Look Out Below

By Chris Millard
Illustration by Christian Northeast January 2009

The game has withstood centuries, wars, depressions and even elections. Given the financial meltdown of late 2008, and the subsequent anemia confronting American wallets, how might the game fare in 2009? Button up your rainsuit.

The economic pressures facing today's golf facilities have been well documented. As always, name clubs will be largely unaffected, but, says Casey Alexander, special-situations analyst for Gilford Securities in New York, "marginal private clubs that are charging $18,000 before you put a tee in the ground and are not exceptional golf experiences" will feel the pinch. "People are likely to find them less necessary," Alexander says. "Some are going to outright close." Public and resort courses also are feeling pressure, but the upside is better deals for the consumer.

Just as a stratum of clubs will feel the heat, so will golf companies. In recent months, the stock of publicly traded equipment companies has come under pressure. Such stocks are seen as proxies for consumer spending, which is likely to slow in a recession. Still, these large, well-capitalized firms that have the ability to compete on price will prevail, says Alexander, while the smaller companies will feel the greatest impact. "The more leveraged that your success is to the success of the industry, the more pain you are likely to feel," he says.

The professional tours are not immune to downturn, either. As the PGA Tour looks to 2009, it has a handful of economic and competitive challenges to face, including a bit of a player grab by the European PGA Tour. The Europeans will launch the Race to Dubai, a season-long cash-fest that will replace the venerable Order of Merit competition and reward the tour's top money-winner with a $2 million bonus. The race will culminate with a $10 million, limited-field purse in November. The obvious threat to the PGA Tour is that U.S.-based players might be tempted to play more events in Europe to qualify for the gobsmacking finale. (The minimum number of European tournament entries required for eligibility is 12.) Some top U.S.-based players, including Vijay Singh, Anthony Kim and Camilo Villegas, already have expressed interest.

Then there are cash- and confidence-starved American consumers whose dim outlook has already taken a toll on stalwarts such as Major League Baseball, NASCAR and even the mighty NFL, which has warned league staffers about revenue shortfalls for the 2008-'09 season. Neal Pilson, former president of CBS Sports and now a television-industry consultant, summed it up: "While sports in general might be recession-resistant for a period of time, anyone who thinks sports is recession-proof is dreaming."

PGA Tour commissioner Tim Finchem strikes a veteran tone when asked about challenges facing the tour in 2009.

"You just have to react to it," he says. "It's like worrying about the weather to some extent, but you've certainly got to have your raincoat on. You've got to work harder to deal with it. You've got to make sure that you're doing what has made you successful before, because we've been through these before, and we've come through them quite well."

Despite the tour's financial reserve built through the years, the immediate concern is the viability of its sponsor base: Will post-meltdown sponsors have the wherewithal to carry out their sponsorships agreements? Finchem expresses confidence in long-term deals with broadcasters and sponsors. According to the tour, its network TV deal is locked in through 2012. Other than three "opposite events" (tournaments on the PGA Tour calendar that are played opposite major championships or WGC events), every PGA Tour stop is contractually sponsored through 2010, and a majority of events are signed through 2012.

The biggest question mark on the 2009 PGA Tour is the Wachovia Championship. With the impending purchase of Wachovia by Wells Fargo, the sponsorship and the championship remain in limbo. According to Ty Votaw, the tour's executive vice president of communications and international affairs, Wells Fargo can still be expected to stage the event. "They assume the contract of Wachovia," he says. "They're the successor organization."