May 6, 2009

On Solid Ground

Ensuring stability for the season-opening tournament at Kapalua, the PGA Tour has inked a 10-year deal with Korean broadcast giant SBS

When Geoff Ogilvy defends his title at Kapalua next year, the tournament will have a different name.

When Geoff Ogilvy defends his title at Kapalua next year, the tournament will have a different name.

Perhaps President Obama should just call in Tim Finchem and have him straighten out the economy because the job the commissioner has done with PGA Tour business matters is rather remarkable, especially in these troubled times. The most recent rabbit Finchem pulled out of his hat is a 10-year deal announced May 7 at the Players at TPC Sawgrass with Korean broadcast giant SBS to take over as title sponsor of the Mercedes-Benz Championship starting next year.

That move not only guaranteed the future of the season-opening event for previous-year winners for another decade, but also greatly improved the prospects for the Sony Open the following week. Mercedes had one more year on its contract and there was talk the tournament might move to the mainland after 2010. If that had happened, Sony's chances of survival would have diminished greatly since it is not cost-efficient for TV to travel to Hawaii for just one tournament. And with no TV there is no tournament. To get SBS as a sponsor, the tour let Mercedes out of its contract a year early.

So that was a two-for-one victory for the tour. And then there is the matter of the 10-year deal, which is close to unprecedented in golf. The tour now has a decade-long rock upon which to build its schedule. And in SBS -- think of them as the NBC or CBS of Korea -- the tour has a business partner that will help expand its fan base in Asia, in part by televising PGA Tour tournaments back to Korea. How'd that work for the LPGA?

Speaking of the LPGA, SBS joined the men's tour as a sponsor in large part because the women's tour turned its back on them. This is the 15th year SBS has had the Korean TV rights to LPGA events, but it is also the last. The LPGA took a higher bid from J Golf, a Korean cable outlet, starting next year. That's a move that could turn out to be penny-wise and pound-foolish. Think Bobby Ginn. Think Stanford Financial.

It probably also did not hurt that PGA Tour executive VP for international affairs Ty Votaw used to be LPGA commissioner and has a long relationship with Sang Chun, the president of SBS International, who was greatly hurt by what he saw as a lack of appreciation by the LPGA for his loyalty as a business partner.

The SBS announcement was the latest in a series of positive economic developments that could position the PGA Tour as a bellwether in the global economic recovery that seems to be looming. Zurich Financial (New Orleans), Travelers (Hartford, Conn.), Accenture (World Match Play Championship) and Liberty Mutual (Champions Tour) have all extended through 2014 this year, joining four other PGA Tour events already signed through '14.

The recent addition of the HSBC Champions in Shanghai as a World Golf Championship event was also a positive business move. While it is true U.S. Bank is out in Milwaukee after this year and FBR will abandon Phoenix after 2010 -– and who knows what will happen with Chrysler and Buick after 2010 -- the tour seems as if it will emerge from this economic downturn not only standing but also climbing.

Finchem has been twice blessed with perfect timing and in each occasion manipulated the situation perfectly. Bringing SBS on board makes it a hat trick. SBS was the LPGA's largest single revenue stream, paying $2.25 million for Korean TV rights this year. After being cut out by the LPGA, SBS was looking for another place in golf. It found a much bigger platform, and one that certainly costs much more than it was playing the LPGA.

Luck may well be the residue of design, as former baseball executive Branch Rickey said, but a fortuitous opportunity only matters if it is fully exploited. Finchem and the tour have done exactly that in the past, and they did it again by working out a deal with SBS. The key was recognizing the importance of long-term loyalty to the Korean company.

But Finchem has proven adept at recognizing situations. In 1997, the tour negotiated a four-year TV deal a month after Woods won the Masters by 12 strokes and pulled a record Sunday TV rating of 14.1. The tour used Tigermania to play hardball with the networks, getting a contract that drove total prize money from $96 million in 1998 to nearly $200 million at the end of the deal in 2002. Tiger opened the door and the tour closed the deal.

The next TV deal was more pure luck. The tour nailed it down in July 2001 and that four-year pact pushed the $200 million figure to $257 million in 2006. Can you imagine how differently those figures would have been if the contract was signed two months later -- after Sept. 11? When that deal expired, the tour took on Golf Channel as a 15-year business partner and consolidated its network coverage in six-year deals with CBS and NBC.

It is not really a coincidence that Finchem knows his way around a business contract. The University of Virginia-trained lawyer has a track record in the White House, serving in the Office of Economic Affairs under President Carter from 1978-79. In June, Finchem finishes 15 years as commissioner. When he took over in 1994 total prize money was $56 million. This year, it is $277 million. Now, Tiger has a little bit to do with that growth, but it was Finchem who steered the ship. As many a baseball manager has proven, you can mess up a good thing.

And it was also Finchem who for years told players it was not a good idea to put every dollar that came in the front door right back out the back door in the form of prize money. He advised putting some money aside for a rainy day. And in these economic tough times how wise does that look? Certainly, the tour has the cash in reserve to step in and help a troubled event, like the former Stanford stop in Memphis which will go on as planned this year despite losing its title sponsor.

The Tournament of Champions, which began in 1953, was sponsored by MONY from 1977-90 and Infiniti 1991-93 before it became the Mercedes Championship in 1994. In 2007, the name was changed to the Mercedes-Benz Championship. The event was played at La Costa CC in Carlsbad, Calif., from 1969 through 1998 when it was moved to The Plantation Course at Kapalua, Hawaii.

The tournament will remain at Kapalua at least for next year with the hope a deal can be worked out to keep it there the full 10 years. But even if it leaves for a new venue the SBS sponsorship is good news for Hawaii since it is likely the Korea-based company, whose main U.S. office its in Los Angeles, would like the mid-Pacific location for business reasons. And it is great news for the PGA Tour, which has a top-tier sponsor lined up for 10 years.

"We have done so much for the girls, now it is time to do something for the boys," Sang Chun, president of SBS International, said with a laugh when asked by GolfDigest.com about taking over the Mercedes-Benz Championship. "This is a very exciting venture for SBS to be associated with the best players in the world," Chun said.

It is also great news for the PGA Tour, the Kapalua Resort and the state of Hawaii. And it's another example of how shrewdly the PGA Tour, under Finchem, has handled its business matters. Memo to President Obama: If you need Tim Finchem's cell phone number, let me know