The Pellucid Perspective - April 2015 - (Page 6)

Golf course technoloGy Digital Caddies customers lose free web connectivity Courses must now pay for Sprint service By Jim Dunlap A nother attempt to sell golf cart-mounted GPS technology to courses as a cost-free amenity has hit a snag. Scottsdale-based Digital Caddies Inc. notified its roughly 160 golf course customers in a March 30th email that from that date going forward, the courses would have to pay Sprint for the wireless connectivity to the worldwide web that enables the Digital Caddies system functions. Previously, the Sprint fees and the Samsung tablets where the various system features were displayed had been paid for and provided by Digital Caddies (DCI), with the company's revenues to be generated through the sale of advertising on the GPS-enabled tablets. The letter to customers from Digital Caddies Inc. CEO Brad Nightingale warned courses that their Sprint connectivity would be cut off on either the next day or the following day, and the systems would be disabled until customers could contact Sprint directly and establish a new account which customers would now be responsible for paying. According to Nightingale's email, ongoing negotiations between the company and Sprint that would allow the company to continue to provide Sprint service at no charge to courses had just collapsed earlier that day. Calls to Nightingale were not returned, but the logical conclusion is that DCI was either unable to continue to pay the Sprint fees or had unsuccessfully attempted to negotiate a lower fee structure with Sprint. Nightingale's email did offer a "special program" for courses to recoup some or all of the unexpected expense involved in now having to pay their monthly Sprint bill. If a course refers advertisers to DCI, those advertisers will receive a special rate of $599 per month per hole to advertise on the course's DCI platform. Revenue generated by referred advertisers will be used to reimburse the course for 100 percent of the Sprint costs; additional revenue generated from those advertisers over and above the Sprint costs will be split 50-50 between DCI and the course. The letter estimated that successfully referring either two or three advertisers per month would cover the Sprint costs for an average 18-hole facility. The problem with that offer and with the Digital Caddies business model is the same one which has plagued other attempts to monetize cart-mounted GPS systems since the introduction of the technology into the industry. In the early years of this century, companies like ProLink, Parview and others either promised course customers a share of national advertising revenues they would generate, or urged courses to create their own revenue stream by selling GPS advertising to local businesses. The DCI failure to sell sufficient national or regional advertising to make a profit is just the latest proof that ad agencies and their clients are not convinced that a golf cart screen during a busy round of golf is the best vehicle for promoting their products. Additionally, sophisticated agencies and their clients typically require some form of independent third party or otherwise verifiable data regarding the number of people who are viewing or "clicking" on the ad, how long they're viewing it, etc. As one industry veteran said, "GPS companies used to tell agencies that a certain course did 60,000 rounds a year, so the agency should tell their clients they'd be reaching 60,000 sets of eyeballs a year. What agencies and clients figured out was that 60,000 rounds did not mean 60,000 unique sets of eyeballs, and there was no way to tell how many people were actually seeing the ads." DCI executives are no doubt on pins and needles waiting to see how many of their current client courses bow out of the program now that their web connectivity is their responsibility. One multi-course operator we spoke with immediately returned the Samsung tablets to DCI and has no plans to pay Sprint's charges for DCI or any other GPS system. The tablets are another concern to the company; they were apparently given to the courses by Digital Caddies as part of the incentive to sign on with the system, and while DCI would undoubtedly like to have them back if courses cancel their service, one source indicated that courses are under no legal obligation to do that. In the meantime, for Digital Caddies, it's apparently either back to the drawing board and back to the private equity well as they contemplate their next step. Several key executives, including former president Mike Loustalot and former Troon Golf and GolfNow executive Tim Greenwell had left the company prior to the March 30 announcement. Golf course operators who like having cart-mounted GPS as an amenity, but don't like paying for it, are hoping that DCI or some other company figures out how to get outside advertising to pay for it, but so far, n that's not the way to bet. DCI executives are no doubt on pins and needles waiting to see how many of their current client courses bow out of the program now that their web connectivity is their responsibility. 6 The Pellucid PersPecTive April 2015

Table of Contents for the Digital Edition of The Pellucid Perspective - April 2015

TOC
Equity clubs increasingly open to change
Digital Caddies customers lose free web connectivity
2015 weather bodes well for industry so far
Environmentalist bid to close historic course rejected
Confessions of a social media Neanderthal
March golf weather impact: Up strongly nationally, regional results vary
Rise of Phoenix needs fall of supply
ClubCorp continues to grow with 6-course portfolio purchase for $44M
Fantasy sports in more ways than one

The Pellucid Perspective - April 2015