The MastersFebruary 23, 2015

Making Big Bucks, Spending Big Bucks

How the Masters turns a $29 million profit

"They were able to increase revenue without harming the experience... It's all pure."

There are two types of people on the commercial side of golf: Those who do business with Augusta National Golf Club and the Masters, and those who want to do business with the most valuable, lucrative—and private—property in the game. As a result, no one wants to be caught talking about the club or the tournament. But discussions with those who understand the business and Augusta National reveal this picture: The Masters makes a lot of money, leaves perhaps even more on the table, spends a lot of money to make its tournament better, and gives away a lot to help grow the game. In all, the Masters will generate about $115 million in revenue this year, according to Golf Digest reporting, more than a five-fold increase from the $22 million the magazine estimated in 1997 for the previous year's Masters. And that $115 million in revenue could translate to a profit of almost $30 million, up from $7 million in our 1997 report.

From the Masters' beginning in 1934 under Bob Jones and Clifford Roberts, the focus of the tournament has been to provide the best experience possible for the players and spectators. From the absence of corporate logos to limiting the number of people inside the ropes, the Masters is perhaps the last major sporting event left where the emphasis is solely on the game. But since taking over as chairman in 2006, Billy Payne has non-intrusively yet dramatically increased revenue and expanded ways in which the club gives back to the game.

"What Billy Payne has done is incredible," said one source involved in sports marketing. "As the commercialization of sports expanded, through great discipline and vision they were able to increase revenue without harming the experience. People want that Masters experience. They want to hear the roars. There are no logos anywhere. It's all pure."

The price of being on property went up this year for the second time since 2012. But after a $75 increase in 2015, to $325, for a badge that gains access to the four competitive rounds, the Masters is still one of the great bargains in sports. Tickets for this year's Super Bowl ranged from $800 to $1,900, and season-ticket holders for the Kansas City Royals were able to buy 2014 World Series tickets for $100 to $420 per game. On the secondary market, four-day badges for this year's Masters were starting at $5,088 on StubHub, the $65 Wednesday practice-round tickets were at least $925, and a one-day Sunday pass was priced from $1,600.

The Masters

Those prices have grabbed the attention of Augusta National officials, and they're doing something about it. "They're buying up the weekly badges on the black market, then dividing them into daily badges," said a source familiar with the brisk secondary business that transpires on Washington Road the week of the tournament. "Just anecdotally, it startles me how many people I speak with who are at the Masters for the first time. These are clearly not badge holders."

Where do those black-market tickets that Augusta National is buying go? Some most certainly go to those who spend $6,000 to $7,500 a week for access to Berckmans Place, a posh, 100,000-square-foot entertainment facility next to the fifth fairway that opened in 2013. The eye-popping party place has five restaurants, replicas of the seventh, 14th and 16th greens, and a merchandise store with items not available to the public. Berckmans Place comfortably entertains about 2,000 people, which means it could generate more than $12 million in revenue, not including merchandise sales.

Augusta National does not release Masters attendance, but if you add that $12 million to the estimated 40,000 Thursday-Sunday patron badges sold at $325 each ($13 million) and the estimated 150,000 practice-round badges split Monday through Wednesday for $65 each ($9.75 million), you'd have $34.75 million in ticket revenue.

That figure stood at $6 million in our 1997 report, when the four-day badge was $100, practice-round tickets ranged from $16 to $21 and Berckmans Place did not exist. Let's assume the 310,000 patrons for the week spend $25 each on concessions—remember, this is a place where you can get a $3 beer and a $1.75 sandwich—and that puts another $7.75 million in the till.

Let's say the 40,000 four-day badge holders and the 150,000 daily practice-round ticket holders each spend $250 for merchandise—many people come to Augusta National with a shopping list for family and friends—and that's $47.5 million, a huge jump from the estimated $9 million in gross sales from our 1997 report. But back then there were only 13 cash registers. Now there are dozens that move with blinding efficiency. Add about $25 million from international television rights—we'll address the break-even domestic TV rights in a moment—and the total take from the tournament approaches $115 million.


But think of the money Masters officials are choosing not to pursue. They could probably triple the ticket prices and still sell out. (A waiting list for weekly badges opened in 1972 and closed in 1978 before briefly reopening in 2000.) The concessions are likely run on a break-even basis—or even at a loss. And imagine how much more they could make if they opened an online store to augment the merchandise pavilion. "Can you even imagine there being an online store?" says a source who runs other tournaments, laughing with incredulity. "We'd all chuckle."

But nowhere is Augusta National showing more restraint than with its domestic TV rights. This is the 60th consecutive year CBS has broadcast the Masters on a one-year contract, an arrangement that began in 1956. ESPN has had the weekday cable rights since 2008 on the same basis. "The way the Masters TV deal is constructed is still shrouded in mystery," says a source in the broadcasting business. "The deal changed a little bit when Billy came in as chairman, bringing in a small rights fee, but neither CBS nor Augusta National makes money on the deal."

Another source, also in the broadcast business, explains it this way:

"After the Masters, CBS sends an invoice to Augusta National, and they check it out and get the money from their corporate partners to cover production costs," says the source.

