By John Steinbreder
The PGA Tour announced July 16 that it had concluded contract negotiations for a new television package in a four-year deal estimated to be worth $850 million.
The most noticeable changes occurred on the cable front, where USA Network bulked up significantly, more than doubling its coverage of the PGA Tour when the new deal takes effect in 2003. In fact, USA Network – along with ESPN – are the only two providers of early-round tournament coverage.
Meanwhile, The Golf Channel, which had 14 tournaments in the current deal, will air no PGA Tour events. Instead, The Golf Channel will become the exclusive home for Buy.com Tour programming.
As expected, ABC, CBS and NBC secured broadcast packages comparable to their current schedules, though some events did jump from one network to another.
The biggest winner in the new deal has to be the PGA Tour. After all, commissioner Tim Finchem and his cadres were able to secure an estimated 50 percent increase in rights fees at a time of general economic uncertainty and softness in the advertising market.
Touring pros also will benefit nicely from that bump in rights fees because more television money means larger purses, which will amount to more than $185 million this year. And they also can expect to see greater contributions to their lucrative retirement plans.
The broadcast networks did well, too, primarily because they were able to keep virtually the same packages of events they currently have for what they consider reasonable price increases. “ABC may have upgraded a little by getting the Nissan Open,” said one source close to the negotiations who asked that his name not be used. “And CBS and NBC were happy to stay pretty much where they are. They all like what they got, and while 50 percent may sound like a big jump, it is spread out over four years. They all feel they should still make money.”
To do that, however, the broadcast networks are going to have to raise advertising rates.
If that happens, there likely will be an even greater exodus from network broadcasts by golf equipment makers, many of whom already feel they are being shut out of an increasingly expensive television advertising market.
On the cable side, USA Network has to be the happiest of them all. “What happened to them is the most surprising aspect of the new contract,” said John von Stade, managing director of Millsport Golf, a strategic consulting firm based in Stamford, Conn. “You would have thought the Tour would have preferred to go primarily where the sports consumer goes, which is ESPN. I mean, people don’t automatically turn to USA for sports.”
But Donna Orender, the Tour’s senior vice president for television, programming and new media, and one of the primary architects of the new contract, said USA got what it did because it “made an outstanding presentation. The network made a tremendous commitment to present the Tour and integrate it in their total network presentation, and we think the people there will do a great job.”
No one believes there are any big losers in this deal, though several observers feel some parties did not do as well as others. ESPN, for example, watched its total number of events fall from 18 to 14. But it did pick up some early-coverage of key tournaments, such as The Players Championship and The Memorial.
Then, there is The Golf Channel, which will not carry any PGA Tour events and instead become the exclusive home of the Buy.com Tour. “No one at the table was really surprised by that,” said a source close to the negotiations. “For one thing, Tim (Finchem) wanted to get as much exposure as he could for the Tour, and both ESPN and USA Network have more than twice the households as The Golf Channel. Also, he wanted to lessen the number of cable partners so people wouldn’t have to search all over the place for early-round coverage each week.”
Some observers say that move is quite a blow for The Golf Channel. But Orender disagrees. “We are going to do a whole thing around ‘Inside the PGA Tour’ and other ancillary programming, for example. In fact, we anticipate that our relationship with them will be elevated, not only through greater focus on the Buy.com Tour but also with the other tours as well.”
Not surprisingly, Orender said she is pleased with the way the entire deal worked out and describes the process as being “very successful” for all involved.
While the deal highlights the strength of the PGA Tour, it isn’t reflective of the overall health of the game.
“What other entity in golf can expect to generate that dramatic an increase in revenues for the years 2003 to 2006?” said Wally Uihlein, chief executive officer of the Acushnet Co., which makes Titleist, FootJoy and Cobra golf products. “Everything else, especially with regard to participation and consumption, is essentially flat.”