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Tour needs TV more than TV needs the tour

10/13/2004

The genius of the way Deane Beman and Tim Finchem have handled
television negotiations for the PGA Tour is that they always have made
certain the networks made money.

As commissioners, they knew that while
TV is willing to broadast the NFL, for example, at a loss because it
generates big enough ratings to use to promote prime-time programming,
golf never would have that luxury. When your Nielsen rating is 2.3
instead of a 12.3, you better make sure your broadcast partner doesn't
get the short end of the stick. That hasn't been a problem -- until now.

"Beman would never take every nickel off the table," said one former
network executive, speaking anonymously. "And Finchem learned from
that." Finchem also has had enormous good fortune in the two TV
contracts he has negotiated since he took over in 1994. In 1997, Finchem
brought the networks to the bargaining table just weeks after Tiger
Woods won the Masters by 12 shots -- and CBS garnered a 14.1 rating for
the telecast. That contract took PGA Tour TV revenue from $63 million in
1998 - the last year of the old contract -- to $124 million in 1999. The
current contract, which went into effect last year, was lucky enough to
be finalized in July 2001, just months before Sept. 11 sent the economy
spiraling down. That deal boosted TV revenue from $162 million in 2002
to $209 million in 2003.

And the next contract? If past form holds, that deal, which will go into
effect in 2007, will be hammered out next summer. But for the first
time, the tour will be negotiating with networks that have lost money
televising golf. And, to borrow an old movie line, the networks are mad
as hell and they aren't going to take it anymore.

"Golf is going the way of the other sports where the economics are
skewed and completely messed up simply because athletes make too much
money," said a second network executive speaking on the condition of
anonymity. "That's why an NBA ticket costs so much money and why taking
a family of four to a baseball game costs $200. Because the players make
too much." The executive, who confirmed information from other
executives that all networks are losing money on the current PGA Tour
contract, said players may have to face a reduction in purses.

"It's difficult for a sport that gets a high 2, low 3 rating," the
executive said. "You've got to ask yourself, 'Why are we doing this if
we are not making money?' Say they play for a $3.8 million purse as
opposed to a $5.1 million purse. Big deal. Is that going to affect their
lives all that much?"

Obviously, if you're a tour player -- or a tour commissioner in charge of
negotiating the new deal -- it will have a big effect. That's why it's a
safe bet the tour will do all it can to protect purses.

"The PGA Tour will try to push back talks if things aren't going well
with the economy," said one executive familiar with the negotiations.
"They will try to re-sign title sponsors through a new contract so they
can go to the networks and guarantee that they have sold at least half
the commercial time already." (Sponsors must buy ad time in broadcasts
of PGA Tour events other than their own.)

That is exactly what is going
on. AT&T, BellSouth, MCI, John Deere and Valero all have extended
through 2010. A similar deal with Barclays through 2010 to take over the
Buick Classic at Westchester CC was announced this week.

Clearly, the PGA Tour has a product sponsors still want. It just has to
find a way to provide it at a price the networks are willing to pay.

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