SBJ/September 5-11, 2011/Media

Tour quickly extends deals with incumbents

It was July 18 when a team of PGA Tour executives, led by Commissioner Tim Finchem, first met with CBS in New York to begin TV renewal talks.

The next day, they took their presentation to NBC. Each time, Finchem emphasized the tour’s robust sponsorship sales, the amount of advertising it could deliver to the networks and the financials he sought.

Brimming with confidence, Finchem left a rough draft of a contract with each partner.

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NBC will continue to take 10 events a year under the new deal, and CBS will take about 20.
Just six weeks later, the tour had an extension of its deals with the two networks. The old deal worth $2.95 billion over six years expires at the end of the 2012 season, and the nine-year extension — announced Sept. 1 — will go out to 2021, matching up with the cable broadcast agreement with Golf Channel. It’s the longest broadcast TV contract the tour has ever signed.

Financial terms of the new deal were not available, but Finchem said increases were built in from year to year, which likely would move the annual revenue to more than $500 million a year.

The structure of the deal is similar, with CBS taking about 20 tournaments a year and NBC 10. There is, however, a significant upgrade in what the tour has planned digitally, including simulcasts of live TV broadcasts.

“The (financial) increases will help us in a number of areas,” Finchem said. “We’re going to be able to grow the financial benefits to players, it will allow us the flexibility to invest in digital applications, and we can invest in things that help the overall presentation of the tournaments.”

The tour took a calculated risk by going straight to its network partners to extend its current contracts rather than opening the bidding as most properties have in recent years.

But there didn’t seem to be an interest from Fox, and ABC wasn’t a candidate because it couldn’t acquire any content for ESPN, which is excluded by the tour’s exclusive cable deal with Golf Channel.

After an 18-month read of the marketplace, the tour decided to go straight to the table with its current and longtime partners in July. The tour opened the bidding to all networks before its last deal, but CBS and NBC were the runaway winners then, too.

“We just thought our relationships with CBS and NBC worked well and that’s what we were committed to,” said Ed Moorhouse, the tour’s co-COO and a leader in TV negotiations, along with a team of Executive Vice President Rick Anderson, Chief Marketing Officer Tom Wade, Chief Financial Officer Ron Price and general counsel Len Brown, among others.

Many of those team members stayed in New York for nearly the entire six-week period at the InterContinental New York Barclay.

Moorhouse went home to Ponte Vedra, Fla., for just two weekends from mid-July through last week when the deal was closed.

Members of the TV team worked out of rented office space on 56th Street, between Park Avenue and Lexington Avenue, which was an addition to some permanent office space the tour leases in the same building.

From that third-floor office, the tour worked through minimal snags, except when it came to the new digital initiatives it sought.

Pushing to become the most progressive property in the digital space, Finchem launched a bid to take golf beyond its traditional limits of broadcast TV.

The tour and the networks agreed that the TV broadcasts will be simulcast on other platforms, including online, smartphones and tablets.

PGATour.com will be one of the homes for the simulcast, but other applications will be developed.
When NBC has the tournament, the broadcast will run on NBCsports.com, while CBS’s tournaments will be broadcast on CBSsports.com. The tour and the networks are considering other possible online outlets.

Other revenue-related details still must be worked out. It hasn’t yet been determined if all of the advertising from the TV broadcast will run on the simulcast, or if those units will be sold separately. And if they are sold separately, who sells it and how will the revenue be split?

What Moorhouse does know is that the tour’s title sponsors will maintain their same position in the simulcast, as will FedEx, the tour’s umbrella sponsor.

The tour is not contemplating a subscription model for the live tournament simulcasts, but there could be some unique premium programming that is sold digitally.

Many of those questions will be answered in the next year as the tour works through another important negotiation with Turner Sports for the tour’s digital rights. Turner’s deal expires in 2012, and Moorhouse indicated that those rights will go to the open market.

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