and rich purses. It also enables the tour to deliver a robust stable of advertisers to its network partners.

Tour partners, most of them title sponsors, account for 65 percent to 70 percent of the advertising on PGA Tour broadcasts. Being able to instantly deliver that level of advertising to its TV partners makes the tour that much more attractive as it negotiates the next deals.

The PGA Tour’s current TV contracts with CBS and NBC expire after the 2012 season. Renewal talks began this summer.

“TV negotiations are still a difficult task, but many of these title sponsors have long-term deals, which provides a level of security for the tour and its TV partners,” said Malcolm Turner, principal of WMG’s consulting group, which advises title sponsors Northern Trust and Nationwide, among others. “Having your title sponsors in place checks a very important box for the tour. The renewals and extensions are an important referendum on its value proposition as a property, despite all the economic headwinds.”

As the tour enters its FedEx Cup playoffs this week at The Barclays, the only inventory it has to sell is the Nationwide umbrella sponsorship for the developmental tour, a “proud partner” position with The Players Championship and perhaps title sponsorship of the proposed tour in Latin America, although marketers say the tour hasn’t hit the streets full-force with that yet. Nationwide vacates the developmental tour after 2012.

The tour’s largest deal, the umbrella sponsorship with FedEx, runs through 2012 with options to continue longer. Wade said he anticipates renewal talks with FedEx formalizing after the TV negotiations are complete.

The sales success has led to increased revenue from sponsorships this year. Wade said that revenue from his group would be up 5 percent to 10 percent.

“The worst period was 2009, when we had some sponsors that went through bankruptcies and we took a hit,” Wade said. “But we’re clearly back on track now, and we’ll see some nice increases in the future.”

With companies still guarding their wallets closely, many properties have struggled to bring new money to their sports. The PGA Tour has not encountered the same resistance despite the pressure on the financial and automotive sectors, the two categories golf relies on the most.

Among the new sponsors that have signed on since early 2010 are auto brands Cadillac and Hyundai, while financial firm RSM McGladrey and Farmers also brought in new money.

Other companies, like Nationwide, were already in the sport before increasing their spending with an event title deal. RBC, already the title sponsor at the Canadian Open, added a deal for the Heritage, while Humana, an official marketing partner, added title sponsorship of the former Bob Hope Classic. The future of both of those tournaments was in doubt past this year without their new title sponsors.

These deals have helped the tour keep its schedule intact for 2012 and gives it a healthy head start on negotiating extensions with the 11 title sponsors whose contracts expire in 2012.

“The word is that there’s another company out there that’s just looking for a date,” McGriff said. “If someone blinks, there’s someone on the sidelines. It’s almost like there’s a waiting list.”

The tour has done little to alter its sales approach throughout the past year and a half, said Wade, who pointed to the tour’s increased international exposure, better cooperation from players at hospitality events and improvements to PGATour.com as significant aids in the sales process.

But for most sponsors, it still comes down to the tour’s core values: media, business-building through hospitality and charity.

RSM McGladrey’s president, C.E. Andrews, cited the ability to increase awareness and build better client relationships last year when his company signed on to sponsor a Fall Series event at Sea Island, Ga.

“There’s no question that this is a testament to the tour’s model and that it works,” Turner said. “It’s all been validated by their success. In private, I’m sure they would concede that their success is a bit of an upset given all of the economic turmoil. But they’ve had all hands on deck, and you can’t confuse effort with results. The tour has results.”

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