Forget Tiger. The PGA Has Bigger Problems

The Tour needs to find 10 title sponsors for next year

Just because Tiger Woods is back in the game doesn't mean the PGA Tour can breathe easy. Professional golf grew fat thanks to corporations eager to get their names in front of affluent fans. But that lucrative business model may have fallen victim to its own success.

In recent years, the Tour created a tier of big-purse tournaments, including the $9.5 million Players Championship that tees off on May 6 in Ponte Vedre, Fla. Top players can clear so much prize money from these events that they often skip the secondary matches that make up the bulk of the golf circuit. The lack of name players in turn has led some corporate sponsors to pull out of lesser events at a time when the PGA is already struggling to replace companies—Chrysler and General Motors among them—lost during the recession.

"The Tour put a lot of emphasis on certain tournaments, which put a lot of pressure on the rest to compete for players and sponsors," says Robert Tuchman, an executive vice-president at sports marketing agency Premiere Global Sports.

Of the 40 tourneys next year that typically bear a corporation's name, about a quarter still do not have "title" sponsors, which pay to have their logos plastered around the course. The problem started in 1999, when the PGA and overseas tours created the World Golf Championships, the first of a new "A" tier of tournaments. Its four yearly tourneys are limited to about 70 of the globe's best players. Purses are $8.5 million per event. In 2007 the Tour created the FedEx (FDX) playoffs, a series of four tournaments each with purses of $7.5 million this year. The best player gets a $10 million bonus.

Top golfers typically play in these eight elite, the PGA's four "majors," and the Players Championships. These 13 tourneys get players most of the way to the PGA's 15 tournaments-per-year requirement. Thanks to the rich A tier purses, elite golfers play sparingly in the remaining 32.

The B-tier tournaments, with $5 million to $6 million purses, and the C tier, with purses below $5 million, scramble for players with marquee value to attract viewers and sponsors. Verizon Communications (VZ) ended its sponsorship of the B-tier Verizon Heritage Classic when this year's contest ended Apr. 18. The match didn't draw enough viewers overseas, where the telecom giant seeks growth, says Rebecca Carr, vice-president of global marketing at Verizon Business.

The PGA is still struggling to replace corporations that fled during the recession. After months of seeking a new title sponsor for the Buick Invitational in Torrey Pines, Calif., organizers signed Zurich Financial's Farmers Insurance Group—10 days before the match's start.

Mark Toohey, a Farmers senior vice-president, says the insurer got a cut-rate deal for its late entry and has since signed a full-price four-year contract. "Golf is a good age demographic for us," he says. "Its fans are in their prime years of buying insurance." It took 10 months to land Waste Management (WM) as lead sponsor to replace FBR Capital Markets (FBCM) for Phoenix's B-tier tourney. Says David Aardsma, Waste's sales and marketing chief: "We wanted to tell a new story: We're not a garbage company, we're an environmental solutions company."

Ty Votaw, the Tour's communications chief, said the renewal or replacement of 16 sponsorships in 2009 and so far in 2010 shows the circuit is doing well in a "difficult time," and he expects 2011 sponsorship vacancies to be filled. "We've come through past recessions in stronger shape, and we expect to again."

The bottom line: Professional golf's period of rapid growth from 1996 to 2008, when prize money grew fourfold to $278 million a year, is over.

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