In light of recession, PGA refuses to wilt

Question of the Day

Is it still considered bad form to talk politics during a social gathering?

View results

PGA Tour commissioner Tim Finchem was on Capitol Hill on Wednesday, attempting to put a positive spin on the tour’s growing sponsorship crisis.

“I do think that this is a particularly bad downturn [in the economy], and we are concerned,” Finchem said afterward at the National Press Club. “But we’ve been 100 percent sponsored during three recessions since I’ve been commissioner, and the reason is the players. They deliver.”

There’s no doubt Finchem has delivered since he took the reins of the PGA Tour from Deane Beman in 1994. Between Finchem’s business acuity and Tiger Woods’ success, golf has enjoyed a golden age of popularity and financial growth in the past 15 years.

Prize money on tour jumped from just under $66 million in 1994 to a high of more than $279 million last season thanks to the on- and off-course efforts of Finchem and Woods. The tour also surpassed the $1 billion mark in charitable donations in 2005 and last season set a record in the category with more than $123 million in charitable revenue.

But for the first time since 1994, total purses on the PGA Tour dropped this season ($277 million) in a precursor to what is certain to be the most challenging sponsorship climate of Finchem’s tenure. Even Woods has experienced the pangs of the recession: Buick ended its nine-year endorsement relationship with the star a year early before the season in an effort to cut costs.

“We as a collective whole on the PGA Tour have to do a better job of making sure that we appreciate all the fans and sponsors for what they do for us and allowing us to have an opportunity to compete and play for a living,” Woods said. “I think over the years we may have taken that for granted. But certainly now is a time that reality has certainly checked in.”

And reality is taking a bite out of the PGA Tour’s budget.

The tour always has experienced some annual sponsorship turnover as the expected fluctuation of any business plan. AT&T; ended its affiliation with the tour’s Atlanta stop (the AT&T; Classic) last season. But at least five events on the original 2009 schedule will either disappear or need new title sponsors for 2010. Another will drop off the slate after 2010.

Conservatively speaking, another six events feature marriages to corporations that are either tenuously positioned in the marketplace, hemorrhaging dollars or implementing major cutbacks in discretionary spending. Any or all of the six could follow the 2009 exodus of Mercedes-Benz, FBR, Wachovia (Wells Fargo), Crowne Plaza, Ginn Resorts and U.S. Bank in terminating relationships with the PGA Tour.

Part of the problem is strictly financial. The recession has pounded PGA Tour sponsorship staples from the financial services and automotive industries. And part of the problem is public perception. Northern Trust turned PGA Tour sponsorship into a hot-button topic three months ago at the tour stop in Los Angeles.

Days after Phil Mickelson’s victory at Riviera at the Northern Trust Open, the public became outraged at reports that the company had thrown lavish hospitality parties featuring gift bags from Tiffany’s and acts like Sheryl Crow and Chicago for its employees and clients. At issue was that such revelry followed Northern Trust’s acceptance of $1.6 billion in federal TARP bailout funding and the corporation’s decision to lay off 450 employees.

“This type of spending is outrageous and disgraceful,” said Rep. Elijah Cummings, Maryland Democrat. “The government did not hand over $1.6 billion for Northern Trust to go off partying or give away taxpayer-subsidized trinkets from Tiffany’s.”

The incident stigmatized PGA Tour sponsorship to some degree. Chrysler had already taken its name off the Bob Hope Classic to avoid public backlash. And in the wake of the Northern Trust debacle, Wells Fargo, which had recently swallowed floundering Wachovia, decided to take its name off the tour’s event in Charlotte, N.C., abandoning funds already contractually committed to the event through 2012.

U.S. Bank (another TARP recipient), FBR and most recently Crowne Plaza terminated relationships with events in Milwaukee, Phoenix and Fort Worth, Texas.

“We went through a couple of months ago some criticism about whether or not it’s appropriate for a company to entertain clients as part of the dollars that they spend,” Finchem said. “Some of the comments that were made, they were isolated on a very narrow part of the value equation. Whether you’re going have a dinner and have some musical entertainment, I think it’s a very subjective thing. Whether you or I might go to a dinner that has Sheryl Crow playing, you might think it’s lavish; I probably wouldn’t, but then that’s my opinion. These are decisions that should be left to companies to effectively use their dollars.”

Story Continues →

View Entire Story
Comments
blog comments powered by Disqus