The PGA Tour: Sand Trap Ahead

As it negotiates new TV deals, the Tour finds itself in a weakened position

When the PGA Tour negotiated its last TV contract in 2001, Tiger-mania was in full scream, and ratings were soaring. Betting that pro golf was the next mainstream sport, networks and cable channels forked over a total of $850 million in rights fees between 2003 and 2006 -- a 50% hike over the preceding four-year deal.

Fast-forward to the present, and it's clear the TV executives took a bogey on those contracts. When Tiger Woods fell into a relative slump in 2003 and 2004, ratings for tournaments broadcast by the networks dropped from an average 3.6 in 2001 to 2.9 so far this year, according to Nielsen Media Research. As a result, ABC, NBC, and CBS are expected to lose collectively as much as $50 million on their golf contracts this year. And as the PGA Tour and TV execs begin negotiations in coming weeks on a new four-year deal beginning in 2007, the networks are threatening to trim coverage -- including, possibly, a cut in rights fees. Speculation is rampant that ABC is considering a reduction in broadcasts of its fall golf events in hopes of landing a piece of the next NASCAR contract. An ABC executive says that no decision has been made.

But network executives, who asked not to be identified, are unanimous that something has to give. "The economics of golf have gotten all out of whack," fumes one TV sports chieftain. "I don't think any of the networks are going to air golf without a better sense they're going to make a profit."

However, Ed Moorhouse, co-chief operating officer of the PGA Tour, notes that it already has locked up title sponsors for more than 20 of its 42 tournaments through 2010. And since those contracts stipulate that roughly half of the sponsors' fees go toward buying ads on golf broadcasts, Tour officials say that -- unlike other pro sports -- they've already presold a big chunk of commercial spots for broadcasters. "I think the state of pro golf is fine," says Moorhouse. "We still have the best business model of any sport."

The mere prospect of a cut in rights fees -- which, in turn, could result in less prize money at some tournaments -- is prompting Tour officials to make changes to their lineup. To maintain viewer interest as the season drags into fall, sources say the Tour may adopt a variation of NASCAR's successful "Chase to the Championship." Under the plan, players would spend the first two-thirds of the season trying to earn points that qualify them for a three-tournament showdown in mid-August. Adopting a points system could also entice top pros to play more events, ending the ratings drop that occurs when stars like Woods and Phil Mickelson begin scaling back their schedules in early August.


Still, some experts say the PGA Tour's real problem is too many hours of golf programming: Under the current schedule, the Tour stages tournaments almost every weekend between January and early November. Says Scott Seymour, senior vice-president for golf events at New York sports marketer Octagon Worldwide Ltd.: "It's the season that never ends."

In response to such criticism, sources say that PGA bigwigs are considering moving the season-ending Tour Championship from November to mid-September, just about the time the NFL season starts to heat up. After that, sources say, one plan would be a series of reduced-purse events with fields made up largely of second- and third-tier players scrambling to earn enough prize money to qualify for a slot on the Tour in the following year. But these late-season tourneys could wind up on cable channels like USA Network and the Golf Channel, which would probably pay only a fraction of what the networks paid in the past.

Already, the prospect of a shakeup is sending tremors through the golf world, particularly among smaller tourneys. "If you shorten the season, where are the opportunities for the younger players?" asks Jim Kline, tournament director for the Reno-Tahoe Open. Yet even Kline concedes that he tends to watch events "when Tiger's playing."

By Dean Foust in Atlanta

    Before it's here, it's on the Bloomberg Terminal.