The Pellucid Perspective - October 2010 - (Page 6)

MEDIA SIDE OF GOLF Will the PGA TOUR be subject to repricing? By Jim Koppenhaver I learned a new word in 2009 that has always been in the dictionary but got elevated to the status of a generic term: repricing. Now it hasn’t yet achieved the status of some other well-known generic terms such as “make a Xerox” (copy), “grab a Kleenex” (tissue) or “schedule a WebEx” (web-enabled meeting), but it’s happened to so many consumers and businesses that it’s rapidly moving up in prominence in the American lexicon. For example, the homes of millions of Americans have been “repriced” (about 30% down on average nationally). Many Americans’ jobs have been “repriced,” although this one’s a little more nuanced. Some of those jobs have been eliminated (reprice = zero value). Some of the jobs have had the fixed/variable compensation changed (more variable against unrealistic goals = total compensation down for same amount of work). And some jobs have been rescoped to include more responsibilities for the same pay (repriced down in the hourly rate). We’ve seen retailers of both durable and consumable goods move to new (lower) price points to move inventory through increasingly cash-strapped and suddenly frugal consumers. The point is, in reaction to the new economy, makers and sellers of goods and services are realizing that there are new “value points” (i.e. lower-priced in most instances) at which a reasonable number of consumers will buy items at the sustainable volumes needed to produce acceptable revenue and profit. Against this backdrop, I’ve been watching the challenges of for extending the match this far, in the face of declining ratings at the last TV contract negotiation and the FedEx Cup gambit promising a “brighter future.” While the jury’s still out on whether the FedEx Cup in its three mathematical incarnations to date has either increased or extended viewership into the Fall, it did give the PGA TOUR more breathing room and a new variable that averted having that contract discussion focused solely around ratings and value. Fast forward to 2009 when a couple of things conspired to make PGA TOUR event sponsorship in particular and business golf in general less palatable: 1. Corporations such as General Motors which were taking federal bailout money came under increased scrutiny regarding their high-profile and expensive investments in professional golf. 2. Similarly banks, at the epicenter of the financial meltdown, were also heavy sponsors of professional golf due to the higher-income demographics which the product attracts and forced by “bad optics” to re-evaluate their positions as tournament sponsors and supporters. 3. Finally, the corporate entertainment practice of hosting clients at high-profile PGA TOUR events with the associated costs and perceived “excess” also fell out of favor for the Fortune 500 crowd. As a result, it seems not a month goes by without some announcement of sponsors retreating from the product in whole- Looking at some of the historical data points leading up to the current environment, you have to give Mr. Finchem kudos for extending the match this far in the face of declining ratings at the last TV contract negotiation and the FedEx Cup gambit promising a “brighter future.” the PGA TOUR over the past 12 months in trying to hold its schedule, sponsors and purses in the face of this broad repricing of America. To Tim Finchem’s credit, he’s survived longer than most other US businesses but the question lingers, “Will the PGA TOUR eventually succumb to the economic reality of repricing or will they be able to convince sponsors and advertisers that basic economics don’t apply to their product?” I’m not a handicapper by trade so I’m not going to make any bets at this point, but there has to be a mounting “wall of worry” in Ponte Vedra about when capitulation might happen and what the worst case scenario might be. Looking at some of the historical data points leading up to the current environment, you have to give Mr. Finchem kudos sale or in part. My favorite euphemism for the latter was the Nationwide rationalization of the various event swaps that recently unfolded, saying, “We wanted to get to an optimum spend level in the golf property.” Jim Lyski, EVP for Nationwide, goes on to more clearly state that Nationwide is indeed reducing their investment in professional golf and the PGA TOUR, saying, “So we were just looking at what’s available and what made the most sense for us to spend down a little.” In fairness, the PGA TOUR is having more success than I had anticipated in signing or renewing 18 title sponsors since 2009, according to a recent article by Ron Sirak. However, looking at several of those moves reveals the underlying pattern of a sponsor “shell game” where the PGA TOUR is staying only one step OcTOber 2010 6 The Pellucid PersPecTive

Table of Contents for the Digital Edition of The Pellucid Perspective - October 2010

The Pellucid Perspective - October 2010
Contents
Bringing a Pellucid Perspective to Golf Industry Information
What's In a Name.... and an Email Address?
September Weather Impact, August YtD Utilization
Will the PGA TOUR be Subject to Repricing?
Alternative Uses for your Golf Course 'Factory'
Los Angeles Market Profile
Survey Says... You're Still Employed
SCGA-PLGA Merger: Sign of the Times?
Sunshine Laws and Midnight Marketing

The Pellucid Perspective - October 2010