Troubled Waters

By Ron Sirak
Photo Illustration by Splashlight December 26, 2008

About the only thing financial prognosticators speak about with reasonable confidence and virtual unanimity is that the global economy will continue to struggle at least through the first quarter of 2009. And that likely means the first three months of the season in which the PGA Tour sprints from the Mercedes-Benz Championship in Hawaii across the West Coast and through Florida -- usually a buoyant stretch -- will be dogged by persistent questions: What is the impact of the recession on this tournament? And why are struggling corporations spending their money on a golf tournament?

The most important spin, at least for the first part of the season, won't be on the golf ball but rather on the economic reality. There are 15 events the first 13 weeks of 2009, and 12 have sponsors from the most distressed areas of the economy. Forget the tournament names and think of it this way: The tour season opens: auto, electronics, auto, financial, auto. All are industries that have suffered deep and painful layoffs.

But there is a sweet kernel of good news beneath this gritty outer layer. The PGA Tour is well positioned to weather hard times because its business model is sound and well thought-out and because it has a good story to tell in these difficult times. As part of the early season effort by the tour, tournament directors and sponsors will be telling that story.

Both stockholders and the public need to be reassured that sponsoring a golf tournament and doing corporate marketing at a sporting event is not a frivolous use of money. Expect to hear the word "charity" a lot during the first three months of the season. Expect the tour to be positioned as a good citizen that contributes to local charities and stages a tournament that provides business opportunities for local vendors.

"In down times, sport still appeals [to consumers], so integrating in the right way still has huge value," says Andrew McLean, president of global clients and business development for Mediaedge:cia, which buys media exposure for companies. "There is a need to filter the public reaction, move away from high-profile, big-hospitality experiences and highlight the cause marketing/community element, as well as the fundraising that certain sports do, such as the PGA Tour. Brands are being forced to make [their dollars] work harder in these areas."

Cause marketing, which involves cooperation between a for-profit company and a non-profit organization, plays into the PGA Tour business model perfectly. The tour has given more than $1.2 billion to charity over the years, and in 2007 it donated a record $123 million, a number it hopes to exceed in 2009 despite the troubled economy. The numbers from 2008 are not yet available.

"We are going to strive to match the dollars as best we can," says Ty Votaw, the tour's executive vice president for international affairs and communications, about charitable contributions for 2009. "It all depends on how long and how deep this [recession] is. If it goes all the way through 2009, it will be a challenge."

Among the industries most challenged is automotive. Buick, in fact, recently reached a mutual termination of its deal with Tiger Woods with a year left on the contract. Still, it has two events on the 2009 PGA Tour schedule, including the Buick Invitational, the fifth event of the season.

"We still have a need -- you might even say a greater need -- to advertise and promote our product than ever before," says Larry Peck, the golf marketing manager for Buick, which is contractually obligated to the two events through 2010. "We still find a lot of value in our association with the PGA Tour." Buick is staking a lot, perhaps even its future, on the 2010 LaCrosse. One will be on display at the par-3 16th hole at Torrey Pines. "It will get a lot of TV time," says Peck. "That's part of the value we get."

For Buick Invitational organizers the selling point is how the event gives back. "The Century Club of San Diego has been a major benefactor in distributing nearly $17 million from [the Buick] to over 200 San Diego charities," says executive director Tom Wilson. "The support of the tournament from our community has been exceptional and has enabled us to generate a substantial amount of funds to numerous charities. With our current economic challenges it is even more important to be able to support so many needed causes."

Thanks to some prescient planning by commissioner Tim Finchem, the financial cloud that hangs over the PGA Tour, while far from unique, is in many ways less threatening than that covering many other sports. More than half of the tournament title-sponsor contracts run through 2012 when the TV deals with CBS and NBC end. The Golf Channel contract runs another nine years after that.