Tour needs TV more than TV needs the tour
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.