LPGA: Riding out the storm
Monday, May 11, 2009
It wasn’t exactly the eleventh hour, but close enough.
Just three months before the start of the sponsor-less Phoenix LPGA International, event and tour officials found not one, but two corporate patrons to back the tournament.
Plugging in J Golf, the tour’s new South Korean TV partner, as title sponsor and Mirassou Wines as presenting sponsor proved a nifty feat during a recession in which many companies have shelved sports marketing.
But there’s a big difference between pulling off one marketing miracle – and repeating the feat over and over. That’s the daunting task facing the LPGA: At least 11 of its 16 U.S. events, excluding majors, already are without naming sponsors or have title contracts that expire by year’s end. That means nearly 40 percent of next year’s potential schedule is cloaked in uncertainty.
What’s worse, any contraction would add to a growing casualty list, which includes six tournaments that were staged in 2008 that aren’t being held this year.
Granted, the worst-case scenario is unlikely. Many of the LPGA’s sponsors are longtime partners, and it’s difficult to imagine they’ll all defect. But there’s nothing guaranteeing corporate investment in the LPGA in these bleak economic times. That point was painfully punctuated only a couple of weeks ago when organizers of the LPGA Corning Classic pulled the plug on the New York event. The 31-year fixture of the tour calendar will stage its finale this month, citing a lack of sponsorship revenue and Corning Inc.’s profit plunge.
Adding to the LPGA’s challenge is the recent backlash against golf sponsorships in general – think the PGA Tour’s Northern Trust and lavish excess – and escalating expenses for tournament owners. For the most part, the LPGA doesn’t own its events; it extends contracts to third parties to host them. The loss of local, secondary sponsors and rising operating costs – in some cases imposed by the LPGA – threaten tournaments, too.
In an interview earlier this year with Golfweek, Jack Benjamin, Corning Classic’s board president, discussed what proved to be insurmountable hurdles.
“What is different today is that this recession that we’re going through is across the board; it’s not just one sector,” he said. “Whether you’re participating from a corporate standpoint like Corning Inc., or a financial institution or a small business . . . their ability to provide funds to sponsor activities like an LPGA golf tournament (is in question).”
Corning Classic’s sponsorship dollars had declined more than 20 percent compared with a year ago, prompting Benjamin to foreshadow the event’s demise.
“We want a partnership with the LPGA,” he said, “but I want to make sure everybody understands this – if the expense side of the ledger does not match up with the revenue side, then we have great difficulty going forward.”
If an institution such as the Corning Classic falls, one question takes priority: How much of its schedule can the LPGA keep intact?
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LPGA officials won’t take a stab at that query. But they’re understandably bullish, contending they’ve got a great product to sell, if not the best in tour history. With a star-studded rookie class, including Michelle Wie – a proven TV-ratings booster – the LPGA can promise sponsors better exposure to viewers as well as to tournament attendees. Throw in a host of other potential breakout stars, plus the LPGA’s surging international appeal, especially in dynamic Asian markets, and the net cast for sponsors widens considerably.
Nevertheless, the tour finds itself in a predicament. The LPGA is vulnerable now because commissioner Carolyn Bivens orchestrated tournament contracts to expire simultaneously. Why not stagger them to reduce risk? She wanted to re-sign events to more uniform deals and aggregate them to better negotiate a coveted cable TV deal. Bivens got what she wanted when she landed Golf Channel as a long-term partner in February, but her strategy also opened the door for title sponsors to exit en masse. In her defense, Bivens couldn’t have foreseen the economic collapse that followed.
Bivens maintains she made the right decision, recession or not, insisting the TV deal was a must-have that strengthens the tour for the long run.
She has a powerful ally in Mark Steinberg, who oversees golf operations for IMG. The sports-management firm has a big stake in the LPGA, owning three of its tournaments and operating the Ricoh Women’s British Open, as well as representing marquee players such as Wie, Paula Creamer, Natalie Gulbis, Yani Tseng and Morgan Pressel. He says the troubles facing the LPGA aren’t linked to Bivens’ strategy and aren’t unique to the LPGA.
“I like the fact that they’ve locked into an official cable home, not dissimilar to what the PGA Tour did,” he says. “It’s what’s going on in the economy, and it’s the same challenge Tim (Finchem) has over on the PGA Tour (and the same one) facing David Stern or Roger Goodell (the commissioners of the NBA and NFL, respectively).
Steinberg predicts: “The LPGA, I’m sure will lose a handful (of events), but I don’t expect it to be double-digits. Events will not renew, but that creates opportunities as well.”
For instance, he cites the LPGA’s ability to launch a new tournament in Los Angeles beginning in 2010, marking the tour’s first return to the vital market since 2005. (J Golf, which backed the Phoenix event just for this year, has a five-year contract to serve as title sponsor in L.A.)
“In these tough times, everybody’s hunkering down, and here they are announcing,” Steinberg says.
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There are several other factors that may help minimize damage for the LPGA.
Right now, price matters. Companies courting golf’s attractive demographics have limited options. And compared with the PGA Tour, sponsoring an LPGA event seems like a veritable bargain. Title sponsorship of a PGA Tour event costs $6 million to $8 million annually (including a TV ad commitment of at least $3 million.) And with many contracts running five to six years, “You’re looking at a $30 million to $40 million commitment,” says Chris Higgs, the LPGA’s former chief operating officer who is co-managing director of golf for sports marketing firm Octagon. By comparison, an LPGA title sponsorship often can be purchased for $3 million annually, and at most, $5 million for events with network TV coverage, according to Higgs.