That means that IBM, AT&T and Mercedes-Benz pay about $6 million to $8 million each in exchange for four minutes of advertising time per hour—about one-third of the commercial interruptions of other sporting events. Rolex and UPS are the corporate partners for the international broadcast. "If they ever opened up the [domestic TV] bidding, it would absolutely be worth more than the U.S. Open, but that's never going to happen," said the source, referring to the $93-million-a-year, 12-year deal the USGA signed with Fox Sports in 2013. "There was talk back when the Masters went without sponsors during the Martha Burk controversy [2003-'04] that it might go to pay-per-view," the source said. "If they did, they could get $100 for the weekend and get two million to three million buys. Do the math on that. But they're never going to leave CBS."

For CBS, the prestige and ratings provide a platform for the network at an event that tops the golf ratings year after year. (The final round of Tiger Woods' 1997 Masters victory drew a rating of 14.1, an all-time record for golf.)

For Augusta National, the trade-off for the one-year contracts and for walking away from such a cash windfall is that the club has complete control over how its event is portrayed on TV. Ask Gary McCord, who was banned for his "bikini wax" description of the greens, or Chris Berman, who is passionate about golf but is said to be too over the top by Augusta National to be part of ESPN's coverage.

Still, the bottom line is impressive. Though domestic TV is a break-even deal and concessions also break even, at best, there is the $34.75 million from tickets sales and that $25 million in broadcast rights to 190 overseas territories. There is also the $47.5 million in merchandise and $7.75 million in concessions. That gets us to $115 million before expenses.

And what are those expenses? An apparel-industry source says Augusta National operates on a 65 percent mark-up in the merchandise pavilion, cutting the overall net revenue to about $98.4 million. There is also about $9 million in prize money and expenses for security, salaries, maintenance, year-round operations, player hospitality, and food and beverages provided for the public and corporate-entertainment packages. Experts in sports marketing and tournament management say that totals about $50 million.

Those estimates would bring net revenue to $48.4 million. Even if Augusta National paid the highest tax rate of 39.6 percent, the tax bill would be $19.2 million, leaving a profit of $29.2 million (versus $7 million in the 1997 Golf Digest report).


Payne has been busy putting that money to work. Under his leadership, Augusta National built not only Berckmans Place but also well-hidden hospitality facilities for its corporate partners next to the 10th hole. And a Golf Digest report last year of real-estate sales records from 1999-2014 showed the club spent $55 million to purchase 100 acres around the golf course.

Part of that land was used to move parking off the original club property, across Berckmans Road, and allow the construction of a state-of-the-art practice facility, which opened in 2010. The next likely move will be the destruction of the media center to the right of No. 1 fairway, replacing it with a new multimedia center farther from the course.

Though the current site of the media center could be used to expand the merchandise pavilion next door, most insiders predict the club will use that prime land for housing and/or entertainment. The thinking is that the club would like to be able to house all its members on property during club events and all the competitors during the Masters.


As Payne expands the infrastructure and revenue streams of the Masters, he's also figuring out how best to use the club's resources to grow the game domestically and globally. The Masters Tournament first began to emerge as a quasi-governing body of the game in 1997, when it signed on as one of the five founding partners of The First Tee effort to bring the game to young people, joining the USGA, PGA of America, LPGA Tour and PGA Tour.

In 2009, the tournament and the R&A launched the Asia-Pacific Amateur Championship, with a spot in the Masters going to the winner. Then in 2011, the Masters Tournament Foundation was created. The club made a $3.2 million donation to the foundation in 2012 and $2.9 million in 2011.

"We essentially give as much as we can every year, and then try as best we can to use that money in our grow-the-game efforts," Payne said at last year's chairman news conference. "It is our intention going forward to be very substantial contributors to our foundation."

The first Drive, Chip and Putt Championship for junior players took place in 2014, and this year the club was part of an effort that created the Latin America Amateur Championship, which also offers a spot in the Masters field. The foundation gave $200,000 to the Augusta First Tee in 2012 and supports the LPGA Foundation, LPGA/USGA grow-the-game programs and other growth initiatives.

"The establishment of the Masters Tournament Foundation is central to fulfilling our responsibility of supporting the game's continuous growth around the world," Payne said.

The Asia-Pacific Amateur Championship has been an unqualified success. When it was first revealed the winner would get a spot in the Masters, some thought it was giving away a position to someone who didn't belong. But Hideki Matsuyama of Japan, who won the Asia-Pacific in 2010 and 2011, proved that wrong. He's now a rising force on the PGA Tour at the age of 23. And in 2012, Guan Tianlang of China won at the age of 14 and astounded everyone by making the cut at Augusta National.

"I think we, perhaps at Augusta, measure success, the future of the game a little bit differently," Payne said earlier this year at the Latin America Amateur Championship in Argentina. "We don't do it in numbers. We don't do it in definable, ascertainable arithmetic growth rates. We measure it in smiles on the faces of these kids. If we can create that here, see it by extension go to others, then we are very happy with the current state of the game of golf."

As with everything done at Augusta National, the club has grown its revenue with patience and discipline. As Jones and Roberts desired, it has never lost sight of the mission that the enjoyment of the player and the patron is the top priority. And it has built on that vision by giving back to the overall game. Augusta National is making more money every year, and it is doing more with it than ever before.