2005: Business - Coming up next . . .
Tim Finchem is expected to begin forma negotiations in September for his third television contract as PGA Tour commissioner.
But unlike previous deals – struck at the height of Tigermania when Finchem held all the leverage – this round of talks promises to be the toughest test of his tenure. By most accounts, Finchem will be fortunate to wrangle a contract bearing a resemblance to the record $850 million, four-year accord he forged for the 2003-2006 seasons.
There’s a chance Finchem & Co. will be forced to settle for less – perhaps as much as $85 million to $125 million. That could lead to one of two ugly scenarios for the Tour: Having to persuade sponsors to cover the shortfall or asking players to take a pay cut. To avoid either fate, Tour officials are on the verge of significantly altering the tournament schedule with hopes of injecting a hefty dose of excitement to maintain the interest of TV suitors.
Foremost among the moves Finchem may make is shifting The Players Championship to May, removing it from an unenviable head-to-head clash with the ratings dynamo known as March Madness or the NCAA Basketball Championship.
It also seems a foregone conclusion that the Tour Championship will move from early November to mid-September, bringing an end to the Tour’s official season before the National Football League gets into full swing.
But even these changes likely cannot cure what ails the Tour, and for that matter, golf at large: limited interest.
That underlying factor could lead to major changes among the Tour’s broadcast partners. There is growing speculation that ABC Sports – weary of fighting a losing battle against football with its anemic fall golf package – may drop the Tour altogether. That could open the doors for The Golf Channel to pick up Tour events it so desperately craves.
“The landscape has changed dramatically since the last set of negotiations,” says Neal Pilson, a television industry consultant and former president of CBS Sports. “And the economics are nowhere near what they were a decade ago.”
Adds a top television executive, who, like many of his peers, requested anonymity because of upcoming meetings with the Tour: “We paid too much for the rights fees last time around, and the marketplace has collapsed.”
Most, if not all, of the Tour’s TV partners are losing money on the current contract, which covers everything but the four majors and Ryder Cup. They are concerned about the seemingly interminable length of the Tour campaign, and agree with many of the top players that a slimmed-down schedule would create greater sponsor and spectator interest by pitting the world’s best players against each other more often.
In addition, they worry about flat TV ratings and a less than vibrant advertising and sponsorship market. Especially painful have been the withdrawal of financial services and accounting companies, which once were among the game’s biggest supporters but have cut spending in the wake of Sept. 11, a broad economic recession and a series of corporate scandals. Plus, many golf equipment companies have been priced out of TV buys, and even a resurgent Tiger Woods isn’t causing the buzz he once did.
The situation is so different from the two previous negotiations, in which Finchem milked huge increases in almost perfect market environments, that there’s speculation the Tour has been intentionally delaying the start of negotiations hoping to catch lightning in a bottle again – the unlikely entry of a wild-card network and an ensuing bidding war – or, at the very least, waiting for the advertising climate to improve.
But Ed Moorhouse, the Tour’s executive vice president and co-chief operating officer, insists the Tour is taking its time so it can properly evaluate schedule changes and present comprehensive proposals to its broadcasters.
In his previous TV deals, Finchem only had to seize the moment. His first contract as commissioner – which ran from 1999 to 2002 and reaped $600 million in rights fees – was signed just weeks after Woods won his first Masters in 1997, igniting fan interest and a ratings boost.
Finchem was equally fortuitous when he negotiated the current deal, which expires at the end of the 2006 season. The agreement was completed not long after Woods had captured the 2001 Masters for his Tiger Slam – and just months before the Sept. 11 terrorist attacks that sent the nation’s economy into a tailspin. That first contract proved profitable for the networks, according to industry sources. But the current deal is not.
“By my estimation, CBS and ABC are going to lose $15 million each on their Tour events this year,” says one source close to the negotiations. “I know one of those networks made about $15 million in the last year of the previous deal, which means it has seen a $30 million swing in only a few years. That is an awful lot of money.”
As for NBC, that source adds, it will lose roughly $5 million in 2005, a lesser sum because of the network’s limited commitment to the Tour. (It carries only five events.)
Occasionally, television networks can afford to take losses on sports programming because of the unique promotional platform they provide for their prime-time lineups (See story, p32). That often justifies the exorbitant sums networks spend on sports such as football or the Olympics.
“You can put the majors in golf in that category,” Pilson says. “But not weekly tour events.” (The broadcast rights for the four majors are held by the following: CBS – Masters and PGA Championship; NBC – U.S. Open; ABC – British Open. NBC also carries the Ryder Cup.)
And therein lies the problem. Network executives, understandably, are loath to overpay for Tour events that will net only losses.
“We love golf. It works well for our schedule, and it is an important part of our heritage,” says Sean McManus, CBS Sports president. “But we need to make a little money on the Tour, or at least break even.”
That means there is a possibility that rights fees could fall. It certainly is not an unprecedented situation in sports, and the Tour would rather lower rates than see their TV partners walk away.
Says Moorhouse: “Clearly the market has not been as good, but we think the game continues to be very popular, and the Tour product is as strong as ever. And what we are looking at regarding scheduling and packaging for the next deal can maybe help ease whatever concerns or fears our television partners have today.”