Golf Needs to Revisit Business Model

Golf is arguably seeing the most direct impact from the economic recession. The higher income, older demographic of golf fans attracts a higher proportion of financial institutions as sponsors than other sports, many of which have had to pull back advertising. Not to mention that Buick and Chrysler have bigger problems than golf sponsorships right now.

The PGA has lost two sponsors for next year already, has had two other sponsors who received TARP money remove their name from tournaments (though still pay for the sponsorship), and has almost 1/3 of its tournament sponsors up for renewal after next year. A few non-PGA, made-for-TV tournaments have also been canceled. On the women’s side, a sport already at the fringe of sports, is facing significant problems due the recession, already losing three tournaments.

Sports sponsorships are already difficult to measure results against, with golf it’s more difficult and a riskier investment because it’s a one weekend deal. Sponsoring baseball or football gives the sponsor an entire season to integrate its brand with the sport and make an impact on fans, a prolonged time period to leverage new business. Golf gives a sponsor four days, or a week if you count the pro-am. And no guarantees on who is going to play, which impacts TV ratings and attendance more than in any other sport.

On top of participation and short time periods, golf tournaments have become increasingly more expensive to run – primarily thanks to skyrocketing payouts. According to a recent SBJ article, purses have doubled since 1999, an unsustainable rate that is raising costs for sponsors and tournament operators.

In the face of sponsorship problems and a growing popularity problem (when Tiger doesn’t play), golf needs to reinvent itself somewhat. On the sponsorship front, it needs to become more creative. A generic title sponsor doesn’t cut it anymore. The sport needs to do a better job of adding value for its sponsors, and helping them unlock the value that a golf sponsorship can provide. For tournaments struggling to find major sponsors, one idea is to localize. Put the name of the city on the event, or the local commerce bureau, and gather multiple local businesses in the area to come sponsor the event. Hold networking events, get employees involved with the players, find a way for each sponsor either to generate sales or leads through the tournament. The key is to focus local, and maximize the value by connecting sponsors with the community in a meaningful way, when you can’t sign national title sponsor.

Taking this a step further, golf should investigate creating a central authoritative body to work on sponsorship and revenue generation for the sport. The PGA, USGA, players, tournaments, it’s a hodge podge of stakeholders. The various constituents should jointly form a group – not too dissimilar from the internal consulting groups that most major leagues not use – to help with sponsorship sales, possibly leading to the point where companies can sponsor multiple tournaments, or maybe the entire season, through one entity. Tournaments working individually will not be sustainable in the long run. At the least, the smaller tournaments need to share resources.

On the player side, purses need to be scaled back and participation mandates put in place. Joe DiMaggio said he always played his hardest because there might have been one kid in the stands who had never seen him play before. Golfers should consider that when they decide to play one event a month – that means you too, Tiger. No matter how good you are at any sport, no player is bigger than the sport. Many systems have been considered – from a certain number of events per year to playing each event at least once every four years, but the question is what is the penalty and how to enforce it. The WTA mandates participation or they fine you. What could you possibly fine Tiger to make this enforceable? Again this comes back to creating a more centralized organization, one where the tournaments help each other. I think the best way is to create participation rules and the penalty for not meeting the requirements is not playing in the majors – with injuries and other personal reasons as the exceptions, just like other sports. Basketball teams don’t sign players each year just for the playoffs, the play all season to qualify for the playoffs. Golf needs an incentive system that forces players to play more than they do.

Revenues should dictate purses. Less television dollars, lower payouts. Less sponsorship money, lower payouts. Look to the other sports. Golf is an individual sport and fundamentally different than the major leagues, but it can use better governance and a more centralized approach.

One final thought on sponsorship, the title sponsor category lacks significant endemic sponsors. Where is the Nike Open? Yes, they sponsor individual players, but how could a tournament sponsorship not benefit a club or ball manufacturer. The product integration and sales possibilities are tremendous. If not a title sponsorship, a secondary or category sponsorship seems like a good idea. Overall, golf needs to reevaluate its structure and move to make the changes that have wide ranging impact on the business of the game.

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