And though the LPGA doesn’t reach as large an audience as does the Tour, it delivers similarly desirable consumers.
Often overlooked, too, is the fact that several LPGA tournament contract holders have a greater mission than just making their events a success: Preserving their own businesses. Unlike charitable foundations that frequently own and operate tournaments, some major LPGA event partners are in the golf business themselves and can’t, or won’t, walk away from the tour.
“When you think about the LPGA events that we own, manage, operate or consult on, when you think about the international television (we negotiate), when you think about all of the players that we represent, all of those things combined . . . it’s tough to quantify, but we have a significant investment,” Steinberg says.
That stake clearly affects IMG’s decisions. Asked if all of its LPGA events are profitable, Steinberg declines to discuss their financial status. But he offers this: “You can’t view every project that you run as, ‘We do it because it’s profitable, and we don’t do it if it’s not profitable.’ The LPGA is a strategic initiative for IMG. So, some of our events have and do struggle financially, but we do them for a reason.”
Steinberg insists the LPGA is a growth opportunity that justifies riding out difficult economic times and accommodating sponsors any way possible.
“With existing sponsors, it’s offering more value-add opportunities,” he says. “When you’re going out and trying to create new opportunities, certainly the price point has to be altered a bit.”
Others similarly entrenched in the tour include Octagon, which owns the Sybase Classic and P&G Beauty NW Arkansas Championship. And the Alabama-based Robert Trent Jones Golf Trail owns and uses LPGA tournaments – played on its golf courses – to drive tourism. This year, it will host the Navistar LPGA Classic for the third time, and it added the Bell Micro LPGA Classic in 2008. According to tournament officials, both events are profitable; a 2007 economic impact study of the Navistar LPGA Classic showed it generated $7 million in incremental spending for the local market.
“I don’t think we would be purposefully trying to grow our relationship with the LPGA (without such success,)” says John Cannon, president of Sun Belt Golf Corp., which developed and manages the 11-course RTJ Golf Trail.
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Tour officials say they’re demonstrating more flexibility than ever before to keep sponsors in the fold. Case in point: They agreed to let title sponsor Bell Micro skip the staging of its fall tournament this year and move the 2010 rendition to a more favorable date in April. Bell Micro officials requested the date change because they were concerned renovations at their venue wouldn’t be ready in time for this year’s event.
The LPGA’s gesture didn’t go unnoticed.
“This thing is a give and take . . . (the LPGA’s flexibility) goes a long way toward us continuing a long-term relationship,” says Don Bell, president and CEO of Bell Microproducts. The company has two years remaining on its title contract.
A more imminent situation for the LPGA lies with longtime partner Anheuser-Busch. Its sponsorship of the Michelob Ultra Classic expires after this weekend’s staging at Kingsmill Resort in Williamsburg, Va.
Dan McHugh, Anheuser-Busch’s vice president of media, sponsorship and activation, says the tournament has been a great vehicle “from a branding perspective for Michelob Ultra, which skews a little more female.
“We are definitely going to continue to be involved with the LPGA,” McHugh adds, but stopped short of saying Anheuser-Busch would renew. The brewery did recently expand its separate, tour-wide marketing partnership with the LPGA by becoming the “official beer” of its developmental circuit, the Duramed Futures Tour.
At the end of the day, the LPGA’s hospitality benefit likely will save the tour. Advocates say it offers a networking experience like none other.
“The fact that you can on a Wednesday afternoon spend 51/2 hours with a player with three or four of your biggest customers – you walk away from an experience that sometimes money can’t buy,” IMG’s Steinberg says. “And the LPGA players in particular understand the value of having to commit to a sponsor. . . . It’s not just showing up at cocktail party. They’re actually engaging with them and enjoying their company and bringing them into their lives a little bit.”
Unlike the PGA Tour, the LPGA’s pro-ams are played in a scramble format, ensuring participants even more of a shared experience with their LPGA hosts.
That’s the experience Phoenix LPGA International officials are selling hard. Given a reprieve this year with the temporary backing from J Golf and Mirassou Wines, they are again sponsor-less.
Officials even selected this year’s tournament venue, municipally owned Papago Golf Course, to gain allies in the search for corporate partners. City fathers recently financed a major renovation of Papago and wanted to showcase the property.
In fact, a couple of prospects uncovered by the city were given red-carpet treatment at the tournament – but not too much, says Rob Neal, executive director of the Tournament Golf Foundation, which owns the event. He says companies still want the business opportunities that tournaments create, but with less fanfare and spectacle to avoid public backlash. That sentiment suits LPGA events, which, he says, always have been more modest affairs.
“It’s not like we’re flying in people from New York City and putting them up in ridiculous hotels and all that,” says Neal, a former LPGA vice president of tournament business affairs.
With a tempering of corporate behavior, he expects problems of public perception to become “less of an issue with every day that passes.”
For Neal, the fewer the obstacles, the better. Clearly, the pressure is on.
“The entire purpose of the 2009 event in Phoenix,” he says, “was to find a title sponsor for 2010 and the future.”
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